[Senate Hearing 110-579]
[From the U.S. Government Publishing Office]
S. Hrg. 110-579
CREATING JOBS WITH CLIMATE SOLUTIONS:
HOW AGRICULTURE AND FORESTRY CAN
HELP LOWER COSTS IN A LOW-CARBON
ECONOMY
=======================================================================
HEARING
before the
SUBCOMMITTEE ON RURAL REVITALIZATION, CONSERVATION, FORESTRY AND CREDIT
of the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
MAY 21, 2008
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
Available via the World Wide Web: http://www.agriculture.senate.gov
----------
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Washington, DC 20402-0001
SUBCOMMITTEE ON RURAL REVITALIZATION, CONSERVATION, FORESTRY AND CREDIT
DEBBIE A. STABENOW, Michigan, Chairman
PATRICK J. LEAHY, Vermont MICHEAL D. CRAPO, Idaho
MAX BAUCUS, Montana RICHARD G. LUGAR, Indiana
BLANCHE L. LINCOLN, Arkansas THAD COCHRAN, Mississippi
E. BENJAMIN NELSON, Nebraska MITCH McCONNELL, Kentucky
KEN SALAZAR, Colorado LINDSEY GRAHAM, South Carolina
Mark Halverson, Majority Staff Director
Jessica L. Williams, Chief Clerk
Martha Scott Poindexter, Minority Staff Director
Vernie Hubert, Minority Chief Counsel
(ii)
C O N T E N T S
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Page
Hearing(s):
Creating Jobs With Climate Solutions: How Agriculture and
Forestry can Help Lower Costs in a Low-Carbon Economy.......... 1
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Wednesday, May 21, 2008
STATEMENTS PRESENTED BY SENATORS
Stabenow, Hon. Debbie, a U.S. Senator from the State of Michigan. 1
Crapo, Hon. Mike, a U.S. Senator from the State of Idaho......... 2
Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota.. 5
Salazar, Hon. Ken, a U.S. Senator from the State of Colorado..... 5
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WITNESSES
Panel I
Broekhoff, Derik, Senior Associate, World Resources Institute.... 16
Corneli, Steven, Vice President, Market and Climate Policy, NRG
Energy, Inc.................................................... 14
Lubowski, Ruben N., Ph.D., Forest Carbon Economics Fellow,
Environmental Defense Fund..................................... 12
Wayburn, Laurie A., President, and Co-Founder, Pacific Forest
Trust.......................................................... 9
Wittman, Dick, Member, Steering Committee, Agricultural Carbon
Market Working Group, and Former President, Pacific Northwest
Direct Seed Association........................................ 7
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APPENDIX
Prepared Statements:
Broekhoff, Derik............................................. 36
Corneli, Steven.............................................. 50
Lubowski, Ruben N............................................ 53
Wayburn, Laurie A............................................ 87
Wittman, Dick................................................ 100
Document(s) Submitted for the Record:
``21st Century Agriculture Project'', report issued by Senator
Bob Dole and Senator Tom Daschle............................... 104
American Farm Bureau Federation, prepared statement.............. 133
American Farmland Trust, prepared statement...................... 139
American Soybean Association, prepared statement................. 146
The Business Council for Sustainable Energy...................... 149
Coalition for Emission Reduction Projects, ``Effects of Offset
Policies on Compliance Costs:''................................ 155
The Contribution of Pecan Orchard Agricultural Systems to Carbon
Storage and Sequestration...................................... 159
National Milk Producers Federation, prepared statement........... 163
The Nicholas Institute for Envoronmental Policy Solutions,
``Harnessing Farms and Forests in the Low-Carbon Economy''..... 168
CREATING JOBS WITH CLIMATE SOLUTIONS:
HOW AGRICULTURE AND FORESTRY CAN
HELP LOWER COSTS IN A LOW-CARBON
ECONOMY
----------
Wednesday, May 21, 2008
U.S. Senate,
Subcommittee on Rural Revitalization,
Conservation, Forestry, and Credit,
Committee on Agriculture,
Nutrition, and Forestry,
Washington, DC
The subcommittee met, pursuant to notice, at 2:33 p.m., in
room SR-332, Russell Senate Office Building, Hon. Debbie
Stabenow, Chairman of the Subcommittee, presiding.
Present: Senators Stabenow, Salazar, Klobuchar, and Crapo.
STATEMENT OF HON. DEBBIE STABENOW, A U.S. SENATOR FROM THE
STATE OF MICHIGAN
Senator Stabenow. Well, good afternoon. I am so pleased
that all of you are here. This is a very important topic, and
obviously very timely given the discussion that we will be
having in June on the critical issues around global climate
change and global warming. And I am very pleased that Senator
Crapo, the Ranking Member of our Subcommittee, has joined me
and agreeing to convene this meeting, and we are looking
forward to some very important information being shared today
that will help us as we formulate some options going forward
to, I think, make sure that agriculture and forestry are a part
of the solution when we look at what we need to be doing
together.
I believe we have a responsibility to our children and our
grandchildren to address the growing climate crisis that we all
know exists, and agriculture does need a voice in that process,
as I indicated, as part of the solution.
We are here today to learn about the role of agriculture in
reducing greenhouse gases and how we can best incentivize these
reductions in a cap-and-trade system. One way that the
agriculture and forestry community can play a role is through
greenhouse offsets.
As my colleagues know, offsets are greenhouse gas
reductions or sequestrations made outside a regulatory cap that
mitigate other emission sources.
There are numerous types of activities that could qualify
for offsets. I know we will talk about many of them today. And
as the jurisdiction of this Committee suggests, we will focus
primarily on those within agriculture and forestry. Whether it
is soil sequestration on croplands, methane capture from dairy
farms, or sustainable managed forests to prevent deforestation,
as well as grow more and older trees, there are many
opportunities to reduce emissions of quality offsets that
ensure that a ton of carbon reduced is a ton of carbon.
First and foremost, we need to discuss an offset policy to
find additional solutions that reduce greenhouse gases. There
are, however, other benefits to a strong offset policy:
creation of jobs and economic opportunity, increasing and
incentivizing new technologies, providing additional
environmental benefits, and, last but not least, offsets
provide cost containment.
Michigan and the Nation stand to benefit from a strong
offset policy. We are blessed in Michigan not only with a
strong manufacturing base, but also agriculture and forestry
are key to our economic success. And I think that we can
benefit both of those sectors as we look at the issue of
quality offsets. Bottom line, we need to meet our greenhouse
gas emission mandates, and we can if we allow this to be a
policy that is reasonably priced, which, again, goes to the
question of offsets.
Offsets allow for significant cost control. Recently, a
well-respected EPA model analyzed the Lieberman-Warner bill and
found that viable offsets can drastically diminish the cost of
carbon both to businesses and to consumers. For example, if we
do not restrict the amount of verifiable quality offsets in a
cap-and-trade market, the cost savings to the economy may be as
much as 71 percent from a program that does not limit quality
offsets.
There are also other significant opportunities that come
from offsets. With proper management, both forestry and
agriculture could help reduce as much as 25 percent of annual
U.S. emissions. Currently, agriculture sequesters only 1
percent of U.S. emissions, but through items we will talk about
today, we could sequester as much as 10 to 15 percent, which is
why this hearing is so important.
So I am hopeful that we can construct a set of policies
from your recommendations today that encourages as many quality
and verifiable offsets as possible. That way we can make sure
that we are transitioning into a new low-carbon economy in a
way that is economically stable and is one that benefits
consumers in all parts of our economy.
I am looking forward to the panelists, and I will introduce
them in a moment. But let me first turn this over to our
Ranking Member, and I also want to thank Senator Ken Salazar
from Colorado for joining us for this very important hearing.
Senator Crapo.
STATEMENT OF HON. MIKE CRAPO, A U.S. SENATOR FROM THE STATE OF
IDAHO
Senator Crapo. Thank you very much, Senator Stabenow. I
appreciate your working with me and your interest in this
hearing. I think it shows very strong leadership, and I
appreciate that.
I also want to thank our witnesses for being here with us
today to discuss the role of agriculture and forestry in a low-
carbon economy. I especially want to give thanks to Mr. Dick
Wittman for traveling here from Idaho to participate in the
hearing. Dick is a member of the Steering Committee on the
Agricultural Carbon Market Working Group and Past President of
the Pacific Northwest Direct Seed Association. He is a farmer,
a rancher, and a forester from Idaho and a leader in the
agriculture industry on carbon markets. He is also very
valuable in terms of his depth of experience, being a producer
who is voluntarily participating in carbon contracts, and I
value his input and consider him to be an important resource on
these issues.
It has been estimated that agriculture and forest land can
contribute immensely to reductions in greenhouse gas emissions.
For many in agriculture and forestry, carbon offsets represent
opportunities to obtain more value out of the land and new land
management technologies in addition to the possibilities of
reducing the costs of cap-and-trade programs.
Agriculture and forestry offsets are already contributing
financially to some farms and private forestry operations, and
because of their important functions, farmers and foresters
must have a voice in the discussion about climate change
policy. That is why I want to thank you again, Chairman
Stabenow, for holding this hearing today for this important
discussion.
Climate legislation is expected to be considered by the
full Senate soon, and it is important that we are having this
dialog today to increase the awareness of agriculture and
forestry's contributions and to take a careful look at what is
known so far as to how offsets are working in voluntary markets
and how projects can be properly verified and monitored.
Additionally, appropriate attention needs to be paid to
examine both the positive and the negative effects of mandatory
cap-and-trade systems on farmers, ranchers, and foresters. I
commend the work that is being done throughout the agriculture
and forestry communities to collectively look at the most
constructive role for agriculture and forestry in this context.
Many of the witnesses here today have been on the cutting
edge of that effort and in the cooperative work that is taking
place on this issue. It is very productive. Congress is on the
verge of finalizing a new farm bill, and included in that farm
bill conference report is a provision to require the United
States Department of Agriculture to create technical
guidelines, including verification and accounting measures to
determine environmental services benefits from conservation and
land management actions. This provision would also direct the
Department to concentrate first on carbon markets. It is
important because it would better prepare agriculture to take
part in the carbon credit markets through a structure led by
the USDA.
This provision also adds to the significant mechanisms in
the farm bill for improving our environment through
conservation programs. We need to keep these programs in mind
as models when considering climate initiatives and legislation.
No Federal policy has contributed more to enhancing our
environment than the farm bill and the conservation programs
specifically included in it.
I continue to believe that incentives rather than mandates
offer the best way to achieve environmental results on private
land. For that reason, the role of family farms and private
forests as offset contributors rather than capped industries
seem to me to be the most productive approach. It is important
to make certain, though, that throughout the advancement of any
legislation pertaining to this issue, it does not turn into a
mechanism to force certain planting or operating decisions that
may not be in the best interest or make the best sense for a
particular agriculture or forestry operation.
Additionally, it is important that U.S. agriculture sectors
do not get penalized for environmental management in
agriculture sectors outside our borders. For instance, the
United Nations Food and Agriculture Organization cited cattle
rearing as generating more greenhouse gas emissions than the
transportation sector. However, in the United States, cattle
management practices surpassed practices in other countries.
The livestock industry is a vital part of Idaho's economy.
In 2007, Idaho's beef and dairy industries provided 57 percent
of Idaho's overall agricultural receipts with more than $3
billion. It is important for our national economy to ensure
that these sectors continue to be successful to maintain these
industries and the jobs that they produce in the United States.
I encourage everyone to continue to take a hard and
realistic look at all the factors, good and bad, that may
result from a mandatory cap-and-trade system. The effects are
far too reaching to do otherwise.
Some have raised the concern that emissions leakage could
substantially lessen the effects of emissions reductions, and
it is also important to look at how early actors who are
already taking steps to reduce emissions will be taken into
account in the new system. It is also important to examine
proper measurement, double counting, permanence, and the very
serious concerns about the impact of cap-and-trade systems on
agricultural inputs that are already sizable and growing. We
also need to make certain that as tradable units are developed,
they are done in metrics that make sense for agriculture.
For farmers and foresters to be able to assist with
reducing emissions, they must be able to remain on the land.
There are legitimate concerns that implementation of the cap-
and-trade system could result in prohibitive increases in input
costs, such as diesel and fertilizer. Policies should best be
structured to enable agriculture and forestry to contribute to
this effort without compromising their ability to thrive.
I look forward to diving into some of these issues as we
evaluate the discussion today. And, again, I want to thank all
of you for coming here, the witnesses, Senator Stabenow for the
farsightedness in holding this hearing, and good timing as
well. And I appreciate what I expect we will have in terms of
our lively discussion today.
Thank you.
Senator Stabenow. Well, thank you so much, Senator Crapo,
and we want to recognize Senator Amy Klobuchar as well, and,
Senator Salazar, if you would like to take a moment, welcome.
STATEMENT OF HON. KEN SALAZAR, A U.S. SENATOR FROM THE STATE OF
COLORADO
Senator Salazar. Thank you very much, Senator Stabenow,
Chairman of the Subcommittee, and Senator Crapo for holding
this hearing.
I have a statement that I will just submit for the record,
but I want to make two comments.
First, it seems to me that what we did with the farm bill
in Title IX, Moving Forward with New Energy Opportunities for
Rural America, was a major step in the right direction. We gave
the farm bill some real meaning with respect to the energy
future of America that deals with everything from cellulosic
ethanol to geothermal to small hydroelectric to small wind and
a whole host of other things that were in there. And I think
that is very important. And as we move forward in the climate
change debate, one of the things that we will be addressing
again is how we continue to move forward with that clean energy
frontier.
One of the aspects of climate change and carbon control
that we worked on in the Energy Committee for a long time has
been the concept of carbon capture and sequestration, and,
unfortunately, we have not been able to move with the
demonstration projects that we have wanted to move forward with
on that agenda. In my own State, we had a plan in place that
would have put together a major IGCC plant that would allow us
to burn coal and would allow us to sequester the carbon in
geologic formations.
As we look at that concept, I think it is also very
important to understand that those who have sequestered carbon
for a very long time are, in fact, the farmers and ranchers of
America, and I think that this hearing gives us an opportunity
to put the spotlight on how our agriculture and rural
communities can help us deal with the challenge that we face
with carbon emissions and climate change.
So I very much appreciate the hearing. Thank you very much.
Senator Stabenow. Thank you.
Senator Klobuchar.
STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR FROM THE STATE
OF MINNESOTA
Senator Klobuchar. Well, thank you so much, Madam Chair,
for holding this hearing. We are both from Midwestern States
where we have people who not only farm but also people who love
the outdoors. And I do not just hear about global warming
anymore from academics. I hear it from hunters in Hibbing,
Minnesota, who have seen the effects on their wetlands; from
people who go ice fishing on Leach Lake and are having trouble
putting their fish houses on; from business leaders up in
Duluth who have seen the effects on the water levels in Lake
Superior. And certainly if the projections are correct, no one
will feel the impact worse than farmers, who may face more
severe weather, droughts, and storms, and will make their lives
even more unpredictable.
But I also believe farming can be part of the solution, and
that is why I am so glad you held this hearing today. Some of
the cutting-edge research on the cellulosic ethanol, which
Senator Salazar referred to, in the farm bill is at the
University of Minnesota, where they found that we can actually
produce carbon-negative motor fuel from native prairie grass.
That is why that section of the farm bill that provides
incentives for dedicated energy crops is so important.
There are other ways for farmers to fight global warming,
too. There is a farmer in northern Minnesota whose name is
Dennis Haubenschild--that is a good Minnesota name. He tells me
that his cows pay him three different ways: first, his cows pay
him with the milk that they produce; second, with the
electricity that they generate with his methane digester; and,
third, he sells the offsets to the Chicago Climate Exchange for
capturing those greenhouse gases. He has a saying, Dennis does:
``It is only waste if you waste it.'' And it has proven to be
true.
I am very excited about the work we are doing in our State
with wind turbines and biomass gassifiers and all kinds of
things. The times are changing quickly, both in terms of our
understanding of global warming and also what we can do to
fight it. And I am looking forward to hearing from our
witnesses about what Congress can do to help farmers to
participate to the maximum extent in clean energy and solutions
to global warming.
Thank you, Madam Chairman.
Senator Stabenow. Thank you, Senator.
We want to turn to our terrific witnesses, and, Mr.
Wittman, you have been introduced already by Senator Crapo, but
I would just welcome you again as a farmer and rancher and
forester from Idaho, very much a part of creating the
solutions. We welcome you.
Laurie Wayburn, who is President and co-founder of the
Pacific Forest Trust. Laurie is the co-founder of the only
nonprofit organization solely dedicated to preserving,
enhancing, and restoring America's private working forests for
all of our public benefits. With more than 25 years of national
and international experience in sustainability issues, Ms.
Wayburn's current focus is advancing the climate benefits of
forests. She is helping to lead regional and national efforts
to enact climate change policies that unit conservation and
management with market-based incentives to reduce carbon
dioxide emissions. We welcome you.
Mr. Ruben Lubowski, economist and Forest Carbon Economics
Fellow at the Environmental Defense Fund, we welcome you as
well and appreciate your expertise. You are working on the
Climate and Air Program and the Climate Campaign with a focus
on developing domestic and international strategies to
integrate carbon emissions and sinks from forestry,
agriculture, and land-use change into a U.S. cap-and-trade
system and a successor treaty to the Kyoto Protocol. From 2002
through 2007, Mr. Lubowski was an agricultural economist in the
Resource and Rural Economics Division at the U.S. Department of
Agriculture's Economic Research Service. That is a mouthful.
You must have had a big business card on that one.
[Laughter.]
Senator Stabenow. So we welcome you.
Steve Corneli, Vice President of Market and Climate Policy,
NRG Energy, and you coordinate NRG's positions and strategic
initiatives related to climate change issues. We welcome you as
well. Mr. Corneli has previously served as NRG's Vice President
of Regulatory and Governmental Affairs and Director of
Regulatory Policy and has been a frequent witness in FERC
market design proceedings and technical conferences. Prior to
joining NRG, Mr. Corneli served in the Minnesota Attorney
General's Office--there you go, Senator Klobuchar--first as a
utility policy analyst, and subsequently as the manager of the
office's Utility Consumer Advocate Division, with primary
responsibility for energy-related legislative affairs. Welcome
to you as well.
And Derik Broekhoff, Senior Associate with World Resources
Institute. Derik helps direct the greenhouse gas protocol team
at the World Resources Institute and leads WRI's work on the
design of greenhouse gas emissions trading programs, registry
systems, and standards for carbon offsets. He is the primary
author of the WRI WBCSD GHG Protocol for project
accountability--OK--and has testified before Congress on the
development of voluntary market carbon offset standards. Prior
to joining WRI, he worked for 10 years in the fields of energy
and climate change consulting, where he developed financial and
economic analytical tools for carbon market forecasting, risk
management, project evaluation, and business strategy
development for a wide range of private and public sector
clients.
As we can see, we have five wonderful experts here with us
today. I welcome all of you, and, Mr. Wittman, we will start
with you.
STATEMENT OF DICK WITTMAN, MEMBER, STEERING COMMITTEE,
AGRICULTURAL CARBON MARKET WORKING GROUP, AND FORMER PRESIDENT,
PACIFIC NORTHWEST DIRECT SEED ASSOCIATION
Mr. Wittman. Well, Madam Chairman, Ranking Member Crapo,
and members of the Committee, I appreciate the opportunity to
come today and speak about ways that agriculture can help our
Nation mitigate greenhouse gas emissions in a timely and cost-
effective manner.
As Senator Crapo already gave my resume, I will not
reiterate that. But I would summarize by saying; being a
manager of a crop and livestock and timber-managing operation
really means, we are``carbon managers''. The more we start
thinking about the most important resource that we manage
carbon and it is only through that resource that we do all the
things we do in the natural resource provider industry, it
brings to bear what this issue today is all about.
For the last 3 years, I have been part of a national
steering group of ag leaders studying carbon markets and
climate change. On behalf of that group, the Ag Carbon Market
Working Group, I commend you for looking at cost-effective
strategies to achieve greenhouse gas emissions.
Science has proven that ag lands have great potential for
sequestering carbon. Sequestration is a proven sink that
offsets the impact of emissions. Analysis by the Pew Center
indicates that agriculture can provide up to 40 percent of the
reductions that we are hoping to achieve by 2010 compared to
1990 levels. Consumers and resource providers have concerns,
and we cannot discount those concerns as they relate to
potential negative impacts from a carbon-constrained economy.
No one wants to face increased costs and uncertainties that
could derail economic progress. But, in my view, the question
is: Do we pay now, or do we pay more later? There is a
continuing increasing cost of ignoring this issue.
Our working group has studied emissions mitigation
strategies all across the U.S. and globally. We have learned
that, with the right incentives and education, there is no
limit to the technologies and practices that businesses and
consumers can tap to reduce negative impacts on our climate.
The organizations that I represent urge you to recognize the
diverse mitigation options that agriculture can offer. These
include things like conservation tillage, forestry and
agroforestry, reducing methane from manure and ricelands,
precision ag efficiencies, displacing fossil fuel with
renewable energy and reducing nitrous oxide emissions from
croplands. Allowing market-based carbon offsets as part of a
national cap-and-trade program provides both a cost-containment
measure for emitters and a shock absorber to our economy. A
cap-and-trade system helps make it profitable for farmers and
foresters to invest in environmental stewardship.
As an energy-intensive industry, agriculture is sensitive
to energy prices. It is in all of our best interests to create
incentives for transitioning to alternative energy that is both
affordable and less damaging to our environment. Greenhouse gas
offsets can play a huge role in creating those incentives.
The EPA and others have modeled cap-and-trade bills, such
as Lieberman-Warner, and they have concluded that domestic and
international offset provisions in Senate bill 2191, capped at
the 15-percent level, could reduce allowance prices by 93
percent over what they would be without these offsets. If we
had unlimited ag offsets, those prices could fall even further.
EPA has also confirmed that if we have unlimited offsets, this
will not hamper technological innovation, but will reduce costs
of the entire cap-and-trade system.
Many organizations are pursuing or already engaging in
carbon aggregation services. Soil carbon credits can be
generated and traded in the greenhouse gas markets with
absolute confidence. My personal experience bears this out. In
2002, the Pacific Northwest Direct Seed Association penned one
of the first contracts in the United States--and, frankly,
throughout the world--to engage in a voluntary carbon offset
trade. We contracted with Entergy Corporation in Louisiana to
direct-seed cropland for 10 years that would sequester 30,000
tons of CO2.
Carbon trading has proven that education and incentives
related to these offsets can result in significant changes in
farming practices. That is what this hearing is all about. We
want to change behavior, and those changes in behavior can
result in both economic viability as well as environmental
improvement.
Emissions offsets that the ag sector can provide are high
quality, they are measurable, and they are verifiable.
Scientists have studied this for years. Soil carbon
sequestration also has many benefits that go beyond greenhouse
gas emissions reductions: It improves air and water quality,
reduces soil erosion, enhances moisture retention, and improves
soil productivity.
A sad fact for our industry is that agriculture has lost
over half the native organic matter in our farming soils across
the U.S. over the past 300 years. This has resulted from
tillage, wind, and water erosion. Practices such as direct
seeding--or no-till--are reversing this trend. By sequestering
carbon, we are strengthening soil quality, not further
degrading it. We are also reducing fossil fuel consumption on
the farm. No other sector can offer such high-value offsets to
society at such a low cost.
As we move to a mandatory greenhouse gas system, buyers
will demand projects that pass rigorous measurement and
verification tests. The dairy industry is doing this, as you
have indicated. Those who say agriculture cannot offer a real
mitigation solution are simply wrong. U.S. agriculture and
forestry are some of the only sectors with currently available,
high-quality, low-cost, verifiable emissions reductions
technologies.
Mitigating and solving our climate crisis will not be easy.
Other world players were initially hesitant to include ag and
forestry as part of the solution. That was a mistake. They are
now incorporating ag and forestry as vital components of their
climate mitigation strategies. Here is an area where the U.S.
has a unique opportunity to provide an international leadership
role by crafting reasonable and innovative ways to include ag
and forestry offsets as part of the total solution. Agriculture
is ready and we are willing to meet this challenge.
Because of our conviction that we can mitigate emissions,
the Ag Carbon Market Working Group has endorsed unlimited
offset markets. So has a report just released by former
Majority Leaders Daschle and Dole. On behalf of the Bipartisan
Policy Center, I would respectfully ask that this report be
submitted for the record.
Senator Stabenow. Without objection, it will be.
[The report can be found on page 104 in the appendix.]
Thank you again for the chance to speak to you today, and I
will gladly answer any questions and assist you in crafting
responsible policies as we move forward.
[The prepared statement of Mr. Wittman can be found on page
100 in the appendix.]
Senator Stabenow. Thank you very much.
I should mention to the witnesses and members, I think the
clock was not working for a while, but I think it is on now. So
if everybody has--there we go. OK. We will ask members to keep
their comments to 5 minutes, our witnesses, and we have lots of
questions for you.
Ms. Wayburn.
STATEMENT OF LAURIE A. WAYBURN, PRESIDENT, AND CO-FOUNDER,
PACIFIC FOREST TRUST
Ms. Wayburn. Good afternoon, Chairman Stabenow, Senator
Crapo, members of the Subcommittee. I would like to thank you,
as well as everyone else has, for holding this most important
hearing, for the role that forests and farms can play in
climate policy is not to be underestimated. I am honored to
testify on the potential of private working forests in
addressing the challenge of climate change. We look forward to
working with you as you integrate the forest and farm sector
into an economy-wide climate strategy.
The forests can and should, indeed probably must, play a
significant role in mitigating climate change. They are an
essential tool to help address this enormous challenge. Their
inclusion will enable the most cost-effective, rapid, and
durable climate gains, which will also catalyze multiple
additional economic and public benefits from our forests, from
sustainable clean energy alternatives to ecosystem restoration
to hundreds of thousands of new sustainable jobs. Harnessing
the power of our forests and climate policy will harness a key
competitive advantage of the United States in the burgeoning
global climate marketplace.
Taking advantage of our Nation's natural assets, deploying
their proven capacity--if you will, they are the original
carbon capture and storage--will help heal our climate. They
can absorb excess CO2 from the atmosphere and store it safely
for hundreds to thousands of years, in the forest, in products,
and in substituting for fossil fuels.
As you mentioned in your kind introduction, I am President
of the Pacific Forest Trust, the Nation's leading nonprofit
organization dedicated to protecting America's private working
forests for their many public benefits, including climate
stabilization, and I would suggest, as our prior speaker has,
that this indeed may be their most important contribution now.
We own, manage, and conserve working forestlands. We
directly conserve working forests valued at over $160 million
and work on millions of acres across the West. But we have also
been instrumental in advancing the role of forests in
California's climate change policies, which are the first
economy-wide in the country; in the Northeast's Regional
Greenhouse Gas Initiative; in the Western Climate Initiative in
Washington State; and a number of others. We have worked on
this issue since 1993.
So in my remarks today, I will address the potential of
forests in offsetting and reducing net carbon dioxide emissions
as well as the lessons learned from our experience in
California developing climate policy and climate markets, where
we have, in fact, developed the first State-compliant project
to meet emissions reductions targets, and we have now sold over
80,000 tons of emissions reductions into this country's first
pre-compliance market.
Our experience shows that forest emissions reduction
projects are realistic, cost-effective and practical tools.
They conserve and restore private working forests, they
economically sustain forest owners, and they ensure the long-
term delivery of public benefits from water to wildlife, as
well as wood. And in addressing the challenge of climate
change, we welcome your inclusion of these sectors in order to
create an effective economy-wide system.
Very simply, forests absorb and hold CO2 when they grow,
and they release it when they are converted, lost to
development, or when they are disturbed. In fact, the United
States shares this global problem of forest loss and
degradation that we are now seeing recognized so strongly in
international negotiations.
We lose 6,000 acres a day of forest and open space in this
country. Over 4,000 of those acres are forests. That is 1.5
million acres of forests a year. Every year, we lose forests
the size of the State of Delaware. When we lose those, we lose
all the carbon stocks that they hold and all their future
sequestration and climate benefits they bring. So we share this
with the global situation.
But this problem is also an enormous opportunity for the
United States, for in the United States we actually have the
legal structures, the governance, and the science to do
something about that forest loss today, and to do so in a
credible, verifiable, and enforceable manner. We can put our
forests to work today in fighting climate change.
By doing that, we can reduce net CO2 emissions by tens of
billions of tons in the next 50 years. Three simple actions--
reducing forest loss, restoring forest carbon banks, and
reforesting former forests--will bring us those benefits. We
can measure those in ways that can be very precise, using
methods that are well accepted and in wide use. And this will
be based on existing legal institutions and governmental
systems. This distinguishes us globally.
My time is running down here, so I am going to switch over
to showing where we have done this in the State of California.
In adopting a compliance system with a Cap, California
integrated forests into that as part of early action measures.
My organization recently completed the first project that met
those compliance targets. That is on 2,200 acres in Northern
California where we are using forest management to both
conserve and restore the forest carbon banks there.
We recently sold 60,000 tons of certified emissions
reductions to Natsource, a leading global emissions and
renewable energy asset manager, which purchased these--this is
their first investment in the United States of any sort. They
purchased these believing that forest offsets are a key policy
tool in the portfolio of activities to address climate change.
A number of other purchases have been made as well, such as by
our Governor and by the Speaker, who wanted to have high-
quality, State-backed emissions reductions.
But the project is also providing other public benefits:
sustainable flows of harvest of timber, and the restoration of
habitat for endangered species, indeed, spotted owls have
recently been sighted on the property. So we are managing for
climate, for timber, and for spotted owls. We are adding a net
asset value, net present value of over $2,000 per acre for this
landowner, and that is not negligible, and that is
complementary to sustainable timber.
So these forest offset projects are an important step in
developing a robust carbon market. We have received countless
inquiries for purchasing these emissions reductions and from
landowners to create these emissions reductions.
What this shows is that when you have the right policy, the
market will follow. In looking at Federal cap-and-trade
legislation, incorporating a system such as in California will
create the kinds of incentives that private landowners need to
manage their lands to produce the climate benefits we need to
address climate change. In doing so, we can provide also
hundreds of thousands of clean, very green jobs through
managing our forests for these products.
In conclusion, I would like to suggest that forests are not
only a bridge to a low-carbon future, they are a key component
of a long-term integrated strategy in U.S. climate policy.
Thank you.
[The prepared statement of Ms. Wayburn can be found on page
87 in the appendix.]
Senator Stabenow. Thank you very much.
Yes, Dr. Lubowski.
STATEMENT OF RUBEN N. LUBOWSKI, PH.D., FOREST CARBON ECONOMICS
FELLOW, ENVIRONMENTAL DEFENSE FUND
Mr. Lubowski. Good afternoon, Madam Chairwoman and
distinguished members of the Subcommittee. I greatly appreciate
the chance to talk with you today about the critical role that
agriculture and forestry can play in moving our Nation and the
world to a low-carbon future.
Last August, I attended a workshop in Des Moines organized
by the American Farmland Trust, the Farm Foundation, and the
Natural Resources Defense Council. This event brought together
27 farmers to share their views on the market opportunities of
a low-carbon economy. I was struck by a widespread recognition
of the potential this holds. One participant summed up the mood
of this meeting by saying, ``Agriculture will be in the carbon-
constrained world. This is one way we can share costs and
spread societal benefits. Agriculture is a system, and it is
involved.''
Overall, the strong message from this meeting was that crop
and livestock producers want to be engaged in a climate change
solution, designing its policies and harvesting its benefits.
These benefits are hard to ignore. Carbon promises to be a
bumper crop for U.S. agriculture and forestry if we put the
right policies in place to reward the farming, forestry, and
ranching practices that reduce greenhouse gas emissions. The
rewards, according to an analysis of legislation similar to the
Lieberman-Warner Climate Security Act, could total more than $8
billion a year for American farmers alone. This is more than
the value of the entire U.S. wheat crop. So it is not--this is
a very significant amount.
My testimony today will cover three key points:
First, our farms and forests have enormous potential to
deliver major environmental benefits and provide a crucial form
of cost control as we move to a low-carbon economy.
Second, a framework of different quality assurances can
safeguard the value of investments in carbon-friendly forestry
and farming practices.
Last, a system that credits reductions in tropical
deforestation is a major opportunity to control costs in a cap-
and-trade system, but the chances to do this are literally
vanishing as we speak. This is an opportunity we cannot afford
to miss to engage key developing nations in the global effort
to control greenhouse gases.
To begin, agriculture and forestry activities have great
potential to provide cost-effective climate solutions that
deliver other environmental benefits as well, as we have
already heard. Our vast rural land base is one of our great
national assets. Climate-friendly agricultural and forestry
practices can reduce emissions of gases that cause climate
change and that can also actually remove these gases from the
atmosphere. Whether in agriculture, forestry, or rangeland
management, our rural economies possess tremendous potential
for growth in a new industry of climate solutions.
By driving changes in land-use and land management
practices, markets for offsets can also create substantial
public benefits in addition to climate change mitigation. For
example, practices that conserve soils and reduce fertilizer
inputs would reduce the amount of pollution entering our
waterways. A well-designed offset program will also provide
major new opportunities for American entrepreneurship because
there will be money to be made by finding new and better ways
to sequester carbon and otherwise reduce emissions from
uncapped sectors. A well-designed offset program will stimulate
technical research and business innovation in America's rural
economies.
The potential impact of carbon-friendly changes in land-use
practices also extends far beyond our borders. The destruction
of forests in the tropics emits massive amounts of carbon
dioxide, approximately 20 percent of global greenhouse gas
emissions. This is roughly as much each year as all the CO2
emitted by all the fossil energy consumed in the United States.
When forest carbon emissions are included, the third and
fourth largest emitters of greenhouse gases in the world are
Indonesia and Brazil, respectively. We have an opportunity to
reap the benefits of these low-cost, high-value emissions
reductions through recognition of tropical forest protection
activities in our own carbon market. It is critical that we
seize these opportunities not only because of the climate
benefits, but also because of the tremendous impact agriculture
and forestry offsets can have on controlling the costs of a
transition to a low-carbon economy. Offsets broaden the set of
available options for complying with the requirements of
climate policy by allowing companies greater flexibility to
make emissions reductions wherever they are cheapest across
both the economic and physical landscape.
Where there is potential to bank allowances for use in
future periods, in addition, offsets allow companies to buildup
reserves of low-cost abatement solutions that can serve as a
buffer against unexpected swings in future allowance prices.
Agricultural offsets are among the lowest-cost of all the
land-use options, and several analyses have shown that these
offsets to be the low-hanging fruit.`` Economic analyses have
confirmed the cost-mitigating value of both agriculture and
forestry offsets.
My second point is our system of quality assurances built
in to a cap-and-trade program can substantially mitigate
concerns over offset quality. An offset program can provide
real reductions in greenhouse gas emissions only if the offsets
represent real reductions that are measurable, verifiable, and
enforceable.
In my written testimony, I describe a two-part framework of
options to meet the need for quality assurances, both at the
scale of individual projects and at the level of the overall
program.
Firstly, the prime example is right here of all the
experience that already exists on ensuring quality at the
project level. This is a manual published last year by Duke's
Nicholas Institute for Environmental Policy Solutions, along
with EDF and a panel of highly regarded scientists.
A range of approaches should also be considered to ensure
quality while providing market incentives for offsets. For
example, an enhanced national and regional accounting system
could be used periodically to compare expected performance from
a sector's offsets to estimated changes in greenhouse gases
measured in a national inventory for that sector. In my written
testimony, I also describe a potential true-up process for the
forestry sector that could permit the use of improved
information on changes in land-use practices to assess and, if
necessary, adjust the parameters of the offset program.
My final point is that policymakers have a time-limited
opportunity to simultaneously engage developing nations and
reap enormous greenhouse gas benefits through market incentives
to reduce tropical deforestation. My written testimony
describes the results from a modeling exercise we conducted at
EDF that shows that inclusion of tropical forest credits can
substantially reduce the overall cost of a U.S. cap-and-trade
program similar to the version of S. 2191 that came out of
Committee. Opening America's carbon market to these
international forest tons would also create a model for
engaging developing countries broadly in solving the climate
problem.
On the other hand, if the world waits a decade or two to
create powerful incentives for compensating those who protect
tropical forests, the forests and the approximately 300 billion
tons of carbon they contain will already be gone.
In short, the benefits of domestic agricultural and forest
offsets, as well as international forest carbon credits, should
not be overlooked. They offer an immediate opportunity to
reduce emissions at home and abroad, and with the right rules
and standards, they can substantially shrink compliance costs
without compromising the integrity of a strict emissions cap.
Thank you for your attention. I look forward to your
questions.
[The prepared statement of Mr. Lubowski can be found on
page 53 in the appendix.]
Senator Stabenow. Thank you very much.
Mr. Corneli.
STATEMENT OF STEVEN CORNELI, VICE PRESIDENT, MARKET AND CLIMATE
POLICY, NRG ENERGY, INC.
Mr. Corneli. Thank you. Good afternoon, Chair Stabenow,
Ranking Member Crapo, Senators. It is wonderful to be here and
to have this opportunity to talk about offsets, which are
probably one of the three most critical issues facing
decisionmakers in designing an effective climate change
program, the other two, in our view, being the rate of emission
reductions and the whole question of allocations. These three
things together will be critical in determining the economic
impacts and environmental effectiveness of any climate change
legislation, and agriculture and forestry are very significant
in the equation because they both contribute large amounts of
greenhouse gases that are hard to regulate under a cap-and-
trade system and, thus, are ideal candidates for providing
offsets. And at a personal level, one of the things you did not
mention in introducing me was that before I moved to Minnesota,
I spent 12 years managing our family's potato and vegetable
farm of 700 acres in Wisconsin, and I know firsthand from that
experience how eager rural America is for the kinds of business
and environmental opportunities that high-quality offsets can
create in agriculture and in forestry.
Now, offsets are also critical for our company as well. We
are a major power producer. We own and operate 23,000 or so
megawatts of power plants throughout the Northeast, the South,
and California. Seven thousand megawatts of those power plants
are coal-burning power plants, and we are one of the largest
emitters of CO2 in the United States, probably the seventh
largest in the power sector. Last year, we emitted 61 million
metric tons of CO2. We are not particularly proud of that fact,
but we are proud of providing low-cost, reliable power, and
coal is part of the equation that makes that possible.
On our own, we are aggressively working to reduce our own
carbon emissions by developing new low- and no-carbon power
plants, including nuclear, wind, and post-combustion and pre-
combustion IGCC carbon capture and sequestration. But these
kinds of voluntary efforts like we are doing we think are
simply not enough. Like the other members of USCAP at the table
here, EDF and WRI, we believe that there has to be a mandatory
U.S. cap-and-trade system to regulate carbon emissions, and we
need this as soon as possible to send a market signal for the
rapid investment in low-carbon technologies across our entire
economy.
There are two reasons we are so interested in offsets.
First, under any cap-and-trade system, we are going to be a
major buyer of allowances. We favor a bill that would have a
mix of auction and allocations, like the Lieberman-Warner bill
does. Under that bill, we would get enough pre-allowances for
about 46 percent of our emissions and would have to buy the
rest, about 33 million allowances in the first year. If we can
buy offsets for less than those allowances, we will buy as many
as the law allows. That is simply in our own interest to do so.
But more than our own interest, the basic laws of supply
and demand mean that the use of ample amounts of offsets,
because they are anticipated to be less costly than many of the
emission reductions in the regulated sector, should not only
lower prices for us but should lower prices for consumers
throughout the U.S. economy. And this will help protect our
economy during the transition to low-carbon technologies while
helping limit climate change. This great potential from offsets
to make climate change legislation more effective and less
burdensome to consumers and our economy is the main reason we
are so excited about offsets. But that can only happen if the
right things in the policy arena happen. So here are the five
things that we think are most important.
The No. 1 issue, probably the most important issue of all,
is we need climate change legislation now. Just as an example,
we are trying to buy offsets ahead of time. We can buy them
through the Regi markets because the rules are established. We
cannot buy offsets that will qualify under the United States
cap-and-trade program because those rules do not yet exist.
Nobody knows what will qualify. Nobody knows how to produce or
buy those offsets. So we need to get the market rules out there
in a way that is friendly to business, friendly to the
environment, and that will unleash innovation in new
technologies. We feel that the entire carbon-related investment
scene, whether it is power plants, automobiles, offsets, were
all frozen in the headlights without clear rules. So that is
the No. 1 thing.
Second, there have to be reasonable opportunities for using
offsets for compliance. As you have heard, various modeling
exercises suggest that more offsets result in lower prices. We
think this is critically important, but it is important not to
ask for too much because, as any farmer knows, too much of a
good thing can cause the price to crash, and too low of a price
that could happen perhaps from unlimited offset use would not
necessarily be in anybody's interest. So it is important to get
the quantity right and the price right.
Third, high-quality offsets are critical. We look for
contractual guarantees that we will not be at risk for offsets
that fail to meet quality compliance requirements, and that
means it is in everybody's interest, sellers and buyers, to
have high-quality offsets.
We think that there has to be a mix of domestic and
international offsets. Again, the same modeling from the EPA,
EIA, and others suggests that domestic offsets alone may not be
enough to achieve the balance that is needed in terms of price
and quantity. And high-quality international offsets,
especially the ones from the reduced deforestation that Dr.
Lubowski talked about, we think are critically important.
And, finally, on that note, a mixture of project-based
offsets and sector-based offsets. Project based offsets--which
are things that entrepreneurs go out--they put in the methane
capture in the feedlot in the livestock operations, and they
sell those offsets to people like us. Those are important. But
sector-based ones, such as the Government of Brazil reducing
deforestation in Brazil, or other sectors that cannot easily be
regulated, also are important.
So that about sums it up. We need action. We need climate
change legislation from Congress and signed by the President
quickly. We need fair rules about offsets. We need ample
amounts of offsets, and we need clarity in the ability to get
on with investing.
Thank you very much.
[The prepared statement of Mr. Corneli can be found on page
50 in the appendix.]
Senator Stabenow. Thank you very much.
And last, but certainly not least, Mr. Broekhoff.
STATEMENT OF DERIK BROEKHOFF, SENIOR ASSOCIATE, WORLD RESOURCES
INSTITUTE
Mr. Broekhoff. Thank you, Madam Chair and distinguished
members of the Subcommittee. Thank you for this opportunity to
testify about the potential role of agriculture and forestry in
achieving a low-carbon economy. My comments today are focused
on the basic requirements for carbon offsets under an emissions
trading program and how agriculture and forestry projects that
reduce or sequester greenhouse gas emissions may fare against
those requirements.
My own study of the issues suggests that agriculture and
forestry have an important role to play in lowering the costs
of mitigating climate change. At the same time, many types of
agriculture and forestry projects may have a harder time
meeting the basic criteria for carbon offsets than projects in
other sectors. It may be more effective to support these kinds
of projects through methods other than a carbon offset program.
To understand the issues involved, it is important to
clearly define the function of a carbon offset in an emissions
trading system. Fundamentally, a carbon offset is a reduction
in greenhouse gas emissions that is achieved to compensate for,
or offset, an increase in emissions at another source. To serve
this function, carbon offsets need to meet five basic criteria.
First, carbon offsets must be real. They must reflect a
complete accounting of a project's effects on emissions. Any
unintended increases in emissions resulting from a project, or
leakage, must be fully accounted for.
Second, carbon offsets must be additional. This means they
must involve reductions that would not have happened in the
absence of a carbon offset program.
Third, carbon offsets must be permanent. Offsets that are
prone to reversal through fire, harvesting, or other
disturbances must have measures in place to compensate for when
this occurs.
Finally, carbon offsets must be verifiable and they must be
enforceable.
The biggest challenge for any carbon offset program is
finding practical methods to ensure that offsets are real,
additional, verifiable, permanent, and enforceable.
Fortunately, a lot of work has been done to develop methods for
doing so under a variety of programs, both international and
domestic, some of them already mentioned here today.
The standards developed under these programs would have to
be carefully evaluated to determine their compatibility with a
Federal regulatory offset program, but there is a large body of
work to build off of. The larger challenge is deciding which
types of projects to include in a carbon offset program.
Generally speaking, emission reductions with the lowest
uncertainty about their quantification and additionality make
the best offsets. Projects that capture and destroy landfill
methane, for example, are highly credible because their effects
can be directly measured, and there is little uncertainty about
their additionality. Projects that sequester carbon, on the
other hand, including reforestation, forest management,
agricultural land management, and avoided deforestation
projects, can be more challenging. This is because, compared to
other types of projects, their effects can be more difficult to
measure; their reference cases can be more difficult to
establish; they are more prone to leakage; and their emission
reductions are subject to reversal.
In most cases, it is possible to compensate for these risks
and uncertainties. But reducing uncertainty means increasing
costs. It may be that these added costs can be borne by a
carbon offset market, but it is also worth considering whether
the climate benefits of these projects could be achieved in
ways that avoid all the costs necessary to certify them as
carbon offsets. If such costs could be avoided, then more
reductions could be achieved for the same expenditure of
resources.
One way to do this would be to encourage projects with high
quantification uncertainties through a separate program of
direct payments or other kinds of incentives. Unlike offsets,
reductions achieved through direct payments, for example, would
not have to compensate for increased emissions at other sources
and, therefore, would not have to be subject to the same levels
of scrutiny in terms of measurement, additionality, leakage,
and reversibility.
Further study is needed to determine which types of
projects might best be encouraged through an offset program and
which might be better achieved through other methods. In the
meantime, it makes sense to design policies that keep both
options open for a variety of emission reduction projects.
Thank you very much, and I am happy to answer any
questions.
[The prepared statement of Mr. Broekhoff can be found on
page 36 in the appendix.]
Senator Stabenow. Thank you very much. We appreciate all of
your testimony.
Let me first start by really asking a question related to,
Mr. Broekhoff, what you were saying at the end in terms of
being able to measure offsets. Obviously, we want to make sure
that whatever is being done meets the kinds of things you are
talking about. It is real, it is new, it is additional, it is
enforceable, permanent, verifiable, and so on. But we have
heard slightly different things as it relates to forestry and
reforestation and so on. And so I am wondering if anyone else
on the panel, if Dr. Lubowski or Ms. Wayburn, you were kind of
looking over--from the look on your face, I thought maybe there
was a little different perspective that you had in terms of
measuring as we talk about reforestation and so on. But I
wondered if either of you would want to comment about that as
verifiable offsets, credible offsets.
Ms. Wayburn. I would agree with Mr. Broekhoff that these
are key issues that have to be addressed, and I think that
these have affected how people think about forests and forest
emission offsets. However, I think we should draw a distinction
between where those uncertainties really exist and where they
don't.
I was suggesting that there is a distinction between what
we have available in the United States in the way of science
and systems and good governance that enable the precise
measurement, that enable the tracking and verification, that
enable the transparency to be able to quantify forest emissions
reductions with very high certainty. And, indeed, I would say
they have to be. The only way we can create offsets that are
fully tradable is to meet those same standards, and I believe
we have done that in California, because we are now in a pre-
compliance market.
I do agree that uncertainties in measurement exist in
forests that we do not yet understand and that we may wish to
take a different approach for forests where we cannot measure
them as accurately as we can in the United States and use those
systems to help buildup, if you will, to the science and
institutional credibility and governance that will enable the
kind of accuracy that we want to see in a full trading market.
But I believe that we have every capacity in this country to
meet all of those requirements, and, indeed, in California's
State legislation, AB 32, which sets a cap, all of those
requirements--real, additional, permanent, verifiable, and
enforceable--are required and forests are accepted in that
regime as offsets through early action.
Senator Stabenow. Do you believe that it is more difficult
from an international offset perspective than it is
domestically as we are looking at forests and offsets?
Ms. Wayburn. I think we need to do both. This is such a
critical issue. When we look at the net excess of CO2 in the
atmosphere today, between 40 and 50 percent of that comes from
forest loss and degradation. That is both in the tropics and
here. So we need to do both. I am suggesting that we may want
to take slightly--we may want to take similar but parallel
approaches domestically and globally so that domestically we
have the systems to be fully tradable to meet those offset
criteria and to do it with all the measurement and verification
down to the very precise 0.01 statistical accuracy. And,
globally, we may not be able to meet that, so we might want to
have a different system that we look at which has a different
kind of discounting approach globally, where what we are really
concerned about is not so much that precise measurement on an
annual basis and verifying it and visiting it, but we are
using, for example, remote sensing to see if those forests are
still there or not and we make direct payments annually to
ensure that; and that as we buildup the science there, we can
have exactly the same kinds of systems and perhaps that in the
U.S. can help inform that globally. But I think we need to do
both.
Senator Stabenow. Dr. Lubowski, you talked also about
international--the importance of addressing what is happening
internationally as well as domestically.
Mr. Lubowski. Yes, and, generally, we think that
incorporating international forest credits is a tremendous
opportunity that should not be missed, and it is an opportunity
that, you know, we are losing as we speak. So for that reason,
it is very important to get those greenhouse gas benefits,
which also, you know, have this potential to offer cost control
for U.S. companies and in this way also reduce costs for U.S.
consumers.
Going back to the monitoring question, I just first of all
want to concur that absolutely monitoring and verification have
to be done and are a key part to ensuring the quality of these
offsets. And, you know, that is essential for having a robust
market where, you know, producers can get fair value for their
product and also where the purchasers can have certainty of
what they are buying.
You were asking about monitoring in the forestry case
versus maybe in terms of some other offsets from agriculture,
and one issue here is that for soil carbon, you really have to
get into the ground to measure it; whereas, forests can more
easily be monitored from space.
I am not a remote-sensing expert, but I have been told that
there are some ways you can actually get some idea about soil
carbon from space. But in the forestry case, this is a lot
easier and a lot more precise.
So that is one of the reasons why in my testimony we
discussed this national accounting system and improved national
inventory with a potential provision for over time, if we are
not getting all the reduction from the forest sector that we
expected, there might be some room for a true-up.
Conversely, you know, we might get more than we expected,
and then we--you know, we would not have to worry about that.
But the key is that, you know, we can do the monitoring from
space and also that it is very important to build a program
that over time will gather more and more data and more and more
information and have the flexibility that as we get this data,
we can then improve the program, refine the protocols, and make
things better as we go along.
Senator Stabenow. Thank you.
To any of the panelists that want to answer, we will be
having in front of us a very important work product regarding
global warming coming before the Senate in June, a very
important piece of legislation, a lot of work, bipartisan and
so on. What would you--would anyone want to speak to how you
would improve on this as it relates to offsets? What do you
think would be the--whether it is the number, whether the
percentage that is in the bill right now, or the language in
terms of types of offsets, do you feel that the language--and I
know we will have a substitute or a manager's amendment. We
will have to take a look at the final language. But do you feel
that the language, in terms of offsets and the kinds of things,
whether it be agriculture or forestlands and so on, are broad
enough to cover all of the things we are talking about? Or do
we need to do some work as it relates to the description of the
offsets as well? But it would be helpful to know any
suggestions that you would have. Yes, Mr. Corneli.
Mr. Corneli. Senator, the comments I will make are about
the bill as it was reported out of EPW. There is certainly a
lot of uncertainty about what it is going to look like soon.
But the two areas that we think would be improvements in the
bill compared to how it was when it came out of EPW would be,
first, to make it clear that when it comes to offsets, the 15
percent that was allowed for compliance for international
credits would instead be clearly specified that those could be
international offsets--a credit being something like what is
traded as an emission allowance in the EU, not an offset per
se. We think that is very important. And that would, in effect,
convert the bill from 15 percent to 30 percent offsets.
We also think it is very important that the idea of these
avoided tropical or avoided international deforestation tons be
a component of the bill simply because the volume of
deforestation that is going on tropically--I did some math. I
think it is 100 square miles a day, roughly, of tropical forest
that is disappearing and will not come back. It is so huge that
that is an opportunity that we just cannot lose. It has all
these other biodiversity and ecological and international
security benefits.
And, finally, as a buyer, again, we hate to see some really
good, cheap stuff go just because people have not figured out
how to weight it yet. You know, let's keep it in the bin until
we figure out what the scale is, and then let's start buying it
pretty quick.
So we think those are two things that would be fairly
straightforward and improvements over the bill as it was in
Committee.
Senator Stabenow. Thank you.
Mr. Wittman.
Mr. Wittman. Well, I would like to add one point on the
percentage of the offsets that could be coming from the ag and
forestry sector. We believe that the current number is too low.
We would like to see unlimited offsets. If this is truly the
least-cost alternative out there, and we are not looking at
this as a permanent solution but, rather, a bridge toward the
future where we can get technology to come up with solutions
for better energy and other changes in our systems that reduce
emissions, we would like to see no limits rather than a 15
percent limit.
Another area that is very important is the issue of the
infrastructure you are going to use to implement this. We
already have a wonderful infrastructure in USDA that can
provide a delivery system that has--it has been in the business
of creating standards. It has been in the business of creating
data. It has data out the front line. One of the issues that I
see of major concern--and this has happened in the past as we
have added new programs like EQIP or CSP--is that we give an
existing organization a new mandate, and we do not give them
any additional resources. We do not provide the educational
support so that they can implement that.
USDA scientists have been studying models for years, and
our organizations have been working very closely with them in
testing and refining these models. And there is a huge body of
work out there. And in reference to the issue of measuring and
monitoring and verification, we share the concerns of others
that we must be able to meet the rigor of these rules so that
they are good quality. But a crude measure of the right thing
is better than a precise measure of the wrong thing. And you
are dealing with measuring something that can only be measured
over long expanses of time, because we have variables in
rotation systems, we have variations in climate, whether ag
offsets, whether it is forestry or soil related, can never be
measured by what happens in 1 year. You have to look at long-
term trends.
Another issue is we have a tendency to think that all the
answers to our solutions exist in the United States. There are
other parts of the world that have been leaders long before us
in implementing no-till. They have data and research that we
can buildupon and add to our existing scientific data to get to
answers as to how to do this measurement process. It is
available in Europe and South America. You have countries that
have wholesale adoption of no-till that are leaps and bounds
ahead of the United States in terms of their percentage of
adoption.
Our no-till organizations are interacting through
international networks to tap that information. So I would
challenge you in these bills to make sure that we clearly
define USDA's role in the definition of these standards, and
particularly in the measurement process, that they be given
some specific directives. For example, one is no further
funding for a USDA model until they put that model in laymen's
language where the user can put their data in without
converting it to metric information.
I recognize their need to publish and their scientific
disciplines, but that industry does not understand today who
their customer is. No farmer, no politician, no policymaker
will stand for trying to convert what we produce into metric
units and taking 3 hours to fill out a data form to test what
is happening in sequestration.
So these are the things that I think the bill could really
improve upon.
Senator Stabenow. Thank you.
Anyone else?
Mr. Lubowski. Thank you. Environmental Defense Fund
supports the version of the S. 2191 bill that came out of
Committee, but we think an improvement, as I said before, would
be to expand the international credit provisions to allow for
the reduced deforestation tons, and this is very important for
the reasons that have been already been mentioned, and
especially because this opportunity is, you know, disappearing
as we speak. And if we don't take advantage of it, we will end
up paying for it in two different ways: first, we will pay
higher costs of complying with our climate legislation today,
and, second, by not getting Brazil and other countries on a
path of reducing their deforestation emissions, this
potentially can make the climate problem worse and have us have
to pay more in the future to make up for the damage.
So for these reasons, it is very important to include these
credits, and I will also add on the monitoring side that Brazil
right now, through its National Space Agency, has on the
Internet a website where you can see in real time how
deforestation is happening across the country. So this can be
monitored and verified.
Thank you.
Senator Stabenow. Thank you.
Yes, Ms. Wayburn.
Ms. Wayburn. Well, I recognize that the version of the bill
that we have seen has changed markedly, so I am not going to
comment on the bill as it may exist or may not at the moment.
But I would like to suggest a couple of things.
We would support unlimited offsets with the proviso that we
need to have with that integrated accounting between the offset
sectors and the cap sectors. And I bring this up because one of
the most effective ways that forests and agriculture can
contribute here is to providing sustainable alternative energy.
And if what we are doing in the forest sector is providing this
woody biomass for energy and eventually for low-carbon
transportation fuels, and we are valuing those fuels in the
cap, but we are not valuing their production facilities, if you
will, the forests and the farms in the cap, we could drive very
perverse outcomes, because if all we do is value the product
but not the resource that is producing it, we push for more
product and we do not have to count for the impact here. And we
have seen this, unfortunately, in this weakest discussion
around corn ethanol. When you look at the whole cycle
accounting, corn ethanol does not pencil out from a carbon
emissions reduction strategy. And so I think that unlimited
offsets I would favor, if as noted a moment ago, because I
think that as we move the market forward domestically in this
country, particularly because forestry is a global industry, we
will pull those markets globally as well.
I believe there is something called ''positive leakage,``
which is if I do well by doing the right thing, you may also
wish to do that, too. And so I think that as we look at trying
to incorporate unlimited offsets, we need to recognize that we
need an integrative accounting between the capped and uncapped
sectors so that we don't have perverse outcomes.
And the only other item that I would like to suggest is
that recognizing the urgency of halting deforestation in the
tropics, we also need to recognize the urgency of harnessing
America's opportunity to restore our own forest carbon banks.
The opportunity here, tens of billions of tons in 50 years, an
average of, say, a billion tons a year, depending upon what
price that you want to use. That is going to be adding tens of
billions of dollars into this economy for revitalizing rural
areas across this country that are forest dependent or creating
new jobs in energy. That is very powerful, and that will
generate the kind of support we need in this country to really
enact effective legislation.
Senator Stabenow. Thank you.
Mr. Broekhoff.
Mr. Broekhoff. Yes, Madam Chair, I would reiterate what Mr.
Corneli suggested in terms of recognition of international
carbon credits, and in particular, credits generated under the
Clean Development Mechanism. This is the largest existing
regulatory offset program in the world today.
There have been some criticisms of the CDM, I think some
reasonable ones, but I think the benefits of the United States
engaging with the system probably outweigh the risks, and that
is a change I would like to see.
If I might take a moment to say a few words about the
international forest credit notion and, in particular,
addressing avoided deforestation through offset credits, I
think, you know, clearly if we look at the issue of climate
change and how we are going to address it, it is critically
important to address deforestation globally, not just for
climate change mitigation but for a whole host of environmental
concerns. However, if you are looking at an offset crediting
approach for deforestation, all the kinds of concerns and
criteria I raised in my testimony come up, I think, writ large,
in many cases.
So you have to deal with issues of leakage. If you prevent
deforestation in Brazil, you don't want it to simply move to
Peru. And it is a global issue. If you look at timber markets
today, they are international and global in scope. They rapidly
respond to shifts in supply and demand.
So I think a system like that would have to have a very
high participation rate. You would want participation from
countries that make up probably 90 percent or more of global
forest coverage.
You also need to look at this issue of permanence. If you
slow rates of deforestation, it does not help if that simply
delays the point at which all the forests are gone.
So if you are looking at an offset crediting mechanism, you
want to make sure that you are crediting against a baseline
that actually slows, stops, and reverses deforestation. And I
think that is important when we are looking at what you credit
against in that kind of system.
You also have to have effective monitoring and
verification, and I understand that there are others here who
are probably more expert on this than I. Talking with my
colleagues, I know we have good systems for monitoring forest
coverage. I think there are greater uncertainties in terms of
measuring the carbon that is actually in the forests, and we
may have to improve some of that before you can have
quantification levels up to the level of confidence we want for
an offset crediting program.
Finally, you need to have institutions and governments
capable of actually delivering on avoided deforestation and
achieving these gains, and doing so in a way that respects
community rights. And I think to do that you will need some
capacity-building efforts prior to the implementation of this
kind of program to get it going.
So, again, it is critically important to address, but there
are a number of ducks that I think you need to get in a row
before this kind of program might be viable as an offset
program.
Senator Stabenow. Thank you.
Mr. Corneli. If I might just----
Senator Stabenow. Yes, quickly, and then I am going to turn
to Senator Crapo.
Mr. Corneli. In the spirit of dialog here between the
limits, the unlimited, and a lot of ducks to get in a row
comments here, one idea that may be worth considering in any
legislation that might help solve all of those issues is to
create a bank, if you will, or a pool of offsets, an offset
reserve much like the old soil bank or the original farm
commodity programs of some time ago, where the idea is to
really put large amounts of offsets, whether domestic or
international in a reserve, so they would be delivered, they
would be realized, the trees would stop being cut down in as
many of the rainforest countries as possible, while the quality
and verification issues are being worked out. And that pool,
instead of being sold to compliance customers like us, people
who want to buy offsets to turn in instead of allowances, would
be held in reserve and dumped into the market or injected into
the market through, say, an auction in response to allowance
prices getting too high. And as all of you know, one of the big
concerns about S. 2191 is some of the model runs that show $77
or $200 allowance prices, well, having a reserve like this not
of allowances but of actual real offsets whose reductions have
already taken place could be a way to, A, guarantee
environmental quality without borrowing from the future; B,
assure that prices are stable; and, C, solve some of these very
real problems while providing ample places for domestic and
international offsets to go and to get paid for.
So that is a concept that could be worth considering as
well.
Senator Stabenow. Right. Thank you very much.
Senator Crapo.
Senator Crapo. Thank you very much, Madam Chairman.
Actually, I think you and I were working off the same list. You
asked a lot of my questions. But, I still have a lot more.
First, Mr. Wittman, I would like to ask you, if you know--I
don't know how thoroughly you have studied the specific text of
Senate bill 2191. I want to get to the baseline question,
though. The baseline in S. 2191 is defined as the ''greenhouse
gas flux or carbon stock that would have occurred in the
absence of an offset allowance.`` Now, the question I have is
for a farmer like yourself, who is already engaging in a
practice that is reducing emissions, such as direct seeding,
would you be eligible for an allowance or an offset under that
language.
Mr. Wittman. The issue is what is the baseline from which
we are trying to reduce overall emissions. If we are using 1990
as the starting point and say, okay, by some future point in
the future, we are going to reduce from 1990, then everything
that people have done since 1990 should be given recognition.
The reality is that the concerns about additionality and
measurement are going to make it very difficult for me to go
back and market the carbon that I have sequestered since 1990.
If I have no-tilled my farm every year, I am probably
sequestering between 0.5 and 0.75 tons of carbon per year. The
problem with not recognizing that is that you create perverse
incentives for someone, to be eligible to cash in on carbon
market opportunity. You create the wrong incentives to
literally plow up soils, and restart the clock so that you can
become a good person. That is the last thing we want to create
in our policy structure.
So our view on this is that we need to look at the
continuation of a practice like no-till. Even though you have
done it for years, every year you still have incremental
sequestration. There is additional good every year that is
being added to the pot. It is not done. We have all kinds of
scientific projections that have said there will be some point
in the future where we will reach saturation and we will no
longer sequester more carbon, and if that is the case, then I
should not be eligible to collect an offset because I am not
sequestering incremental carbon.
So it is both the issue of incremental sequestration as
well as avoided emissions. The minute I turn around and till
soil, I start emitting. I send CO2 up into the atmosphere. So
we need to create a policy that encourages not only adoption by
new people of a practice that works, but avoidance of practices
that are going backwards.
Senator Crapo. Thank you. And I know, Ms. Wayburn, you had
mentioned additionality as an issue, as well as Mr. Broekhoff,
and probably all of you. But anybody else want to get in on
this issue right now, Ms. Wayburn.
Ms. Wayburn. Well, Senator Crapo, one of the approaches--
the approach that we suggested and that has been adopted in
California is something called ''regulatory additionality.``
And what this does is establish a level playing field for
everybody. You work from what are existing laws in your State
or, in the absence of law, best management practices in your
State that are recognized. And whatever you do above what you
are required to do by law and that you commit to keeping there
qualifies as additional. And that does several things.
No. 1, it recognizes early actors, people who have been
doing an excellent job, and says thank you for doing that we
will reward you, and other people will then follow. We
recognize that the law sets a baseline of common behavior. And
so that concept of additionality can happen in this country
because we do have a regulatory baseline or a best management
practices baseline which is widely identified.
Senator Crapo. Thank you.
Mr. Broekhoff.
Mr. Broekhoff. Yes, this issue of additionality is probably
the most vexing aspect of a carbon offset program and how you
approach it. To speak about it conceptually, the idea is
essentially you want total emissions under an emissions cap-
and-trade system to be the same whether you have an offset
program or whether you don't. When you issue an offset credit,
that allows emissions from capped sources to go up. So in order
to keep net emissions the same, you have to give credits to
reductions that would not have happened if you didn't have a
carbon offset program. And if you are giving credits for
reductions that occur from activities that someone was going to
do anyway, they had been doing for years, it made sense anyway,
in effect you are undermining the integrity of your emissions
cap.
Now, I realize that creates all kinds of difficulties and
problems, so I think there are some practical ways to approach
additionality. Regulatory additionality may be one component of
that. Probably in some cases for some types of projects, you
need to go beyond just the regulatory piece of it. But it does
become difficult to give credit, even though that may seem
unfair, for activities that have been going on for years and
would likely continue into the future without an offset
program.
Senator Crapo. Thank you.
Anybody else.
Mr. Lubowski. Thanks. The point about rewarding people that
are already doing the right thing is important in the sense
that we definitely don't want to create perverse incentives for
people that have been doing the right thing now to not do it in
order to then be able to get credits. So it is very important
to address this, and there are different ways it could be done,
including potentially through, you know, using the allowances
that have been reserved for the agriculture and forest sector,
and there are other options as well. So this is an important
issue to deal with.
In terms of additionality, there are very detailed
guidelines already developed to deal with incalculate baselines
for individual projects, you know, depending on the type of
project and type of activity. In addition to this project level
work, we think it is very important to do very good monitoring
and accounting of the overall sector, to get an idea overall
nationally what we are getting, and then be able to use this
data to then go back and improve the project level standards
and protocols.
In terms of the tropical deforestation, there what we have
been advocating is for the largest emitting tropical countries,
there is no indication that deforestation is decreasing. If
anything, the recent experience shows that it is going up.
So we have been advocating using historic data on
deforestation rates over, you know, a historic period and then
crediting national level reductions below these historic rates
as our definition of ''additional,`` and especially if you look
at it at the national scale, you know, you don't have this
within-country leakage issue. There still is, of course, what
Mr. Broekhoff alluded to in terms of potential leakage
internationally. So, you know, the solution to this is getting
at least the biggest emitting countries on board, you know, and
creating a process to try to encourage as many other countries
to join into the program.
Thank you.
Senator Crapo. Thank you.
Mr. Wittman, again, do you and the organizations that you
have been working with support the allowance of international
forest carbon credits to be utilized in the United States?
Mr. Wittman. Do we?
Senator Crapo. Yes.
Mr. Wittman. I think our organizations generally would
support a combination of domestic and international. As a
massive user of energy and fully aware of the implications to
fertilizer costs and energy costs, it is important to us and
the consumers that buy our products to not have economic shocks
that we can't stand. So as long as international projects are
verifiable--and I will recognize the Clean Development
Mechanisms that exist--there are those that say if you are
going to rely on international projects and they meet those
standards, those are tougher than many of the things that we
have existing in the U.S. today.
So I don't think we should be so concerned about the
quality of international offsets if they are only allowing
those to qualify that meet those clean development mechanism
standards today.
Senator Crapo. I know an argument has been made that
international offsets would be less expensive than domestic
offsets. Is that generally agreed? I see yeses and noes, so
maybe I ought to ask the question. The question that I am
getting at is that--I guess there are several issues here to
weave together. One is if we allow international offsets,
should they be capped? If they are allowed and if they are
capped, again, should the domestic offsets be capped similarly,
or should domestic offsets be treated differently? In the
context of this question, what kind of an impact on the market
price allowance would international offsets would cause.
I know that is a very complex question, but would any of
the witnesses care to comment on the issue in general and how
we should approach it?
Mr. Wittman. I would like to just add to what I said on
that. There is a real concern that if we just allow people in
the U.S. to go the cheapest place in the world elsewhere and
buy low-cost projects, that we will not really affect the
emissions reductions that we are trying to achieve. It won't be
painful enough.
If we have an unlimited cap on domestic offsets, I think we
are protecting the opportunities for economic investment in the
U.S. first. And maybe to be conservative, we should have some
cap on international. But I don't think we should stop with the
international as long as we make sure that the standards those
projects have to meet are as rigorous as anything we would do
in the U.S.
Senator Crapo. Anybody else want to comment on that, Mr.
Corneli.
Mr. Corneli. I think that these are very tricky issues, and
the insights that are out there, many of them come from
modeling exercises that make their own assumptions about the
costs of domestic and international offsets.
So with the proviso that my view is somewhat informed by
these models and that they may be wrong, I will go ahead and
say it looks like the domestic offsets get more expensive more
quickly than the international ones, and that that means that
if you were to rely on domestic offsets to moderate prices--and
I think this is consistent with what Mr. Wittman just said--you
would see higher prices for allowances, and they could be so
high that they could--the allowance prices themselves could
have these effects of causing people to use a lot of natural
gas instead of coal in power production, driving up the price
of natural gas for consumers and fertilizer manufacturers.
So to avoid that problem, it would probably be useful to
allow a fair number of international offsets, especially the
ones that are likely to be lower cost, such as the avoided
deforestation ones, and understanding that those may be more
expensive in terms of all the risks and transaction costs that
we really don't know about yet.
So what that suggests is that if there was a limit on
domestic offsets, it might not be hit. If there was a limit on
international offsets, it might be hit. The domestic one might
not be hit because the market price would not be high enough to
turn on all of the domestic ones that are available.
Senator Crapo. I understand.
Yes, Ms. Wayburn.
Ms. Wayburn. I think that we just do not know at this
juncture which is going to be more or less expensive, and I
think one key reason for that is that, in our experience doing
these projects, we have what we would call an all-in approach.
Starting from the beginning, we have paid for the long-term
security, we have paid for the monitoring, we have all of those
costs built in from the beginning; whereas, in many of the CDM
projects and the international projects, the initial costs are
there, but not the long-term costs. And the question of how
much transaction cost that will add over time is at this point
unknown.
What I would say is that in our experience in selling these
offsets in a pre-compliance market--so this is where people are
counting on these to meet their requirements under law--our
prices are between those of the Chicago Exchange and those in
Europe. And they are equal or less than those we are seeing on
CDM.
Senator Crapo. Thank you.
Mr. Lubowski, quickly, if you----
Mr. Lubowski. Yes, quickly. I will just say that it is
important to note that the version of S. 2191 that came out of
Committee also has a provision for a Carbon Market Efficiency
Board that would have various powers, including the power to
adjust limits on offsets, if appropriate. And some people argue
that there should be no offsets; some people argue there should
be unlimited offsets. I think the key thing to keep in mind is
that we should have a system of checks and balances where you
have very good data and are able to assess, you know, the
quality of the offsets over time and have flexibility to, based
on this real information and good data, determine which offsets
should be let in, how many should be let in, and be able to
have flexibility to do this as the data comes online. And--I
will leave it at that. Thank you.
Senator Crapo. Thank you.
Madam Chairman, I do have one more question, if I could ask
it.
Senator Stabenow. Yes, you may.
Senator Crapo. I cannot resist asking this question since
this is the Forestry Committee. It deals with forest fires, and
the question is, how do you contemplate that we weave in the
issue of healthy forests in terms of the context of forest
fires into this whole debate? And let me just say a few things,
and I would love to hear statistics or information that any of
you have, or ideas here. But as I understand it, the record
forest fires and rangeland fires that we saw last year caused
immense emissions, in fact, my understanding is the emissions
caused by these fires far exceed that of any other sources of
emissions, or at least the transportation sources of emissions
that we have in this country. So it is a huge emissions source,
yet there is also a great debate going on as to whether or not
we should let fires burn or not in terms of the proper
management practices in our forests. So once again, the way we
deal with it in the context of global warming raises, to me, a
phenomenal set of difficult issues.
I know that is a huge question, but it has got to be one
that people have struggled with as we deal with this in the
context of forests.
Ms. Wayburn, do you want to start out there, or Mr.
Wittman.
Mr. Wittman. Go ahead.
Ms. Wayburn. Well, I think that is an excellent question,
and it is one that gets more pointed as we look at what climate
change is predicted to do to forests. And I would like to
suggest there are several ways to approach it.
No. 1, the primary incidence of fire is on our public
lands, not our private lands. And what I was suggesting in my
remarks is that we focus the market and offsets on private
lands, not public lands. I think we want to establish a goal
for public lands that looks at managing these forests for their
greatest adaptation and resilience in climate change because of
the increased stress that climate change brings.
Now, that may, in fact, mean much more management on these
lands than what we have been experiencing in order to reduce
those fuel loads, in fact. And so for that long-term
environmental gain in re-injecting, if you will, resilience
into these forests, we would have increased management to do
that.
On private lands, where the incidence of fire is so much
smaller, I think what you are looking at is what is your
insurance system. How do you have--it is really a contractual
issue, but if I have sold you 100 tons of carbon emissions
reductions, I have got to guarantee those against all sorts of
natural risks. And so in our buy-sell agreement, we need to
have a provision for that, and I can tell you that buyers have
very, very strong provisions around that.
So there is a buffer system there that is required. Whether
it is individually or whether it is pooled, whether it is
Government-backed, there is a buffer system.
So I think the question of fire can, in fact, be dealt
with, and it needs to be dealt with over the long term, and it
particularly needs to be addressed to our public lands to
restore resilience and adaptation to these lands.
Senator Crapo. Thank you. My time has far expired, but, Mr.
Wittman, if you could be very quick.
Mr. Wittman. You hit a hot button with me because we manage
forests, private forests, and we are right next to publicly
managed forests. We plant almost 9,000 trees every year. We
selectively log our forests. And when we get done, we have a
fully stocked forest.
The role that many of us have here is not only managing
carbon, but we are trying to educate others on this whole
issue. One of the challenges we have had is getting people to
see: ``what products we have to sell in a carbon portfolio
market?'' Just last week, we were engaged in this debate with
some foresters. They are interested in getting into carbon
trading. Their questions are: ``What do we have to sell?'' And
I said, ``You have three different kinds of products: you have
reduced-emission products, you have avoided-emission products,
and you have offsets through sequestration.'' They said,
``Well, what does that mean?'' Here is what this means.
A reduced-emissions project would be going to a chipping
operation and chipping slash piles and sending it to a power
plant instead of lighting a match and sending that carbon into
the atmosphere. Now we are producing renewable energy from
limbs instead of sending this smoke up in the air and doing no
good at all. That is reduced emissions.
Avoided emissions is being able to go out and selectively
log a forest so that when you do have a fire, it burns limited
residue on the ground, but it does not totally destroy the
forest, and it does not burn up 8 inches of organic matter and
turn your ground sterile.
So once they put language to carbon concepts they can
understand at the layman level, they start thinking of all the
things we can do, and I think that is a message that we
probably have not talked about enough today. We underestimate
the potential of our American entrepreneur to create solutions.
If I am allowed to be a prophet for about 30 seconds, I
will say that the cost of this whole climate change legislation
will never be as bad as what we think it will be. American
ingenuity will create solutions that we never imagined. Once we
educate people on the opportunities and how they can
participate and we scare them with the threats of how bad the
costs can be, I think we will see solutions coming out of the
woodwork that we never would have imagined.
Senator Crapo. Thank you.
Senator Stabenow. Thank you very much.
Senator Klobuchar.
Senator Klobuchar. Well, thank you much, Madam Chair, and
thank you to all the witnesses. A lot of the questions have
been asked, but I will forge ahead.
You know, I am on the EPW Committee and an original
cosponsor of the Lieberman-Warner bill, and I feel strongly
that we should not wait a year to act. I was in Greenland last
summer and saw the water melting off these humongous icebergs.
They call it the ''canary in the coal mine of climate change.``
And you have laid out some of the arguments that we have heard,
Mr. Wittman, against the bill, and we know there are always
changes that we can make to make it better.
But what I was most interested in was, Mr. Corneli, not
just because you have a Minnesota connection, but your
testimony and where you freely said that your company produces
7,000 megawatts of electricity from coal-fired power plants in
addition to the natural gas and oil and nuclear plants that you
operate and that you are the seventh largest emitter of CO2.
Are people surprised when you go out and speak, are they
surprised to hear you advocating for climate change
legislation?
Mr. Corneli. Not so much anymore.
[Laughter.]
Mr. Corneli. We look at this, as many in the utility or
power industry do, as fundamentally a problem of technology.
When it is free to put carbon in the air, people will do it.
You know, why would you not do something that does not cost
anything when you are making a business decision and your
competitors are all making business decisions? So we have not
really had any powerful incentive as an industry or as a
company to find something else to do that either will not emit
the carbon or that will capture it and keep it from going into
the atmosphere.
Like Mr. Wittman, we think that when there is a price
signal, and also when there are also other complementary
policies that will help support the kind of technology
development we need, that people will very quickly--engineers
at GE, another member of USCAP, General Electric, by the way;
at Siemens, another member of USCAP, the companies that make
this stuff, the companies that build this stuff, and the
companies that buy it and use it--will all very, very quickly
figure out how to take the carbon out of things like the power
sector and how to keep using coal in a way that keeps the
carbon out of the atmosphere.
And so we think that that is sort of like we are part of
the solution--I mean, we are part of the problem. We have to be
part of the solution. Policies have to change the technology.
And I think the same thing applies to the offset business. We
have to get a clear signal to use the forest sinks, the soil
sinks, the avoided greenhouse gas emissions that cannot easily
be regulated, get people innovating about those, and the
answers will come out of the woodwork, and we will be surprised
at how quickly and effectively we can get there.
Senator Klobuchar. One of the things I have been noticing,
you say our country developed the wind technology, but now we
have been leapfrogged by two or three other countries in terms
of them getting there first in terms of the number of turbines
and what they are doing. Could you talk a little bit more--I
know you talked earlier about the urgency of this and the lost
investment and kind of the delay that, in fact, what I am
starting to believe is because the people of this country and
the entrepreneurs know we are going to do something, they are
actually holding back until we do something. Is there some
validity to that?
Mr. Corneli. I believe there is. It is very hard to sink a
lot of money--a new power plant costs several billions of
dollars. A new auto production line probably costs something
like that. Engineering a new electric battery so that low-
carbon or no-carbon power plants could provide electricity with
zero carbon to cars, to consumers' cars, so they would not have
to buy $4 gasoline--those things cost a lot of money, and
people will hesitate to spend that kind of money until they
know they can get it back in terms of selling goods and
services. And so there really is this sort of leashed-up demand
here.
I think what we are--you know, there is a lot of fear--
China is the usual sort of suspect--about we are exporting jobs
to China if we regulate CO2. There is another----
Senator Klobuchar. And how do you respond to that?
Mr. Corneli. Well, part of that is that we have to lead in
figuring out how to do this so cheap that they want to buy it.
But there is another big risk, which is there are people, there
are many companies in China figuring out how to make low-carbon
technologies that they can sell here. And there is a global
race in terms of decarbonizing, inventing, innovation, and
America is the greatest economy in the world, the greatest
source of innovation and creative thinking in the world. As
soon as we get a market system that will turn that on for
solving carbon stuff, we will win that race. But if we wait too
long and other countries get ahead of us in the race to low-
carbon technologies----
Senator Klobuchar. Thank you.
Does anyone else want to respond to the China argument that
we often hear, Mr. Wittman.
Mr. Wittman. I have a concern, and this is fed to me
constantly by my children, who are much better educated than I
am, that we spend too much time blaming China and India for
being part of the problem when, in fact, we need to look at our
consumptive patterns in the U.S. and consider the fact that
India and China simply want to grow the right to build their
eating habits and standard of living like we have. We are the
model. And if everybody in this room went through the process
of doing a carbon footprint and we start studying the impact
that we have on global resources, I don't think there is a
single person in here who would not change some behavior
tomorrow. But the first step in changing or correcting a
problem is understanding or creating an awareness of how you
are personally part of that problem, whether you are an
individual or whether you are a business. We are not going to
change China's and India's demand for resources. They don't use
a fraction of what we use yet, and while their growth is
increasing, the level per person is nowhere close to the United
States.
So I agree with the concept that we go back to becoming
world leaders in crafting solutions, making it so successful
that they will want to copy us like they have copied everything
else, and they will follow us in making environmental change.
Senator Klobuchar. Thank you.
Mr. Broekhoff.
Mr. Broekhoff. Just following up on that and turning that
question a slightly different way, if you look at this question
of international carbon offsets and the Clean Development
Mechanism, this is an offset program that clearly we are not
participating in, but it has already created opportunities for
U.S. companies in developing countries. The United States is
actually second only to Japan in terms of being the source of
technologies that have been deployed in these energy-efficient,
renewable energy projects in developing countries, including
China, so that, you know, the benefits and risks can go both
ways.
Senator Klobuchar. Thank you. I want to follow up with
something else, Mr. Broekhoff. In your testimony you talked
about the problem with measuring how much additional carbon is
stored in the soil with tree plantings and grass plantings, and
you said that it is difficult to measure whether it is
verifiable.
I know there were provisions in the 2002 farm bill and we
have some similar provisions in the 2007 farm bill that require
USDA to study the potential for soil carbon sequestration.
Could you tell me a little bit about the research that you
alluded to or the lack of research and where the shortcomings
are, and what do you see as the highest research priorities
going forward?
Mr. Broekhoff. Well, let me try to clarify my argument. I
am not arguing that we do not have the technology or the
scientific knowledge to verify with some accuracy the carbon
that is sequestered in soils or trees. I think you can employ
methods that do that with a high degree of accuracy. However,
it is harder to do than it is for certain types of other
projects that could be used as offsets. So if you are talking
about landfill methane, for example, you capture methane coming
out of the landfill and run it through a flare or use it to
generate electricity, you can measure how much methane you are
capturing with a flow meter with a high degree of accuracy, and
at low cost.
Turn to something like soil carbon sequestration, and the
methods you use to try to get to that same level of accuracy
entail a lot more costs, relatively speaking. So it is a
relative argument.
And the issue basically boils down to there being more
kinds of overhead costs like that for many of these kinds of
agriculture and forestry projects than for other types of
projects.
Senator Klobuchar. Thank you.
Any thoughts on hybrid trees? I visit all 87 counties in my
State every year, and my most memorable visit to Crookston
recently was that the highest tree in Crookston was only like 8
years old or something. It was a hybrid poplar in the back of
Wendell Peterson's yard.
And so, Ms. Wayburn, do you have any thoughts on that and
the development of that and if that is a possibility as we look
into, you know, more trees and more forests and how we could
handle these things in terms of the global warming issue?
Ms. Wayburn. I think agricultural approaches to forestry
make a lot of sense. But I think at the same time, we want to
recognize the role of managing our natural forests effectively
as well, and that those gains perhaps are more sustainable, and
they are certainly more realizable in the near term.
I had my hand up just to offer an anecdote of how we can
positively affect China through what we have done in California
with forests. Now in Fujian Province in China, they are looking
at natural forest management as a tool in their own carbon
emissions reductions as opposed to what they have been looking
at before, which was a very intensive industrial forest
management policy, and looking at the net gains that they were
making in climate through natural forest management and meeting
their timber and product supply needs. So that was a positive
leakage example of developing something here and using it and
having it work in China. So I would support that.
But the notion of can we use hybrids, can we use genetic
modifications, can we use fertilizers, all very much more
agricultural approaches in forestry, I think the answer is yes.
We just need to look at the total carbon budget and what the
side effects are. Because if we are going to look at things
like crop switching, which is what I would suggest hybrid
poplar might well be, that might make more sense than, for
example, something like cotton.
Senator Klobuchar. OK. Any other thoughts?
[No response.]
Senator Klobuchar. All right. Well, thank you very much. I
appreciate it.
Senator Stabenow. Well, thank you very much to each of our
panelists. I think we have exhausted our time today, but we
have learned a lot, and I appreciate very much your comments as
we explore ways to be able to use offsets in a way that is
measurable, quality, permanent, all of the things that we have
talked about today to really be able to allow us to expand upon
the effectiveness of a cap-and-trade program. And I appreciate
all of the ideas as well.
I think it is an exciting time for us. There is a lot of
work to do. Coming from a State that is not only a great
agricultural and forestry State, but we are proud of making
automobiles, you may have heard, and manufacturing. And so
there are lots of pieces of this.
And I have to say on a side note that in addition to
working on this issue and on the farm bill, which is very
important in terms of the energy and conservation provisions,
we also have a budget resolution on the floor that we hope to
be voting on this evening or tomorrow that has a green-collar
jobs initiative with new dollars in it for advanced battery
technology and conservation and energy efficiency and other
areas that are very important, and tax provisions that we have
been trying very hard to get passed, get passed a filibuster,
to be able to incentivize a number of different technologies
that need to be happening.
Coming from that manufacturing State, I have to say,
though, just a note on China and our Asian neighbors, and that
is, they are rushing on technology. When the first Ford Escape
hybrid was placed into the marketplace--and we are very proud
of the first hybrid SUV--they could not find a battery in the
United States. They had to buy it from Japan.
So the budget resolution that we have that includes an
aggressive amount of money, new investment in advanced battery
technology, is critical because China is spending hundreds of
millions of dollars, as is Japan, as is South Korea, and we
certainly do not want to be in a position where we go from
dependence on foreign oil to dependence on foreign technology.
So I think the rush is on, and in addition to all of the
issues that deal with what is happening with our forests and
open spaces, the rush is on for us to act quickly and
effectively. And we thank you very much for your input.
[Whereupon, at 4:25 p.m., the Subcommittee was adjourned.]
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A P P E N D I X
May 21, 2008
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DOCUMENTS SUBMITTED FOR THE RECORD
May 21, 2008
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