Climate Change Conference

Good afternoon and thank you for inviting me to be your keynote speaker for the Alaska Municipal League’s Climate Change Conference.

I must admit that I’ve been having trouble deciding just what to say to you today. If this speech had been delivered two weeks ago its content would have been far easier to craft.

But just last week major changes were proposed in the bill that likely will serve as the vehicle for climate change - carbon emission reduction debate that soon will start in the U.S. Senate—the Lieberman-Warner Climate Security Act. Those changes, which are complex and so far not fully explained, have added a new level of complexity to an issue that I would have thought couldn’t have gotten much more complex.

So, while I’m sure all of you would like a precise update from Washington on what’s in pending climate legislation, what it will do to Alaska’s environment and economy, how it will impact local governments and your revenue streams, and what it might do to or for Alaska and the nation, both from an environmental and economic standpoint, all I can say is we all are going to need more time to analyze the current bill.  Not just what is says, but how it actually will work in practice.

This morning my annual shootout began at Eagle River and I can tell you it is always harder to hit moving targets than stationary ones.

 But let me try to summarize where we are, and what types of issues we will be wrestling with as we prepare for initial Senate debate on a bill that may be the most wide-ranging and complex measure ever considered by the U.S. Senate, and which could have the greatest impact on life in America and in Alaska of any bill ever before considered by Congress over this Century.

First, I suspect most Alaskans, more than Americans as a whole, accept that we have been seeing changes in our environment over the past three decades. I have met few long-time Alaskans who haven’t noticed that: winters are warmer; breakup is occurring earlier – except for this snowy spring; summers seem hotter; storms seem stronger; and wildlife habitat and migration behavior is different. Ocean, lake and river ice is forming later, is weaker and melting sooner, and permafrost in some places is thawing; affecting hunting and fishing, roads and travel, construction, and sometimes, our very way of life.

We know by satellites that the Arctic sea ice pack has shrunk by an area twice the size of Texas since 1979. More importantly, the thick multi-year ice has been steadily thinning, meaning more of the Beaufort Sea is open by late summer, increasing the danger of coastal erosion from storms, and more troublingly, helping to warm waters and thus the environment even more.

We know lakes up north are drying up, probably because the permafrost that holds their water is melting. We know that wildlife have shifted. Don’t get me started talking about polar bears, we’ll leave that for another time.

What we can’t know for sure, is whether the changes are the result of  a natural climate variation caused by an increase in radiation from the sun, a wobble in the earth’s orbit, or a change in Atlantic and Pacific ocean currents that is dragging warmer water into the Arctic Ocean. We certainly know the latter is happening. What we don’t know is whether the ocean current changes are a symptom of climate change or a cause of it.

Scientists, who have worked on the United Nation’s Intergovernmental Panel on Climate Change, certainly believe the ultimate cause is the documented increase in man-made carbon dioxide and other so-called greenhouse gases that we have added to the atmosphere since the dawn of the industrial revolution.

The scientific case is strong that carbon emissions will raise a planet’s temperature, just look at Mercury. But since mother nature, due to volcanic eruptions, ocean warming, or permafrost thaw, can pump so much more carbon into the atmosphere than man can, for some there is an issue whether it makes sense for us to spend vast amounts to reduce our carbon emissions, since natural or worldwide emissions can dwarf whatever Americans do to eliminate or reduce carbon emissions. For them adaptation, not prevention is key.

I personally am of the belief that we should move to cut carbon emissions where we can without harmful costs to our economy and way of life, even if only as an insurance policy against significant atmospheric change, and because it might help to lower those adaptation costs in the future. We should do it just in case all those computer models and all those horror stories about sea level rise, ocean acidification, permafrost melt, killer hurricanes, deepening drought, global starvation and civil unrest may actually occur.

That brings us to what is happening in Congress to cut carbon emissions. There are several ways we can cut emissions. We can fund technological change, both research and demonstration projects and actual new alternative or renewable energy plant construction, so that fossil fuels are replaced by non-emitting energy sources.

 We can impose a tax on carbon; the higher it is, the more likely that it will encourage development of more renewable energy and certainly curtail fossil emissions by prompting energy conservation. It would be a blunt instrument harming the poor and the middle income in America and indirectly impoverishing the Third World, but a tax is the most direct price signal we can send, that markets must take the total cost of carbon emissions into account in the future.

Or we can mandate a cap and trade emissions allowance trading system that increases the cost of carbon emissions – like a tax – but provides a host of more economical ways for people and businesses to reduce emissions, either by reducing them themselves or buying emissions from others here or worldwide that have learned to do more with less or no emissions. 

I have tended to support the cap and trade concept because I believe it offers the opportunity to reduce carbon, but at the least cost to society.

Last year I and Senator Stevens co-sponsored a bill by Jeff Bingaman and Arlen Specter that would set up such a carbon emission system, while using the revenues from the sale of emission allowances for a host of technological development and to cover “adaptation costs,” the costs of fixing roads, airports, ports, sewer lines, building seawalls, helping wildlife or restoring wetlands, damaged by climate change impacts.

The Bingaman-Specter bill includes a “safety valve” that would limit increases in energy prices to no more than 5 percent a year, above inflation. That limits its costs to society, while still likely resulting in a decrease of about 60 percent of our 2005 carbon emissions by 2050 – what a host of scientists say is necessary to prevent the worse impacts of climate change from occurring. It did not go far enough, however, in the view of some environmentalists to speed carbon reductions.

The Lieberman-Warner bill as it currently exists will cut emissions about 2% a year to 2050, meaning it will cut total emissions by 71% by 2050 from 2005 levels. It also cuts emissions more quickly than the Bingaman bill – cutting emissions by 19% from 2005 levels by 2020 — and that drives up its compliance costs greatly.

Up until last week, a half-dozen different computer models had been done – some of them now perhaps out of date -- predicting the impacts of the Warner-Lieberman bill. And while they all differed widely, it was clear that the bill would have cost consumers between two and five times more than the Bingaman bill and for Alaska, it was clear that the bill would have provided between two to four times less adaptation assistance than the Bingaman bill.

Last week, however, Senators Joe Lieberman and John Warner and Environment and Public Works Chairman Senator Barbara Boxer moved to meet some of our concerns with their bill. They added a new adaptation funding mechanism that might provide Alaska with about $50 billion of additional adaptation assistance from 2011 through 2050.

That money would be on top of the hundreds of millions of dollars Alaska would get for wildlife aid, and on top of the hundreds of millions of dollars of aid to help offset electricity cost hikes for rural utilities and residents that burn diesel fuel. It also is in addition to money proposed to go to Alaska Natives – tribal aid – perhaps to pay for village relocations and other rural infrastructure needs.

The problem is that while the money in the Bingaman bill was mandatory direct spending – money automatically guaranteed to Alaska -- the money in the new version of the Lieberman-Warner bill is largely dependent upon appropriation each year by congressional committees, which means almost none of the money is actually guaranteed to go to Alaska’s needs, although the bill is somewhat on clear on this issue.

The Lieberman-Warner bill certainly could have some benefits for the State.  It funds the Energy Efficiency and Conservation Block Grant program that we created last December – perhaps to the tune of $136 billion nationwide till 2050. That is money that at least the state’s larger cities are destined to receive, although there is no agreement yet from the models on exactly how much Alaska cities will gain. 

It funds a worker relocation and training program at about $190 billion till 2050 nationwide. It funds aid to Indian tribes as I mentioned, and a number of other wildlife and coastal restoration programs. And it funds technology research – roughly $300 billion over the next 40 years -- and provides money to build renewable energy projects – about $150 billion nationwide. Alaska certainly may gain its fair share from those funds.

There certainly may be funds available to build coal or waste gasification power plants; wind, geothermal, ocean, solar and biomass energy projects, demonstration projects to sequester carbon dioxide underground, perhaps using it to get more oil out of the ground at the same time. It almost sounds like Christmas.

But beware, there is no such thing as free money. You need to remember where the money is coming from. It is coming from receipts from revenues from auctions of carbon emission allowances and all of us will ultimately pay vastly higher prices for energy to generate every dime of this money. This bill will soak up more disposable income from Americans and redistribute it than any single measure ever before considered in this country.

All of these numbers come from computer forecasts of what carbon will cost. Just last week the Senate Energy Committee held a hearing into just how reliable or unreliable any of these estimates are and the answer was probably not very reliable. The Congressional Research Service actually said all of the estimates, past a decade from now, should be viewed with “attentive skepticism.”

But if you add up all these currently promised pots of aid money, the total comes to $4.69 trillion dollars by 2050 – and all of that money will come from Americans’ pocketbooks.

Now Alaska overall may gain more in return than what we individuals pay at the pump or in higher utility bills -- assuming that the higher costs for everything we buy that arrives here by ship, barge or plane won’t eat up those benefits – because Alaska may be the most severely impacted in the future by climate change – if all the computer models prove correct.  But the American economy overall is going to take a tremendous beating.

Alaska’s State Treasury, as the University’s Institute of Social and Economic Research has indicated in the past, may benefit since the likely higher prices for natural gas may make an Alaska gas line more economic to build. But how that benefit is distributed to average Alaskans who will ultimately pay for the allowances is less clear.
The nationwide estimates before last week’s revisions to the bill predicted that electricity costs would rise from between 20% and 129% by 2030. Gasoline costs were forecast to rise in an EPA estimate by between 53 cents in 2030 to $1.40 a gallon by 2050 – on top of our current sky-high prices. Natural gas is likely by the national estimates to rise from between 9% to 146% by 2030 – the models are wildly differing in their forecasts for natural gas impacts and nuclear power impacts and coal impacts. Household costs, however are likely to rise from a low of $446 in an EPA estimate, to a high of $6,750 in a forecast by the National Association of Manufacturers.

In a statement in a Senate committee last week I complained, given that the estimates for this bill’s costs to Americans range from just over $1 trillion to more than $7 trillion to 2050, that Congress has never before been asked to pass such a complex bill with so much disagreement as to what it actually will cost individuals and how it will affect our economy. And on how it will redistribute wealth and whether it actually will generate wealth by propelling America to the lead in 21st Century “green” technology.

The only agreement is that unless all the nations of the world adopt similar legislation, American action alone will only cut total global carbon emissions by between 23 and 25 parts per million in 2050. If all nations adopt similar policies EPA predicts that global emission levels would likely stabilize at around 490 parts per million by 2095. If foreign nations do not follow the U.S. lead, however, emissions are likely to be between 600 and 700 parts per million, even with the U.S. actions.

That is important not only because of the competitive disadvantage American firms will face if the rest of the world does not follow our lead, but because the UN scientists predict that huge global temperature changes will occur if total carbon rises above 700 parts per million, compared to our current carbon levels of about 380 ppm today.

So where do we stand. I continue to try to work with the bill’s sponsors to address a host of important issues for Alaska. We have made some progress. The latest version does include a fix we submitted to prevent Alaska natural gas from being double counted, so we have protected the economics of a natural gas pipeline or liquefication project.

We have partially fixed a tribal definition so that Alaska Native corporations that control 44 million acres of this State, also can benefit from the bill.

But we still have problems. We need to deal with the impact of the bill on the state’s three small oil refineries. If we drive them out of business, Alaskans again will face the bad old days of importing all of our fuel on tankers from the West Coast, increasing prices and risking environmental damage from tanker spills. We know we can’t convert to hydrogen-powered cars overnight.

We have to try to aid Alaska’s coal industry, since Alaska does lead the world in coal reserves. It would be nice if our reserves can be utilized in the future, especially since coal is the only fossil fuel where we currently have the technology to capture and store emissions generated by its use – technology, however, that still must be proven to work both at scale and at lower cost. 

And we have to deal with the many larger issues of cost and equity involved in climate legislation, whether the bill contains a workable “safety valve” to protect America’s economy from huge price spikes, if technology doesn’t allow carbon emissions to be avoided or captured at reasonable cost in needed timeframes.  We have to wrestle with how to keep business, small and large, from being killed by the red tape that could come from recording, reporting and then controlling carbon emissions, much less buying allowances or putting together carbon offset projects.

Clearly I think that furthering technology and reducing its cost is the real answer to reducing carbon emissions, not just mandating lower emissions whether the technology actually yet exists to allow utilities or industry to meet the mandates.  Front loading of funding for new technology is the real key to reducing emissions and such be expanded throughout the bill.

So my update from Washington is that I am still trying to analyze the impacts of the new changes to the Lieberman-Warner. I am continuing to try to change the bill so that it better meets Alaska’s needs.  Only when I’ve gone as far as I can with those efforts will I decide whether this is a bill that I can support this year, or more likely in the future.

My suspicion right now is that this bill is not yet ready for “prime time.” There is still too much we don’t really know about the bill and how it will actually impact so many other parts of the U.S. and global economy.  But I am the first to admit that climate change is a serious concern for this state, so I will continue to try to improve and craft legislation that will help stabilize Alaska’s climate, while protecting our current and future economy.

At current fuel and utility prices far too many Alaskans are having trouble making ends meet. Congress must observe the oath of doctors and “do no harm” while trying to treat climate concerns. Alaskans are barely holding on under these record fuel prices. Making these costs rise far higher without, at least the clear expectation, that action will eventually reduce energy costs and help new industry and jobs flourish is unacceptable in my view.

Since I last appeared before the Alaska Municipal League, Congress has done a great deal on the energy front. We passed the Energy Independence and Security Act that includes two grant programs to promote renewable energy in Alaska, which hopefully will be implemented and funded this year and provide aid to cut electricity costs. The bill took major strides to improve building codes and increase energy conservation and efficiency efforts. It extended weatherization programs. It increased lighting efficiency and will improve vehicle fuel economy in the future.

Congress has increased funding, unfortunately not enough, for the Low Income Home Energy Assistance program to aid lower-income residents deal with these record fuel costs.

But we will keep trying to do more.

At this time we truly need a balanced energy plan for America. But I will save my “open ANWR speech” for another venue.

The overriding concern in the Senate in coming weeks will be how to address record energy costs, without worsening them and hopefully while reducing the nation’s carbon emissions – potentially the cause of climate change. It is a truly daunting task and I would welcome your advice on what we should be trying to do in carbon limitation legislation.

So let me stop talking and start listening to your questions and your wisdom. Thanks for the invite.