Datasets:

alea-institute

/

kl3m-sft-hearings-sample-001

like 0

gpo114.pdf

Mr. MARKEY.

Thank you. My colleague Mr. Upton and others have argued that it would be more cost-effective to address the symptoms of global warming instead of the disease. In effect, they say we should adapt our way out of this. Can you respond to that argument?

gpo114.pdf

Mr. STERN.

Adaptation is going to be important. We are already sponsible we are, it is rather likely that we are going to experience another one-and-a-half or two degrees centigrade, and you can see that the adaptation cost of that will be very important. So adaptation is a fundamentally important issue. But adapt your way out of it, if I understand that term, and it is a term that is often used, seems to suggest that somehow by pulling a few levers, you can get back to something like the lifestyle that you used to have. Well, the kind of big movements of population that I have described, and the conflict that could ensue, I think it is clear that adaptation is not the kind of thing that you would describe as easily getting back to the lifestyle that you had before. So in that sense, there are limits to adaptation, but it is absolutely clear we will have to adapt. I don't want to mitigate this or that. We are going to have to do a lot of both.

gpo114.pdf

Mr. MARKEY.

But adaptation is not a substitute for mitigation?

gpo114.pdf

Mr. STERN.

Absolutely not. You could not seriously describe the kind of migration and conflicts that are likely to result from getting to 5 degrees centigrade as simply adapting to changing circumstances. It doesn't seem to be a very good description.

gpo114.pdf

Mr. MARKEY.

And now that the scientific debate over climate change is largely over, although there are outliers out there still battling, like Japanese soldiers still on islands in 1952 or 1953, but the scientific debate is largely over, the debate is turning to largely discussion over the costs of dealing with this issue. The Senate debate on the Lieberman-Warner bill largely devolved into a battle of economic models, but these models have consistently overstated the costs of environmental and consumer protection and underestimated or ignored the costs of doing nothing. What prospect is there for improving these economic predictions, that is the cost of actually inventing these new devices, these methods of energy that fuel our economy and as a result lowering the overall economic projections of the harm to the economy?

gpo114.pdf

Mr. STERN.

First, I agree with you that the scientific debate is essentially over, in the sense that I think it is very clear that climate change generated by humans is there, and it is a major issue. Obviously, there would be debates and there should be, how big are the risks? But in terms of what humankind is doing and the magnitude of the risks, I think that debate is over. I am sure that you and I would both defend the rights of people to join the Flat-Earth Society and speak up and say that the Earth is flat. It is a free country, and that is their right to do it. They just don't happen to be terribly convincing, and I think that is the same position now on the climate change story. On how good are we at economic forecasting, broadly, the answer is not very, but that doesn't mean that we have nothing to say. I think the costs of action, the analytical basis of the cost of action, through close examination of the kinds of technologies we have, what they cost and so on, I think that is reasonably well founded. We do know quite a lot about the cost of wind power. We have more to learn, but we are learning about the cost of carbon capture and storage. We know quite a lot, from experience, about the cost of nuclear. So I think that scenario, where we can actually be quite confident the estimate that we have, provided, of course, we offer a range, so when I say one percent of GDP for 550, I think that stabilizing at 550, you know, you are going to have to take plus or minus one or two, higher if policy is bad and technically progress goes slowly, lower if it is the other way around. So I think we can start to get a feel for where these ranges are and the kinds of errors that are likely to be made. Also, I want to underline that this kind of analysis is quite young. It is only really over the last 3 or 4 years that there has been tremendous focus in the political and the analytical arena on this area. There has been, in the past, quite a lot of work, but the intensity has leapt up in the last 3 or 4 years, so I am optimistic, in answer to your question, that we will get rather better over the next 5 years.

gpo114.pdf

Mr. MARKEY.

I think you are right, and I appreciate the chairman's indulgence. AT&T, in 1980, believed that there would be one million people using cell phones in the year 2000 in the United States. I think that there tends to be an underestimation of the ability of technology to transform society over the long run, and we are seeing that. But on the other hand, it took until 1990 for the Vatican to apologize to Galileo, so I don't know how long we will have to wait for apologies to Jim Hansen, another scientist, and move on, then, to what the consequences are to these scientific discoveries. I thank you, Mr. Chairman.

gpo114.pdf

Mr. BOUCHER.

Thank you very much, Mr. Markey. We are honored to have as a member of the subcommittee the Minority Whip of the House of Representatives, the gentleman from Missouri, Mr. Blunt, and he is recognized now for 5 minutes.

gpo114.pdf

Mr. BLUNT.

Thank you, Mr. Chairman. I will admit the FlatEarth Society comment got my attention. Since we are there on that topic, was there ever a time that there wasn't climate change that you are aware of? Haven't we always had climate change?

gpo114.pdf

Mr. STERN.

Yes, indeed. There are lots of factors involved, oscillations in the solar energies coming in, explosions of volcanoes, these kinds of things. There are many natural effects which are important.

gpo114.pdf

Mr. BLUNT.

And I think you don't have to be particularly perceptive to accept the fact that we have always had climate change, nor do you have to be particularly knowledgeable to know that a generation ago, everybody was talking about the climate cooling in the '70s. That has not turned out to be the case. I agree with you that it ought to be dealt with in the best way, but it also ought to be seen as part of the cycle of the Earth, as it is, and how you deal with that is an important thing. I only really had one question Mr. Chairman. I don't think I will take my 5 minutes. Looking at your report, today world oil prices is around $140 a barrel. What was the price point when you did your report?

gpo114.pdf

Mr. STERN.

We published at the end of 2006. I would guess it would be $50, $60 a barrel then.

gpo114.pdf

Mr. BLUNT.

And in talking about what it takes to induce technological chance, how would you factor in the price-point factor, now, differently than when you wrote you report, the impact of $60 a barrel oil on all of these issues, versus the impact of $140 a barrel oil, how do you see that Lord Stern?

gpo114.pdf

Mr. STERN.

In some ways, it makes the cost of switching over away from fossil fuels to other kinds of things cost less, because you are comparing a higher cost of doing it through fossil fuels with the cost of doing it in other ways which has not moved so much. I haven't redone the numbers, but that effect would be to push down the cost. It does, of course, make some of the politics more difficult, because you are talking about carbon taxes and cap-and-trade in the context of prices for fuel that have gone up. So I think there are, in some respect, greater political difficulties, but the economic argument for switching over to other things is strengthened by that.

gpo114.pdf

Mr. BLUNT.

Would I be right in assuming that the economics of a cap-and-trade system to where you use that system to encourage technological shifts, some of that should be offset by what has happened now in the economy to the cost of oil and other fuels? Would that be correct?

gpo114.pdf

Mr. STERN.

That is absolutely right. It does have the momentum in that direction, but there is still the case that there is market failure. There is a damage that they are doing when they consume those fuels, which, unless there is policy, the market doesn't face them with, and that is why a cap-and-trade scheme is important, because it is correcting a market failure, even in the context of high fuel prices.

gpo114.pdf

Mr. BLUNT.

I will ask one more question because I am learning some things here that I need to know. Why would it be that the cap-and-trade penalty would produce a behavioral change difference than just the marketplace penalty of fuel costs that are two-and-a-half times as high as when you wrote you report?

gpo114.pdf

Mr. STERN.

They have quite strong effects in similar directions, but let me just differentiate the two, because in many ways they are the same, but they are not exactly the same. If you think of carbon capture and storage for coal, coal prices will go up with the other fossil-fuel prices, and to that extent, other fuels will become more attractive relative to coal. But it will still be true that carbon capture and storage for coal will be more expensive than not doing carbon capture and storage for coal. So in order to induce people to switch from ordinary coal to carbon capture and storage for coal, you do need a price for CO2, and that could not be achieved simply——

gpo114.pdf

Mr. BLUNT.

By the marketplace?

gpo114.pdf

Mr. STERN.

Yes.

gpo114.pdf

Mr. BLUNT.

Thank you.

gpo114.pdf

Mr. BOUCHER.

Thank you very much, Mr. Blunt. The gentleman from Washington State, Mr. Inslee, is recognized for 8 minutes.

gpo114.pdf

Mr. INSLEE.

Thank you, Lord Stern, and thank you for your international service. It is very much appreciated. I want to make three points. First, the European experience, you noted that there were too many permits issued, and our study in Europe indicated that they essentially had some bad data, because they got some bad data from the applicant, if you will, and I want to point that out to some of my colleagues, because Tammy Baldwin and myself are endeavoring to pass a bill this year that will start the registration process this year so that we can gather good data even before we implement the cap-and-trade system, hopefully in 2009. And I just want to emphasize your testimony in that regard about the importance for us to get good data when we start, and we want to start that process this year, so thank you for bringing that up. In your report, you talked about a couple of mechanisms for increasing clean technology research and development, and you addressed something we call a renewable portfolio standard, and a second something you call in Europe a feed-in tariff. I just want to let you know, I am introducing, with some of my colleagues today a bill that will essentially implement a feed-in tariff system in the United States. It is a called the Renewable Energy Jobs and Security Act, because we think that will promote jobs and security. I noted in your report that in evaluating those mechanisms, you concluded that both had been proven effective in the European experience, and concluded that the feed-in tariff, which essentially is a guaranteed price for clean electricity, was the most economically beneficial, most efficient mechanism. That is heartening, because you were here today, and we are introducing our bill today, so it is a happy coincidence. I just wondered if you may comment on why that is and what your findings were in that regard.

gpo114.pdf

Mr. STERN.

I think it is largely to do with the importance of clarity in long-term planning for investment decisions, and a feed-in tariff does give the person making the decision, for example to invest in solar, competence in the long-term price that they will get in return on their investment. In electricity, they will get their investment. Of course, there will be revision clauses in those contracts, but the revision clauses are transparent, too, or else there will be some uncertainty resulting from that. The investor has an understanding of what that is. I think when you have renewable portfolio standards, that isn't quite so clear. The price you are going to get, a lot depends on exactly how those standards function, and I think there is greater uncertainty involved for the investor in that. So from the point of view of transparency and clarity for all of those involved I would share your preference for feed-in tariffs. And on your previous point, I would strongly recommend that in putting your policies on cap-and-trade in place, you learn from some of the mistakes we made in Europe.

gpo114.pdf

Mr. INSLEE.

We intend to go to school, and I would love to add your name as a cosponsor of my bill, but we just don't allow Lords to cosponsor bills in the House, so that is the one handicap we have. I want to test-drive a theory that I have on the ultimate benefits of a cap-and-trade system. There really are two parts, in my view, of a cap-and-trade system. One is it is a self-restraint on one's own national contributions to CO2 loading, which is beneficial. But I really believe it is a more important of industrialized nations, particularly the United States' adoption of one to the extent of which it drives clean energy research and development, because ultimately, even if the United States restrains itself to zero CO2 emissions, unless the Chinese and the Indians of the world have access portant part of a cap-and-trade system is to drive investments to develop these clean-energy technologies, which frankly we can sell, to the extent that they are not pirated to the developing world. So my view is we get a self-restraint, but a self-development is actually a more important reason for having a cap-and-trade system, ultimately, when it comes down to the world's CO2 loading. That is a theory I wan to throw out. I just appreciate your comments on the thoughts.

gpo114.pdf

Mr. STERN.

Cap-and-trade with auctioning permits and with carbon taxes are in some ways quite close, but there are important differences. Cap-and-trade gives you clarity on the quantity. You are much more sure about the overall emissions you are going to be making, but of course, there is some uncertainty on the price. A tax gives you the greater certainty on the price of carbon by the tax, but it gives you greater uncertainty on the quantity, and I think uncertainty on the quality is worrying in this context where we have to move quickly. Secondly, on cap-and-trade, you have the advantage that if you open up to trade elsewhere, you not only bring your costs down or get more emissions reduction for the money, for the usual reasons that international trade allows you to buy where the product is produced most cheaply; but also, you have a chance to bring the developing world much more strongly into the story because they will recognize if they have very cheap ways on cutting back on emissions, they can get resources on the carbon market to help make that happen. So I think it will be a very important part of the glue of a global deal. So cap-and-trade, if opened up in the right way to international trade, does enhance the prospects of the global deal in a way that I don't think carbon tax does. You could fix it so that a certain amount of the revenue is promised and so on, but I am not sure that that would be credible, because that would be the government transfers, rather than the private sector buying those reductions on the market. So those two reasons, clarity and quantity and their role in international trade, I think cap-and-trade does have some advantages. I think, in its driving of R&D you could argue that tax on carbon drives R&D also, but I do think a cap-and-trade with clearly announced future reductions of the kind that you have been discussing in your bills does actually give the greater, and I think people have greater confidence in that environment about what they have to plan for. Now, governments under pressure can change taxes. Long-term plans, which everybody in the industry is plugged into, where everybody knows where they are going, I think, are more robust to short-term political pressures, and that is very important in this context.

gpo114.pdf

Mr. INSLEE.

Well, you just reminded me about another lesson from Europe. When we talked to the European folks, they repeatedly stressed that a cap-and-trade system was not a silver bullet and had to be a part of a coalition of other mechanisms, including feed-in tariffs, including efficiency standards, including good public transportation systems, including good public planning of our growth and the like. And their message to us was don't think a cap-and-trade system is going to be the only thing. You have got to have a panoply of these things to address the issue. Would you share in that?

gpo114.pdf

Mr. STERN.

I definitely would, and I would add to that list strong public support for research and development.

gpo114.pdf

Mr. INSLEE.

Wholeheartedly. Ours is pathetic. We are going to increase it dramatically, I hope. Thank you for your testimony and your work.

gpo114.pdf

Mr. BOUCHER.

Thank you very much, Mr. Inslee. Well, Lord Stern, this has been most illuminating for us. I am sorry. Mr. Shimkus has arrived. I didn't see you.

gpo114.pdf

Mr. SHIMKUS.

I know you were trying to sneak away.

gpo114.pdf

Mr. BOUCHER.

We are delighted by your arrival, and you are now recognized for 5 minutes, the gentleman from Illinois.

gpo114.pdf

Mr. SHIMKUS.

And I apologize. I can give you a fair accounting of my locations since I left. Ninety members of the Future Farmers of America had to get into the Capitol, and that with one of our NASA astronauts just in the office, and of course we cast three votes, so that is the life of a member of Congress here, and we apologize because we do appreciate your attendance here. Let me ask you a question that has been bothering me. Sir Isaac Newton established the fact of gravity. And all of this debate on climate change, and Chairman Dingell mentioned it today, it is the consensus of the scientific community. Why is it not a fact?

gpo114.pdf

Mr. STERN.

I have great respect for Sir Isaac Newton, but he established a law of physics that holds under certain circumstances. It doesn't hold at the level of nuclear physics, so I think any law of physics applies to a description of certain kinds of circumstances. I don't want to be a linguist logic chopper, but I wouldn't call it a fact. I would call it a law of physics, applicable to certain kinds of circumstances. Now, the laws of physics for climate change, and please, I did math and physics as undergraduate: I am not a scientist. I am here as an economist.

gpo114.pdf

Mr. SHIMKUS.

There are very few scientists here either.

gpo114.pdf

Mr. STERN.

I listened to the scientists very carefully in doing the work, but I am not a scientist. But if I understand this well, the science at this story started with Fourier in the 1820, the famous French mathematician and physicist, and he did a heat balance of the world, looking at what was coming in and what was going out, and he was puzzled because the world turned out to be rather warmer than he thought, and that led him to the idea of something being trapped. In the middle of the 19th Century, they worked out, a British scientist, particularly, Tyndall, worked out what it was that was doing the trapping, and by the end of the 19th Century, Arrhenius, a Swedish chemist, got the Nobel Prize, really, in part for his work, did some calculations on how big these effects were. So what I want to emphasize here in response to your very important question is this is 19th Century simple science. Now, what we have had since then is much greater quantification, more detailed modeling of the very complex structure of the atmosphere and so much, which has added greatly to that work, and in recent years has given us a feel for the probabilities, and it is only if you got a feel for the probabilities that you can start to get quantitative on the risk. So that is the way in which I understand that the science has developed and the way in which the laws of physics and chemistry have been folded into this, but I am not a scientist.

gpo114.pdf

Mr. SHIMKUS.

And I appreciate that. I think that part of the problem for a lot of us is that it is a consensus of the scientific community that it is manmade emissions that is the primary driver of this when there are so many other variables that are really never discussed or talked about. Ranking Member Barton always talks about the evaporation aspects. Are you familiar with the Argus buoys that are measuring the temperature of the ocean through different depths as they have been deployed over the past years?

gpo114.pdf

Mr. STERN.

I am aware of that work, but I am sorry, sir, I don't really know much about it.

gpo114.pdf

Mr. SHIMKUS.

The Argus buoys have disappointed global-warning alarmists in that they have failed to detect any signs of eminent climate change, from measuring the change of the ocean through the currents at the different levels. There are a couple other things, and I want to be quick. Some people say to get to where we want to go, it is going to cost $2.50 per ton. You have expounded the cost of inaction is $85 a ton.

gpo114.pdf

Mr. STERN.

I have tried to focus in most of the work on the marginal cost of abatement, how much it costs to get rid of the extra ton. And then on the kind of paths we are thinking about, that might be $40 or $50 a ton of CO2. You then have to compare that, and I think one of your colleagues referred to this earlier, what you think is the marginal damage of a ton of CO2. That is enormously sensitive, and I lay this out carefully in the Ely lecture that I referred to before, the one published in the American Economic Review last month. That is extremely sensitive to the assumptions you make, and in particular, varies greatly across the path. So the more responsible you are in bringing down the emissions, then the lower that cost will be.

gpo114.pdf

Mr. SHIMKUS.

And if the chairman will allow me, Chairman Boucher, I will be real quick, and I apologize for running over my time, I just want to present a premise. You mentioned also about the cap-and-trade, and you also talked about a carbon tax. If we move in this direction, I would like us to be intellectually honest with the public, because the public has to make a decision because there are going to be increased costs. And what is intellectually honest and really easier on the balance sheet is the tax and a portion of the revenues to the solution, versus this cap-and-trade regime, which is a design regime to really confuse the public that there is actually a cost as the cost is passed on by other methods. I think Chairman Dingell had mentioned that at first. Of course, that is part of where I will come because we have to convince the public, and then they have to be willing to accept increased costs, whatever they may be. And I know that in Great Britain, in an article by Colin Brown, deputy political editor of the Independent, on the 2nd of May, more than seven in ten voters insisted that they would not be willing to pay higher taxes in order to fund projects to combat climate change, according to a new poll. And this is a Kyoto-regime accepted country. I met with some British parliamentarians from Scotland, coal regions. The GDP debate is across the board for a specific country, but what happened here in the Clean Air Act, as I have mentioned here in the committee, and I have talked to my environmental friends on the left, yes, you may apportion a moderate increase across the board, but there will be areas of the country that will be greatly disadvantaged in movement in this, and that is where a lot of us will be fighting for a fairer application across the board. Thank you, Mr. Chairman. You have been very gracious. I yield back my time.

gpo114.pdf

Mr. BOUCHER.

Well, thank you very much, Mr. Shimkus. And Lord Stern, we appreciate very much your testimony here today which has been illuminating for all of the members. I think you could see from the range and depth of the questioning, the level of interest that we have in the work that you have done, and we are most appreciative to you. I think you can also see from the questions you received today that there is a somewhat more vigorous debate about whether we need to act on the subject of climate change in this country than exists in the U.K. and in most of Europe. It was a pleasure having you here. We look forward to future conversations with you, and with that, you are excused.

gpo114.pdf

Mr. STERN.

Thank you very much. It was a privilege to be with you. Thank you all for your very thoughtful comments, and vigorous debate must be healthy. Thank you.

gpo114.pdf

Mr. BOUCHER.

Thank you, Lord Stern. We turn now to our second panel of witnesses, and I would ask that they take seats at the table at this time. Ms. Sherri Goodman is the General Counsel of CNA, and the Executive Director of the CNA Military Advisory Board for that organization's project on national security and the threat of climate change. Dr. Anthony Janetos is the Director of the Joint Global Change Research Institute, which is a joint venture between the Pacific Northwest National Laboratory and the University of Maryland. He will testify regarding the effects of climate change on agriculture, land resources, water resources, and biodiversity in the United States, recently released by the U.S. Climate Change Science Program at the U.S. Department of Agriculture. Mr. Jim Lyons is the Vice President for Policy and Communications for OXFAM American. And We welcome each of our witnesses. Without objection, your prepared written statements will be included in the record. We will now welcome your oral summaries. And Ms. Goodman, we will be happy to begin with you. CNA, EXECUTIVE DIRECTOR, CNA MILITARY ADVISORY BOARD

gpo114.pdf

Mr. BOUCHER.

Ms. Goodman, your time has expired by about 3 minutes now, so if you could, wrap up very quickly.

gpo114.pdf

Mr. BOUCHER.

Ms. Goodman, thank you. We are going to need to pass on to other witnesses at this point. Thank you very much for your testimony. Dr. Janetos, please. GLOBAL CHANGE RESEARCH INSTITUTE, PACIFIC NORTHWEST NATIONAL LABORATORY, UNIVERSITY OF MARYLAND

gpo114.pdf

Ms. BALDWIN [presiding].

Mr. Lyons? COMMUNICATIONS, OXFAM AMERICA

gpo114.pdf

Ms. BALDWIN.

Mr. Lyons, I just want to note you are approximately a minute over your time.

gpo114.pdf

Mr. LYONS.

And I will be 30 seconds in wrapping up. How is that?

gpo114.pdf

Ms. BALDWIN.

Thank you, sir.

gpo114.pdf

Mr. LYONS.

We think there are opportunities for investment that go beyond simply those that have been recognized in the past, such as the development of clean-energy technologies. There are investments in water-purifications systems, in climate-risk insurance, a project that we are working on currently with some of the world's largest insurers, and in building a new energy future, not just for those developing countries that we talk about often, and that is China and India, but also for other developing community so they can get on low-carbon pathways as they enhance development. Let me simply close by saying that I think the two lessons that come from all of this is, as the saying goes, the first way to get out of a hole is to stop digging. We clearly need to develop a strategy to address CO2 emissions and to curb their effects, and secondly, we have to recognize the impacts of climate change, particularly for those in vulnerable communities, and particularly in the developing word, not simply as a matter of moral and ethical importance, and not simply because of the environmental consequences, but most importantly because of the social, economic, and global security ramifications if we fail to act. Thank you. [The prepared statement of Mr. Lyons follows:]

gpo114.pdf

Ms. BALDWIN.

Thank you. Dr. McKitrick, you are next. AND DIRECTOR OF GRADUATE STUDIES, DEPARTMENT OF ECONOMICS, UNIVERSITY OF GUELPH

gpo114.pdf

Mr. MCKITRICK.

Thank you, Madam Chairwoman and subcommittee members. I am an Associate Professor of Economics at the University of Guelph in Canada, where I specialize in environmental economics and climate change. I have submitted an extended written testimony, where I discuss a lot of aspects of today's hearing. For my verbal presentation, I just want to highlight three points. The first is that cost-benefit analysis as it has played out over the last few years in the economics literature simply doesn't provide support for deep emission cuts at this time. The Stern Review was not the first time that the economic consequences of global warming were studied. One recent tally points out that it is number 211 in a long series. There have been hundreds of studies looking at the economic consequences if climate-model projections are true. The median costs that emerge from these studies on a pertonne basis fall in the range of about $0 to $20, and because there are relatively few abatement policies available in that range, costbenefit analysis does not support deep emission cuts. The Stern Review, as has been noted, used some methodology and assumptions to generate much higher estimates of the per-tonne costs and fairly low estimates of the abatement costs. Those assumptions have been subject to quite a bit of criticism in the economics literature, not simply the discounting assumption, but other methodologies as well, and I think the Stern Review has been convincingly shown to be an unreliable guide for decision-making. The second point is that if you do choose to act, cap-and-trade is a poor instrument for controlling CO2 emissions. There have been a lot of studies comparing carbon taxes to cap-and-trade instruments. Cap-and-trade, for the same outcome, costs many times more than what a carbon tax would. Cap-and-trade, you should understand, is basically a cartel-forming device. It allows a group of energy producers in this case to restrict output, raise consumer prices, and pocket windfall gains as a result. One study showed that the distortions in the economy from cap-and-trade would be so severe that the very first tonne of emission reduction would begin at a cost between $20 and $55 a ton. So if you do choose cap-andtrade, you have to believe that the marginal damages of CO2 emissions are at least as high as that; otherwise, you are guaranteed to make people worse off by implementing it. The third point, my final point in summation, is that the stringency of any policy that you implement should be tied to the severity of the problem, and the severity should be measurable. It cannot be based on impressions formed by anecdotes or scare-stories, or for that matter offhand dismissals of the problem. There must be some measurable aspect to this that determines how severe a problem it is. So if, for instance, you should go with what I think is the mainstream economics view, the only policy that could be justified at this time would be a low carbon tax. Now, in the future, the carbon tax might be expected to go up, but there is no agreement at what rate it should go up. I would suggest, and I have argued in a number of publications, that future increases in any carbon tax should be tied to the actual, observed mean temperature in the atmosphere. That way, if the people who are concerned about the greenhouse gasses are right, the carbon tax would go up rapidly in the years ahead, and you would get steady emissions reductions as a result. On the other hand, if greenhouse gasses are not really causing much global warming, then the tax won't rise, nor should it— either way, the severity of the problem guides the policy response, and I think it is a common principle in any policy undertaking that you tie the stringency of the policy to the severity of the problem, and I would remind you that that principle should apply in this case as well. Thank you. [The prepared statement of Mr. McKitrick follows:]

gpo114.pdf

Ms. BALDWIN.

Thank you. Next, Dr. Pielke. SCIENTIST (CIRES), SENIOR RESEARCH ASSOCIATE (ATOC), UNIVERSITY OF COLORADO, BOULDER

gpo114.pdf

Ms. BALDWIN.

I would like to thank our panel of witnesses. We will now proceed to a round of questioning by members. And I will start by recognizing myself. admirals and generals who participated agree that climate change was a problem that needed to be addressed or were there divergent views within the group at that point? And if there were divergent views, how did that dynamic evolve as the group heard from scientists and developed its report?

gpo114.pdf

Ms. GOODMAN.

In fact, when we began, I would say that many of the generals and admirals came to the project somewhat skeptical of climate change and human-induced climate change because largely they weren't familiar with the subject. And we spent some considerable period of time educating ourselves, and they learned from meeting climate scientists as well as skeptics. They met with business leaders as well as industry and government leaders and scientists. We traveled to the U.K. and met with leading climate officials there as well as leading British government officials and industry officials. And they really came to believe that this is a serious risk to national security that needs to be addressed now, and that it is prudent to begin to take the proper actions to integrate climate change into national security planning.

gpo114.pdf

Ms. BALDWIN.

I understand, or I think we heard in some of the opening statements that a National Intelligence Assessment for Climate Change is being released this week. What does this report say that is different from the conclusions reached by the CNA, or are the two reports, in general, in agreement?

gpo114.pdf

Ms. GOODMAN.

Well, I would say the National Intelligent Assessment actually validates many of the findings of our report in that climate change is a threat multiplier for instability and the National Intelligence Assessment uses a phrase of ''impact of state stability'' and ''consequences for state stability.'' So they framed it in the terminology that is commonly used in the intelligence community, and they have noted, in particular, the impact on water resources over the coming decades and the potential for migrations, and so I would say, in many ways, the two reports have reached similar conclusions and confirmed that the national security impacts are quite important and warrant attention now.

gpo114.pdf

Ms. BALDWIN.

The Chair would next recognize Ranking Member Barton for his questions for 5 minutes.

gpo114.pdf

Mr. BARTON.

Thank you, Madam Chairwoman. My first question is to Mr. McKitrick. In Lord Stern's analysis, did he include any benefits of climate change, and if so, how did he cost those, like longer growing seasons, more irrigable land, things like that?

gpo114.pdf

Mr. MCKITRICK.

In the Stern Review the cost of greenhouse gas emissions are put into a number of different categories. Some of them are the direct effects, which would be netted against benefits of the type you are talking about. That category, in the end, is very small. Eighty to 90 percent of the costs are indirect effects, which go under headings like social and political instability and knock-on effects, and these categories, I don't think are all that well defined in the report, and it is hard to get details of how the underlying model treats them, or what the parameters were that drove them. But those are the costs that dominate on the cost side of the ledger. So even if there are some assumed benefits from longer growing or increased CO2 fertilization, they are quite a bit overwhelmed by these other cost categories.

gpo114.pdf

Mr. BARTON.

And my next question is to Dr. Janetos and Dr. Pielke. I have begun to see pop up various climate groups talking about the goal of getting to 350 parts per million of CO2 in the atmosphere. And my question is: where does that number come from, and what is the assumption that that is the perfect level of CO2 to have in the atmosphere?

gpo114.pdf

Mr. JANETOS.

I will start if you don't mind. It is not a goal that we address in our report. In our report, what we try to do is look at the data as we understand them today, and not do an analysis of what an appropriate target goal might be. And so what we have done is look at both effects of increased atmospheric carbon dioxide in the atmosphere, longer growing seasons, as you just pointed out. We also look at the issues of the sensitivities of natural environments to phenomena like reduced precipitation, long-term drought, fire, and pests, and so on, which we are also beginning to see. We have made no attempt in our report to establish what a target might be. That is not simply a scientific question. It is also a question about values, and it is not one which we were asked to address.

gpo114.pdf

Mr. PIELKE.

I would answer. I think that is a very good question. I don't know how they come up with that number. And I would also point out that if you want to come up with a number in terms of how we are disturbing the human-climate system, you could do that for land-use change, or you could do it for nitrogen deposition. You could do it for aerosols. And I think the problem we see is they picked one particular disturbance of the climate system as the whole universe that they are looking at.

gpo114.pdf

Mr. BARTON.

Well, is it fair to say that this number does not have a scientific basis?

gpo114.pdf

Mr. PIELKE.

Basically it is above the preindustrial level, but other than that, it doesn't have any reality that I can see.

gpo114.pdf

Mr. BARTON.

I think this is something that you believe: we need to address climate change, and we need to do it sooner rather than later. Are there things we could do that would have a greater costbenefit effect than carbon cap-and-trade, carbon taxes? Are there things like planting more forests, doing something in the oceans? I have heard all kinds of ideas put forward. I just don't have the scientific basis to evaluate them. I have even heard that you just even painted the parking lots in Los Angeles white or silver that that would have a temperature effect. And I am not saying that it would. I am asking.

gpo114.pdf

Mr. PIELKE.

Well, it would, but I think the first thing we have to do is separate climate policy from energy policy, and we are using climate policy to make energy policy, and I think that is a huge mistake. When we look at climate, climate has always been changing, and we have to recognize that we have dealt with that for a long time, and we have been very successful in this country—less loss of life, casts. So I think we need to see what we can do in terms of adaptation to climate, because it has always been varying. And we always have to do things, like you say put white roofs or white parking lots in drier climates and semi-arid climates. That would be a cooling effect, and you would use less air conditioning. But I think the bottom-line message is this is a complex issue, and we need to look at it in an integrated fashion, and there is no simple solution. It would be really great if we could just turn down carbon dioxide and we would prevent droughts and floods, but it is not that simple, and I think that has not been recognized?

gpo114.pdf

Mr. BARTON.

I know my time is expired, but could I have one more question?

gpo114.pdf

Ms. BALDWIN.

Without objection.

gpo114.pdf

Mr. BARTON.

Again, this is not an argumentative question. It is just an informational question. I see all of these allegations that climate change or CO2 increases in the atmosphere are now responsible for violent hurricanes and more violent weather events, but I have not been able to find any scientific or meteorological justification for that. Could the two climatologists on the panel explain to me what the genesis is for that and what the link is?

gpo114.pdf

Mr. PIELKE.

Well, there are conflicting papers in the literature about increases of hurricane intensity. They are based some on data, some on models. The ones that are based on data, unfortunately, are using a data set that is not homogenous in time. So I think the bottom line is we just don't know what is the effect of all of these human disturbances on the climate system. But it seems that if you are from one side or other, you tend to pick an event and say it is attributable to CO2, and I think that is a mistake.

gpo114.pdf

Mr. BARTON.

Global warming is responsible for everything.

gpo114.pdf

Mr. PIELKE.

Right, and I think that is mistake.

gpo114.pdf

Mr. BARTON.

We have a drought; we have a flood. It doesn't matter which way it goes, somebody says it is a global warming issue.

gpo114.pdf

Mr. PIELKE.

Well, our research has shown, I think rather convincingly that it is the regional changes that matter, not the global average temperature change anyway. So we have to be able to understand how the regions change in response to these climate forcings, and we are just not there essentially. So when I hear people say the science is done, it is far from done. If it was done, you wouldn't be funding any more science research, so it is not done.

gpo114.pdf

Mr. BARTON.

Doctor, let us have your view on that.

gpo114.pdf

Mr. JANETOS.

My view is not so different from Dr. Pielke's. I wouldn't pretend to know what the geneses of all of these assertions are. It is, I think, in some sense, a fool's errand to say that this particular storm, or this particular drought or this particular rainfall event or hurricane is the marker for climate change. That is simply making the mistake that a particular event is emblematic of what is a very clear longer term trend of change in the physical climate system. The science on hurricanes is obviously an active scientific debate as to what has happened during the 20th Century. There are some serious model issues with projections. It requires far more computational power than we currently have to do these hurricane projections in a reasonable way. So I think, in some sense, the jury is very much out as to what the future entails in terms of tropical storms. We are quite clear on those particular points in our assessment. What is equally clear is that the longer term trends that we have seen are already having demonstrable measurable effects on natural resources, and that is something that is not a matter of modeling results. It is a matter of data and actual observations, and that is something that I think is important to keep in mind as we consider the fate of these natural resources and the people who depend on them over the next several decades.

gpo114.pdf

Mr. BARTON.

Thank you, and thank you, Madam Chairwoman.

gpo114.pdf

Ms. BALDWIN.

Thank you. The chair now recognizes the gentleman from Utah.

gpo114.pdf

Mr. MATHESON.

No questions.

gpo114.pdf

Ms. BALDWIN.

The Chair now recognizes the gentleman from Illinois, Mr. Shimkus, for 5 minutes of questions.

gpo114.pdf

Mr. SHIMKUS.

No questions? I am impressed. I appreciate the panel being here. I am curious. I just was aged out of the Army Reserves after 28 years served during the Cold War on the border, infantry officer. I think I have a little bit of background in national security and in military affairs. The Japanese went to Southeast Asia for what? Oil. The Germans went into the caucuses for what? Oil. Our dependence upon imported crude oil is a national security concern, and it is such of a concern. I have a couple of questions. I have got zillions, but I will try to be very patient. the nuclear Navy?

gpo114.pdf

Ms. GOODMAN.

Congressman, I support a strong Navy.

gpo114.pdf

Mr. SHIMKUS.

But the question is not a strong Navy. The question is Gene Taylor, my friend from Mississippi, is calling for the expansion of the nuclear navy. It addresses climate. It addresses energy security. Do you support that?

gpo114.pdf

Ms. GOODMAN.

I think we have to look at all of the options to maintain the viability of our Navy.

gpo114.pdf

Mr. SHIMKUS.

Now, you sound like a politician. Yes for expansion of nuclear Navy or no?

gpo114.pdf

Ms. GOODMAN.

I think the Navy, itself, is considering those options now.

gpo114.pdf

Mr. SHIMKUS.

And is that good or bad?

gpo114.pdf

Ms. GOODMAN.

I think if we can maintain the record——

gpo114.pdf

Mr. SHIMKUS.

Do you like nuclear power?

gpo114.pdf

Ms. GOODMAN.

Nuclear power has been excellent for our Navy. There is absolutely no doubt about it. They have an excellent and unsurpassed safety record in managing nuclear power.

gpo114.pdf

Mr. SHIMKUS.

Nuclear power, does it emit any carbon?

gpo114.pdf

Ms. GOODMAN.

Nuclear power is a good, non-carbon——

gpo114.pdf

Mr. SHIMKUS.

You sound like a politician. We are the politicians up here. Does nuclear power emit carbon?

gpo114.pdf

Ms. GOODMAN.

No, it does not.

gpo114.pdf

Mr. SHIMKUS.

The answer is no. Should we expand a nuclear Navy? I believe yes. I believe that one of the greatest challenges to the world today will be fighting over energy resources. We saw it in WWII. We can see it in the future. If you are a climate change believer, the problem that many of us have is you all won't go to nuclear power. The environmental left says no nuclear power, and that is fool hearty. And if we are talking about national security and our military ships traveling around the world and doing warfare, but also doing great humanitarian issues, I support Gene Taylor. For every dollar increase in a barrel of oil, it costs our Air Force, the number one jet-fuel user in the world $60 million. What we have been trying to say is good American coal, good American jobs. It is actually better for capturing and sequestering carbon than a pulverized coal power plant, American jobs to operate this refinery. American jobs to produce in this refinery. Put it in a pipeline, away from the shores, the gulf coast or anything that could be affected by a Katrina, and you pump it to our jet airplanes. If you want to talk about helping the national security environment of this world, it is decreasing our reliance on imported crude oil from unstable places around the world, like Iran, like Venezuela. We have increased our reliance on imported crude oil. The only way we get out of this mess is by developing our own energy resources, which we have in the Outer Continental Shelf, we have in Alaska, we have on the east coast, we have on the west coast. We have in coal in Illinois. So I would hope that my admiral and general friends would talk about how we operate our military war machines in this era of increasing costs and this fight over energy resources, and especially if there is an inability or unwillingness to move to nuclear power. And that is the same argument that our country has to have. We have to move to nuclear. And Mr. Lyons, my time is running real quickly. I would submit that the higher cost of fuel today is currently doing as much if not more damage to the developing world in the food debate and in the food riots than this supposed futuristic concern. I would say, and I think the economists that are here are saying cost-benefit analysis and how do you get the biggest bang for the buck now, and what is the best way to transform? And my last question, because I know I am running out of time. your opening statement, you addressed the difference between a cap-and-trade regime and a carbon tax, and I would like my colleagues to hear this, because I said in my opening statement, if you want transparency, a carbon tax is clearer. But you pose an economic principal that a cap-and-trade regime is also more costly. Can you just briefly elaborate that?

gpo114.pdf

Mr. MCKITRICK.

Yes, thank you for the question. A cap-and-trade regime controls the quantity of emissions and allows the market for permits to determine the price. The government doesn't capture the rents that are created by this regime. What happens is that by controlling the quantity of emissions, the producers of energy who are allocated the permits are able to increase the price that they charge to consumers. That gap, then, doesn't go to the government who could, in principal, at least, reduce other taxes or provide some other means of recycling the revenue to households. Instead it just accrues to the owners of the permits. There has been a lot of work in economics using what are called computable general equilibrium models to compare the effects of carbon taxes and cap-and-trade systems. And there is a kind of hidden mechanism with cap-and-trade in the way that it affects earnings to labor, real earnings, and real income, and those indirect effects, which are called the tax-interaction costs, turn out to be a large category of costs for households, but they are entirely hidden. In terms of transparency, if you are not willing to put a $50 a ton carbon tax in front of the public and say you want to charge them that, it is not fair to do it in the form of a cap-and-trade system where the permit price turns out to be $50, because that is still the same hit for the public, but there is no offsetting benefit in terms of income tax reductions financed by a carbon tax, and that is where the extra costs come in for the cap-and-trade system. And one of the reasons cap-and-trade doesn't work very well for carbon dioxide emissions is there are so few abatement options that firms can't really cut their emissions. They just have to keep cranking up the prices until the demand falls enough that they meet their permit allocations. And because they have very few emission reduction options it is not like sulfur dioxide. It is not like particulates. It just translates into large price shocks for consumers. The carbon tax system allows you to put a cap on the price shock, and that is very important if you are interested in protecting households from the economic consequences.

gpo114.pdf

Ms. BALDWIN.

As this hearing winds to a close, the chair would allow either Mr. Lyons or Ms. Goodman to respond to that same last question.

gpo114.pdf

Mr. LYONS.

I appreciate that, Madam Chairman. Thank you very much. And I appreciate the question, Mr. Shimkus, and I wouldn't disagree with you on the energy-cost quotient. There is front-end cost associated with inputs, and there is certainly a high cost associated with transportation. I guess where I would disagree with you on the notion that there is some futuristic element to climate change. I think all of the evidence would indicate that there are real impacts being felt now, that these are being documented, not only by scientists, but if I could quote from the intelligence estimate that was presented to the Congress yesterday, ''scientific studies indicate that climate change is likely to cause agricultural losses, possibly severe in the Sahel, west Africa and southern Africa. Agricultural yields from some rainfall-dependent crops could be reduced by up to 50 percent by 2020.'' So those represent real, environmental induced costs. I know we are running out of time. And I guess the third thing I would point out is I would be glad to submit for the record if you would like an explanation of the 350 parts per million, the scientific basis for that. I am not an economist, thank God, but I know a little bit about science.