Statement of Marlo Lewis Before the Committee on Energy and Natural Resources

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Thank you, Mr. Chairman and Members of the Committee, for the opportunity to submit testimony on S. 388, the Climate Change Technology Deployment and Infrastructure Credit Act of 2005. 

My name is Marlo Lewis.  I am a senior fellow in environmental policy at the Competitive Enterprise Institute in Washington, D.C. CEI is a nonprofit, nonpartisan research and advocacy institute dedicated to advancing the principles of free enterprise and limited government. I am also representing the views of several other conservative and free-market organizations including the American Conservative Union, Americans for Tax Reform, Freedom Works, and the National Taxpayers Union.


We have strong concerns about S. 388’s “transferable credit” provisions, particularly Section 1612(a)(6-7), which direct the Secretary of Energy:

(6) to provide to persons and entities that enter into … voluntary agreements [with the Department of Energy] and reduce greenhouse gas emissions transferable credits that may be used for any incentive, market-based, or regulatory program determined by Congress to be necessary and feasible to reduce the risk of climate change and effects of climate change; and

(7) to provide for the registration, transfer, and tracking of the ownership or holding of those credits for purposes of facilitating voluntary trading among persons and entities.


My testimony develops the following points:


·         Although not part of the sponsoring Senators’ intention, U.S. Government provision or certification of transferable credits would build a corporate clientele for Kyoto-type emissions cap-and-trade policies. Transferable credits derive their economic value solely from the threat or imposition of a carbon cap. Consequently, all credit holders acquire financial motives to lobby for a cap. 

·         Although participation in a transferable credit program is not mandatory, neither is it truly voluntary. Such programs transfer wealth, in the form of tradable emission allowances, from those who not “volunteer” to those who do. Non-participants are penalized under a future cap—hit with extra burdens they would not face absent a transferable credit program.

·         The political result of this coercive, zero-sum dynamic is all-too-predictable: a large mass of companies holding carbon-reduction coupons that mature and attain full market value only under a cap. Transferable credits will expand the ranks of energy-rationing profiteers.

·         Since all insiders know that transferable credits are a prelude to future cap-and-trade policies, enacting Section 1612 would trigger fuel switching from coal to natural gas—further driving up natural gas prices.

·         The Department of Energy (DOE) is nearing completion of a multi-year rulemaking to improve the voluntary reporting of greenhouse gases program (VRGGP) established under Section 1605(b) of the 1992 Energy Policy Act. DOE commendably resisted pressure to adopt accounting rules that would allow special interests to game the system for PR or competitive advantage. Section 1612 threatens to undo DOE’s careful work and give special interests another bite at the apple.