[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




 
                       FULL COMMITTEE HEARING ON
    CLIMATE CHANGE SOLUTIONS FOR SMALL BUSINESSES AND FAMILY FARMERS

=======================================================================

                                HEARING

                               before the


                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             APRIL 29, 2009

                               __________

                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

            Small Business Committee Document Number 111-017
Available via the GPO Website: http://www.access.gpo.gov/congress/house



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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman

                          DENNIS MOORE, Kansas

                      HEATH SHULER, North Carolina

                     KATHY DAHLKEMPER, Pennsylvania

                         KURT SCHRADER, Oregon

                        ANN KIRKPATRICK, Arizona

                          GLENN NYE, Virginia

                         MICHAEL MICHAUD, Maine

                         MELISSA BEAN, Illinois

                         DAN LIPINSKI, Illinois

                      JASON ALTMIRE, Pennsylvania

                        YVETTE CLARKE, New York

                        BRAD ELLSWORTH, Indiana

                        JOE SESTAK, Pennsylvania

                         BOBBY BRIGHT, Alabama

                        PARKER GRIFFITH, Alabama

                      DEBORAH HALVORSON, Illinois

                  SAM GRAVES, Missouri, Ranking Member

                      ROSCOE G. BARTLETT, Maryland

                         W. TODD AKIN, Missouri

                            STEVE KING, Iowa

                     LYNN A. WESTMORELAND, Georgia

                          LOUIE GOHMERT, Texas

                         MARY FALLIN, Oklahoma

                         VERN BUCHANAN, Florida

                      BLAINE LUETKEMEYER, Missouri

                         AARON SCHOCK, Illinois

                      GLENN THOMPSON, Pennsylvania

                         MIKE COFFMAN, Colorado

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

                  Karen Haas, Minority Staff Director

        .........................................................

                                  (ii)

  
?

                         STANDING SUBCOMMITTEES

                                 ______

               Subcommittee on Contracting and Technology

                     GLENN NYE, Virginia, Chairman


YVETTE CLARKE, New York              AARON SCHOCK, Illinois, Ranking
BRAD ELLSWORTH, Indiana              ROSCOE BARTLETT, Maryland
KURT SCHRADER, Oregon                TODD AKIN, Missouri
DEBORAH HALVORSON, Illinois          MARY FALLIN, Oklahoma
MELISSA BEAN, Illinois               GLENN THOMPSON, Pennsylvania
JOE SESTAK, Pennsylvania
PARKER GRIFFITH, Alabama

                                 ______

                    Subcommittee on Finance and Tax

                    KURT SCHRADER, Oregon, Chairman


DENNIS MOORE, Kansas                 VERN BUCHANAN, Florida, Ranking
ANN KIRKPATRICK, Arizona             STEVE KING, Iowa
MELISSA BEAN, Illinois               TODD AKIN, Missouri
JOE SESTAK, Pennsylvania             BLAINE LUETKEMEYER, Missouri
DEBORAH HALVORSON, Illinois          MIKE COFFMAN, Colorado
GLENN NYE, Virginia
MICHAEL MICHAUD, Maine

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, Pennsylvania, Chairman


HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma, Ranking
BRAD ELLSWORTH, Indiana              LOUIE GOHMERT, Texas
PARKER GRIFFITH, Alabama

                                 (iii)

  
?

               Subcommittee on Regulations and Healthcare

               KATHY DAHLKEMPER, Pennsylvania, Chairwoman


DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia, 
PARKER GRIFFITH, Alabama             Ranking
MELISSA BEAN, Illinois               STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             GLENN THOMPSON, Pennsylvania
BOBBY BRIGHT, Alabama                MIKE COFFMAN, Colorado

                                 ______

     Subcommittee on Rural Development, Entrepreneurship and Trade

                  HEATH SHULER, Pennsylvania, Chairman


MICHAEL MICHAUD, Maine               BLAINE LUETKEMEYER, Missouri, 
BOBBY BRIGHT, Alabama                Ranking
KATHY DAHLKEMPER, Pennsylvania       STEVE KING, Iowa
ANN KIRKPATRICK, Arizona             AARON SCHOCK, Illinois
YVETTE CLARKE, New York              GLENN THOMPSON, Pennsylvania

                                  (iv)

  
?

                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Graves, Hon. Sam.................................................     2

                               WITNESSES

Yoder, Mr. Fred , Past President, National Corn Growers 
  Association....................................................     3
McNamara, Mr. Rob, Senior Vice President, National Roofing 
  Contractors Association........................................     5
Johnson, Mr. Roger, President, National Farmers Union............     6
Sharp, Mr. Gordon P., Chairman, Aircuity, Inc., Newton, MA.......     8
Kavanagh, Mr. Lawrence W., Vice President, Environment And 
  Technology, American Iron And Steel Institute..................    10

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    26
Graves, Hon. Sam.................................................    28
Yoder, Mr. Fred , Past President, National Corn Growers 
  Association....................................................    30
McNamara, Mr. Rob, Senior Vice President, National Roofing 
  Contractors Association........................................    35
Johnson, Mr. Roger, President, National Farmers Union............    42
Sharp, Mr. Gordon P., Chairman, Aircuity, Inc., Newton, MA.......    51
Kavanagh, Mr. Lawrence W., Vice President, Environment And 
  Technology, American Iron And Steel Institute..................    59

Statements for the Record:
Halvorson, Hon. Debbie...........................................    64
Connors, Mr. Corey, Director Legislative Relations, American 
  Nursery & Landscape Association................................    66
Looney, Mr. Robert J., Vice President of Government Affairs, CHS, 
  Inc............................................................    71
National Oilseed Processors Association..........................    78
Kozak, Mr. Jerry, President and CEO, National Milk Producers 
  Federation.....................................................    87

                                  (v)

  


                       FULL COMMITTEE HEARING ON
    CLIMATE CHANGE SOLUTIONS FOR SMALL BUSINESSES AND FAMILY FARMERS

                              ----------                              


                       Wednesday, April 29, 2009

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 1:00 p.m., in Room 
2360 Rayburn House Office Building, Hon. Nydia Velazquez 
[chairman of the Committee] presiding.
    Present: Representatives Velazquez, Dahlkemper, Bright, 
Graves, Luetkemeyer and Thompson.
    Chairwoman Velazquez. I call this hearing of the Small 
Business Committee to order.
    Within the scientific community, a clear consensus has 
formed about the need to address the dangers of climate change. 
The effects of global warming are indisputable, from rising sea 
levels, to increasingly violent natural disasters. 
Repercussions like these will be disastrous, not only in terms 
of human suffering, but also for our global economy.
    Across the country, America's small businesses are stepping 
up to help address this problem. Today, the Chicago Climate 
Exchange boasts 3,500 members, and trades $9 million worth of 
carbon offsets. That is enough to mitigate annual emissions for 
320,000 cars. Entrepreneurs and family farmers are pioneering 
innovative ways to reduce carbon in the atmosphere. Whether 
it's trading carbon credits, or developing renewable fuels, 
small firms everywhere are making critical investments in a 
greener future.
    If it's done right, reducing greenhouse gas emissions will 
mean more opportunities for our small business economy. As 
legislation to address climate change goes forward, we need to 
make sure that the final proposal not only protects our 
environment, but creates jobs. Properly constructed legislation 
will result in a win-win. It will expand small business jobs, 
while protecting the planet.
    Despite these opportunities, some businesses understandably 
worry about the expense of addressing climate change. And, of 
course, it is important that entrepreneurs not be unfairly 
burdened as we transition to a carbon constrained economy. 
Let's not forget, small businesses are some of the largest 
energy consumers, so we need to carefully consider how capping 
carbon emissions will affect them.
    In grappling with these issues, one thing has become 
clear--the only option not on the table is doing nothing. For 
better or worse, the EPA's recent decision to classify carbon 
dioxide as a dangerous pollutant means that it will now be 
regulated under the Clean Air Act. The Clean Air Act laws, 
which were enacted in 1970, simply were not written with this 
purpose in mind. Trying to regulate carbon dioxide emissions 
through the existing Clean Air Act laws is trying to put a 
square peg in a round hole. That means, the question is no 
longer if we're going to reduce greenhouse gas emissions, but 
rather when, and how.
    If we are going to both address climate change, and create 
new growth opportunities for small businesses, leadership will 
be required on all fronts, not just from EPA, but from 
Congress, as well. That is the right way to go about this 
monumental task.
    The panel before us today can testify about some of the 
ways in which small businesses and family farmers are 
pioneering the green revolution. I look forward to hearing 
about their experiences in the growing field. However, if they 
are going to continue this impressive work, they will need the 
proper support from all of us.
    I thank our witnesses for being here today, and I yield to 
Ranking Member Graves for his opening statement.
    Mr. Graves. Thank you, Madam Chair. Good afternoon, 
everyone, and thank you for participating in today's hearing. 
And I want to thank Chairwoman Velazquez for holding this 
timely hearing.
    The debate on climate change has shifted from the global 
cooling concerns of the 1970s to global warming today. There 
seem to be a broad consensus that human activities are 
increasing carbon dioxide emissions into the atmosphere. 
However, debate continues on how much those emissions are 
changing the climate, at what rate it is changing, and what 
effects are exactly are going to be.
    It seems that you can find a statistic or a scientist that 
can support any position on climate change. And with such 
variation among scientists, I think it's important that we take 
a very calculated approach towards addressing climate change.
    Dramatic new requirements for industry can also have 
devastating effects on the economy, both for business, and for 
consumers. Studies suggest that taxes from proposed climate 
change legislation could cost the American household thousands 
of dollars per year in increased energy bills. Revenues would 
be collected from new mandates on industry, and the cost would 
be passed on to the consumer, both residential, and commercial.
    Considering the lagging economy, this is something that I 
look at as to be a big question; is this something we want to 
do? And when other countries, like China and India, don't have 
the same strict caps, are we putting businesses in an unfair 
advantage here in the United States?
    Besides these concerns, I also find alarming that nuclear 
power is not being considered as a renewable fuel source. If 
reducing CO2 emissions is truly a goal, then ignoring nuclear 
power is a big mistake, given it already provides this country 
with 20 percent of its electricity. Simply allowing nuclear 
power to meet new renewable electricity standards, I think 
would moderate costs to consumers.
    Real solutions need to take into account regional 
differences throughout the country, take advantage of clean 
fuel within our borders, including natural gas, and nuclear 
power, offer incentives, and carefully consider how our economy 
will be impacted, both domestically, and internationally.
    And, again, thank you, Chairwoman, for holding this 
hearing. I look forward to the testimony.
    Chairwoman Velazquez. Thank you. And I welcome our first 
witness, Mr. Fred Yoder. He is a corn farmer from Plain City, 
Ohio. Also, he is the past President of National Corn Growers 
Association, and current member of the 25x25. Mr. Yoder also is 
part of a new task force, NCGA, established to evaluate climate 
issues. The NCGA represents more than 32,000 corn growers from 
48 states.
    Welcome, sir. You have five minutes to make your statement.

                    STATEMENT OF FRED YODER

    Mr. Yoder. Thank you, Madam Chair, and Ranking Member 
Graves. It's a pleasure for me to be here, and I appreciate the 
remarks that you both have shared with us.
    Thank you for the opportunity to testify today on behalf of 
the National Corn Growers Association regarding climate change 
solutions for small businesses and family farmers. I applaud 
the Committee's efforts to focus attention on the important 
role the agriculture industry has in the area of climate change 
and the issues facing rural America.
    I grow corn, soy beans, and wheat near Plain City, Ohio, 
and I've been an active participant in climate change 
discussions for many years. In December, I had the opportunity 
to attend and participate in the United Nations World Climate 
Conference in Poland, where I was able to discuss the role of 
agriculture in reducing greenhouse gas emissions. Also, in 
addition to being part of NCGA's efforts, like you said, Madam 
Chair, I serve on the boards of numerous other ad hoc groups, 
including 25x25 Working Group for Carbon, and also the Ag 
Carbon Market Working Group here in D.C.
    I feel strongly that as Congress moves forward on climate 
legislation, that agriculture should be considered as a 
significant part of the broader solution as we evaluate ways to 
reduce greenhouse gas emissions. Our nation's corn growers can 
play a major role in a market-based cap and trade system 
through sequestering carbon on agricultural lands. Numerous 
economic analyses have shown that a robust offset program will 
significantly reduce the cost.
    In the near term, greenhouse gas reductions from livestock 
and agricultural conservation practices are the easiest, and 
most readily available means of achieving reductions on a 
meaningful scale. EPA estimates that ag and forestry lands can 
sequester at least 20 percent of all annual greenhouse gases 
here in the United States.
    Further, agricultural producers have the potential to 
benefit from a properly crafted cap and trade system. Given 
those opportunities, it's critical that any climate change 
legislation seeks to maximize agriculture's participation and 
insure greenhouse gas reductions, while also sustaining a 
strong farm economy.
    For years, corn growers, along with the rest of the 
agriculture industry, have been proactively engaging in 
conservation practices, such as no till, and reduced tillage, 
which result in a net benefit of carbon stored in the soil. In 
fact, on my own farm, I do both no till and reduced till. For 
the past five years, I've worked with my State Association, the 
Ohio Corn Growers, on a research project with Dr. Rattan Lal, 
from the Ohio State University, on soil carbon sequestration 
research. As part of our research, we have on-farm plots at six 
different locations to study various soils, and their carbon 
capture capabilities. I've been actively engaged from the 
beginning in defining the research protocols. This is just one 
example of the proactive steps our industry has taken.
    NCGA has identified several priorities, which I believe are 
critical elements to the agricultural sector within the cap and 
trade legislation. First, NCGA feels the agricultural sector 
should not be subject to an emissions cap. Any efforts to 
regulate greenhouse gas emissions from America's two million 
farms and ranches would be costly, and burdensome. The 
agricultural industry accounts for a very small percentage of 
emissions in the overall economy. Only 7 percent of all 
greenhouse gas emissions. Therefore, it would be unreasonable 
to concentrate on regulations for such a small and diffuse 
industry.
    Furthermore, an important component of creating such a 
successful cap and trade system is insuring that domestic 
offsets are not artificially limited. Artificial caps will 
prevent legitimate carbon sequestration, livestock methane 
capture, and manure gasification projects from occurring.
    Another top priority for our industry is the role of USDA. 
NCGA feels that USDA should play a prominent role in developing 
the standards, and administering the program for agricultural 
offsets. The Department has institutional resources, and 
technical expertise necessary to oversee programs that have the 
potential to be massive in scope. USDA has a proven record of 
program implementation, and collaboration with farmers.
    One other issues that continues to be of the utmost 
importance to NCGA is the treatment of early actors. 
Agriculture is constantly evolving. As technologies and 
practices improve, farmers will continue to adopt new and 
efficient practices. However, producers that have taken these 
steps already should not be placed at a competitive 
disadvantage by being excluded from compensation for future 
offsets that occur as a result of these ongoing efforts.
    In conclusion, it's our hope that we can continue to work 
with Congressional leaders to insure Congress--that they choose 
the best path for agriculture and America. Finally, corn 
growers will continue to meet the growing demands of food, 
feed, and fuel in an economical and environmentally responsible 
manner.
    I thank the Committee for its time, and I very much look 
forward to your questions. Thank you.
    [The statement of Mr. Yoder is included in the appendix at 
page XX.]
    Chairwoman Velazquez. Thank you, Mr. Yoder. Our next 
witness, Mr. Robert McNamara. He's the President of F.J.A. 
Christiansen Roofing Corporation in Milwaukee, Wisconsin. His 
company was founded in 1879, and is one of the largest, most 
respected roofing contractors in the Midwest.
    Mr. McNamara is testifying on behalf of the NRCA, which was 
founded in 1886, to represent all segments of the roofing 
industry. Welcome, sir.

                  STATEMENT OF ROBERT McNAMARA

    Mr. McNamara. Thank you, Madam Chairwoman, and members of 
the Committee for the opportunity to testify today on behalf of 
the National Roofing Contractors Association. I am Rob 
McNamara, President of F.J.A. Christiansen Roofing, a Tecta 
America Company in Milwaukee, Wisconsin, and incoming President 
for our Association.
    The roofing industry is uniquely positioned to play an 
important role in developing innovative solutions to climate 
change issues now being addressed by Congress. These 
opportunities include (1) increased energy efficiency, 
including vegetative and reflective, or cool roofs, in 
appropriate climates, as well as daylighting through rooftops 
to reduce interior electric lighting requirements; and, second, 
production of renewable energy from rooftops via solar 
electric, solar thermal, and wind energy generation.
    First, regarding increased energy efficiency, residential 
and commercial buildings in the U.S. account for about 30-40 
percent of the carbon emissions generated by our nation. 
Providing incentives for building owners to adopt more energy 
efficient roofing systems will provide numerous benefits to the 
public. Current trends toward the adoption of green buildings 
are key drivers of economic growth in our industry. NRCA and 
its members are working to maximize the environmental, energy 
conservation, and economic benefits of expanding green 
buildings through a variety of energy efficient roof 
technologies that can help reduce carbon emissions, and provide 
other environmental benefits.
    Second, we continue to see the increased use of rooftop 
technologies to increase energy production from sustainable 
sources. These include photovoltaic roof systems that generate 
electricity from solar power, solar thermal rooftop 
installations to reduce energy requirements for heated water, 
and roof-mounted wind turbines for power generation. Roof 
surfaces across the nation offer an economical and ready-to-use 
platform for the production of renewable energy. If only one-
third of the roof area of current U.S. residential and 
commercial buildings was used for solar energy production, our 
rooftops could generate over 50,000 megawatts of power 
annually, or about 8 percent of our current electricity 
generating capacity. And these numbers will only increase with 
expected advances in PV technology, and the resulting 
efficiencies in the coming years.
    As Congress considers legislation to address climate change 
issues, NRCA urges members to adopt market-based solutions 
wherever possible to achieve public policy goals.
    We are pleased that the discussion draft proposed by 
Representatives Waxman and Markey recognizes the positive role 
that energy efficient roof systems can play. For instance, this 
proposal would accelerate the adoption of so-called cool roofs 
that reduce carbon emissions by achieving higher levels of 
solar reflectance. NRCA shares the proposal's objective to 
accelerate the use of energy efficient roofs, and we look 
forward to working with Congress to insure that roof standards 
reflect the reality of differing climatic and geographic zones.
    NRCA also shares the goal of achieving accelerating energy 
efficiency by setting new standards for building codes. 
However, we urge Congress to work with the existing code 
bodies, the construction industry, and other stakeholders to 
maximize attainment of energy efficient goals that are 
effective, practical, and achievable.
    NRCA also urges Congress to consider providing tax 
incentives for building owners who install energy efficient 
roof systems that go beyond the requirements of existing 
building codes.
    While our industry can play a productive role in addressing 
climate change issues, NRCA does have concerns about the 
potential impact of a cap and trade system for combating 
climate change. Given that a large percentage of roofing 
products contain asphalt-based materials, the cap and trade 
program could adversely effect the price sensitive roofing 
industry by raising input prices.
    NRCA urges Congress to remember that higher costs will 
inevitably be passed on to consumers, and this could inhibit 
the growth of our industry, and the adoption of energy 
efficient roofing.
    NRCA also has concerns over the Environmental Protection 
Agency's proposed endangerment finding which would result in 
greenhouse gases being regulated under the Clean Air Act. Many 
of NRCA's members have already had untold number of projects 
cancelled, or put on hold indefinitely, due to the downturn in 
our economy. The advent of additional regulation and permitting 
could bring our present level of activity to a virtual 
standstill.
    Finally, NCRA believes that Congress should remove an 
obstacle in current law affecting the expansion of energy 
efficient roofing by passing the Green Roofing Energy 
Efficiency Tax Act. In lieu of the current 39-year depreciation 
schedule that is well beyond the average life of a roof system, 
GREETA would provide a more realistic 20-year tax depreciation 
schedule for commercial roof systems that meet a benchmark 
energy efficiency standard. By accelerating demand for green 
roof systems, GREETA will reduce carbon emissions by 20 million 
pounds per year, and would benefit millions of small business 
owners.
    NRCA wishes to thank you, Madam Chairwoman, and also 
Congressman Moore for co-sponsoring GREETA.
    To conclude, NRCA believes that recent advances in energy-
efficient and energy-producing roof systems will provide unique 
opportunities for our industry to play a significant role in 
addressing climate change issues, and we thank you for this 
opportunity to testify today.
    [Mr. McNamara's prepared statement is included in the 
appendix at page XX.]
    Chairwoman Velazquez. Thank you, Mr. McNamara. We have 
three votes, but we will have time for Mr. Johnson to make your 
testimony. So, let me just introduce you formally.
    Mr. Johnson is a third-generation family farmer from Turtle 
Lake, North Dakota. He is also President of the National 
Farmers Union. NFU was founded in 1902 to help the family 
farmers address profitability issues and monopolistic 
practices, and today has a membership of 250,000 farm and ranch 
families. Welcome.

                   STATEMENT OF ROGER JOHNSON

    Mr. Johnson. Thank you, Madam Chairwoman, and Ranking 
Member Graves. We are pleased to have this chance to testify on 
behalf of the agricultural community, and specifically on 
behalf of our 250,000 members.
    National Farmers Union emerged as a leading voice for how 
agriculture can play a significant role in dealing with climate 
change a few years ago. Our policy adopted by all of our 
members supports a national mandatory carbon emission cap and 
trade system. We've seen the impacts of some of the climate 
change--some of the climate change impacts over the years on 
our industry, and we think it is time that Congress dealt with 
this issue.
    We also think that it is, as you indicated, not a matter of 
if, but a matter of how and when that this issue gets 
addressed. We think it makes sense for us to use a cap and 
trade system. It is what much of the rest of the world seems to 
be doing. It provides flexibility that would be important for 
us. And, hopefully, it will provide an opportunity for our 
farmers and ranchers to participate in a meaningful way.
    Climate change legislation, if it is not passed, likely 
will result in EPA regulating. That is not something that our 
members would look forward to being subjected to, so we support 
a comprehensive legislative approach to addressing climate 
change.
    Agriculture's role, we believe that, as you heard in 
earlier testimony, we contribute less than about 7 percent of 
U.S. emissions in agriculture, but we have the potential to 
offset up to 20, to maybe 25 percent of all U.S. greenhouse gas 
emissions, and so we stand ready to play a role in that.
    The income potential from using offsets will be 
significant. Our members understand that whatever climate 
change legislation is ultimately implemented, it is going to 
result in increased costs for fuel, and fertilizer, and other 
inputs. We also want to have an opportunity to participate on 
the income side by the use of agricultural offsets.
    The distribution of allowances is particularly important, 
and we think that we have some suggestions in the testimony on 
how those allowances can be distributed back to the sector to 
help mitigate some of those cost increases that I referenced 
just a bit ago. Providing a percentage of those overall 
allowances back to us would be very beneficial.
    The National Farmers Union currently is a member of the 
Chicago Climate Exchange that you referenced in your opening 
comments. It is the CCX, the world's first greenhouse gas 
emission registry. It's operated voluntarily, but members of 
the CCX make legally binding, voluntary commitments to reduce 
greenhouse gas emissions.
    Our organization is currently the largest aggregator of 
agricultural credits for the CCX. We have about five million 
acres enrolled across 31 states in this country, nearly $9.5 
million has been earned by about 4,000 of our members across 
the country.
    We also believe that there needs to be a significant role 
for USDA in running the offset program. As you heard earlier, 
USDA has a lot of the technical expertise, over 20 years of 
targeted climate change research has been done as USDA. We 
think they are well positioned to work with our farmers, both 
in terms of providing technical assistance, and also having 
access to facilities. They basically have offices in virtually 
every county across the country, and so farmers and ranchers 
are used to dealing with them.
    We also believe that domestic offsets should be unlimited. 
There are a couple of reasons for that. Certainly, the 
potential to sequester up to 20 percent of greenhouse gas 
emissions is something we don't want to overlook. Using offsets 
provides a mechanism for doing that. An arbitrary limit on 
offsets would work against sort of the idea of trying to keep 
this thing under some sort of cost control. The larger the 
market is, the more likely it is that the overall cost of the 
system will be reduced, and so offering unlimited offsets would 
help in that fashion, as well.
    We have a number of other concerns. Just quickly, three 
topics; additionality. We think that what you need to do in 
Congress is to establish a static baseline of activities. We 
want to make sure that we don't punish early actors. In fact, 
they ought to be rewarded. There are systems that deal with 
reversals, which is an issue that some on the other side of 
this issue have sometimes raised from the environmental 
standpoint. And we also support stackable credits. Just because 
a farmer implements a practice that it's good for the 
environment with respect to soil erosion, should not mean that 
that person shouldn't be able to take advantage of an economic 
opportunity to also reduce greenhouse gas emissions.
    With that, Madam Chair, I would be pleased to respond to 
any questions, when that time comes.
    [Mr. Johnson's prepared statement is included in the 
appendix at page XX.]
    Chairwoman Velazquez. Thank you, Mr. Johnson. And the 
Committee now stands in recess until we come back from voting. 
Thank you.
    [Recess.]
    Chairwoman Velazquez. The Committee is called back to 
order.
    Our next witness is Mr. Gordon Sharp. Mr. Gordon is the 
founder and Chairman for Aircuity in Newton, Massachusetts. Mr. 
Sharp is also the founder and former CEO of Phoenix Controls, 
and has more than 25 U.S. patents to his name. Aircuity's 
products reduce building energy and operating expenses while 
simultaneously improving its indoor environmental quality. 
Welcome, sir.

                   STATEMENT OF GORDON SHARP

    Mr. Sharp. Chairwoman Velazquez, thank you for the 
opportunity to speak before you today on how small business 
can, and is addressing climate change. My name is Gordon Sharp, 
and I am the Chairman and founder of Aircuity. I have started, 
and successfully grown several small businesses built around 
technology innovation for energy efficiency.
    Aircuity is an example of the impact of small business 
innovation on addressing climate change. Aircuity has 
commercialized technology to optimize ventilation for 
commercial and institutional buildings without sacrificing 
comfort, safety, or occupant productivity.
    Since most buildings are actually over-ventilated, properly 
controlling outside air in building ventilation is the single 
largest factor affecting both building mechanical system-
related energy-efficiency, and indoor environmental 
performance.
    Aircuity's innovation was to develop an improved means for 
measuring the indoor environment that enables a reliable 
demand-based ventilation approach. Borrowing from the data 
networks world, we architected a multiplexed sensing system 
that routes air packets from throughout the building to a 
centralized set of high grade sensors. The result was a cost-
effective, accurate, low-maintenance solution that addresses 
the deficiencies of conventional approaches. For example, this 
hearing room is a good candidate for our technology, since much 
of the time this space is not fully occupied, requiring less 
outside air. However, like most buildings, it is probably 
always ventilated at the same high rate, wasting significant 
amounts of energy on cooling, heating, and fan power.
    In terms of the climate change impact, Aircuity's forecast 
for 2009 should represent more than $7.5 million in annual 
energy savings, or an annual reduction of 38,700 metric tons of 
carbon dioxide, or equivalently, 85 million pounds of CO2. This 
is the climate change impact of 30.5 megawatts, or about $225 
million of installed solar PV capacity, which is about 7.5 
percent of the total capacity that was brought on last year.
    Whereas, Aircuity represents a younger small business in a 
rapid growth stage, Phoenix Controls, another small business 
that I founded, that was later sold to Honeywell, is a more 
mature business in the field of energy savings, airflow 
controls for laboratories. The climate change impact of their 
sales last year was roughly equal to the total new U.S. solar 
PV capacity installed last year. In fact, Phoenix Controls' 
current installed base of systems is reducing energy 
consumption by about $1.1 billion annually, representing a 
carbon footprint reduction of 5.6 million metric tons of CO2, 
or the energy equivalent of 1-1/4 days of imported foreign oil.
    Regarding the financial practicality of these energy 
efficiency solutions, cost is often raised as an obstacle. 
Whereas, in reality, they are solid financial investments. For 
example, Aircuity systems usually deliver paybacks from one to 
four years, which represents internal rates of return from 100 
percent to about 20 percent. A larger obstacle is actually 
owner concerns that the projected savings are not achievable, 
or that the technology is too new, and from a lesser known 
small business.
    This credibility gap can be difficult to cross until there 
is a critical mass of proven installations. As I have 
personally experienced, pioneers are the ones with the arrows 
in their backs. One means to help bridge this gap is to 
introduce incentives from both utilities and the government to 
reduce the financial barriers for early adopting organizations 
that have effectively been increased by these concerns. 
Additionally, carbon credits may represent another helpful 
financial boost. Over time, this assistance becomes less 
important as the technology's true financial returns become 
known.
    Due to the current high cost of renewable energy, the 
interest in using energy efficiency to address climate change 
has increased dramatically. In fact, our business has nearly 
tripled in the last six months. On a broader front, in the last 
four years, the value of green building construction has gone 
from about 2 percent, to a level approaching almost 10 percent 
of new construction starts. In the next four years, the green 
building market, even with the current economic downturn, is 
projected to reach between 96 and 140 billion dollars annually, 
versus 36-49 billion dollars today.
    There has never been a more important time for small 
businesses to pursue innovation for energy efficiency and 
sustainable climate change. Aircuity is proud to be one of many 
small businesses doing its part to achieve these ends.
    I want to thank the Committee for the opportunity to appear 
here today, and I will be happy to answer any questions that 
you might have.
    [Mr. Sharp's prepared statement is included in the appendix 
at page XX.]
    Ms. Dahlkemper. Thank you, Mr. Sharp. I'd like to recognize 
the Ranking Member, Mr. Graves, to introduce our next witness.
    Mr. Graves. Thank you, Madam Chair. Our next witness is 
Lawrence Kavanagh, who's the Vice President for Environment and 
Technology with the American Iron and Steel Institute. Your 
members, I believe, make up 75 percent of the steel production 
in the United States, and look forward to hearing your 
testimony. Thanks for coming today.

                 STATEMENT OF LAWRENCE KAVANAGH

    Mr. Kavanagh. Thank you. It's my pleasure to be here.
    AISI does, in fact, represent three-quarters of the steel 
made in the U.S., and in addition to companies that produce 
steel, some of which are small businesses, we have over 130 
suppliers to our industry that are members. And that is a group 
that has many small businesses as part of it, technology 
suppliers, raw material suppliers, machine shops, et cetera. We 
depend on them, and they depend on us.
    I would like to start with the steel industry's most 
important issue regarding climate change policy, and that's 
competitiveness. The steel industry in our country is the 
lowest CO2 emitter amongst steel companies around the world. 
For that reason, it's good for the environment to make steel in 
the United States. We've reduced our energy use per ton of 
steel by a third since 1990. And as a result of this 
achievement, and this is a key point, the processes we operate 
today are pushing their energy limits as defined by the laws of 
physics.
    What this means is that the basic premise of climate 
policy, make energy more costly, and people will use less, 
doesn't work for steel, because we're already using less. We're 
already at the point with today's processes, which is little as 
possible. So, when you combine that fact with the fact that 
steel markets are global, and we compete with steel from 
countries that are not subject to the same, or will not be 
subject to the same climate policies, you realize we can't pass 
those additional costs across.
    On the positive side, our new green economy is going to 
require a major infrastructure investment. That's a great 
opportunity for steelmakers here, and for small businesses; 
things like transmission towers, wind towers, pipelines, solar 
panels are all steel-intensive. Steel, we believe, for these 
products, should be made here, which, as I already said, is the 
best and cleanest place to make steel in the world.
    Our ability to stay competitive in a global market means we 
need fair and strong trade laws that are rigorously enforced. 
That's the same principle that's true for climate. We need fair 
climate laws with global reach that could be enforced. Any 
legislation that would otherwise undermine the competitiveness 
of U.S. producers would force steel production to other 
countries, with lower environmental standards, and, 
consequently, lower costs. Such an event would have the 
perverse outcome of actually increasing global greenhouse 
gases.
    To prevent something like that from happening, there are 
three fundamental components that we believe are part of good 
climate policy. One has to do with the stability of emission 
allowances. As I've mentioned already, the steel industry is 
very near the energy intensity limits that it can achieve, as 
dictated by the laws of thermodynamics.
    Now, we are researching, and have been for the last five to 
eight years, new ways to make steel that don't emit C02. This 
is an activity that we think, if successful, will be complete 
about the middle of the decade of the 20s. This is also, I 
should point out, a great opportunity for small businesses in 
the research community, a lot of innovation, a lot of new 
technology comes through collaborative R&D that we do with 
universities, and private investors. But it means that until 
that technology is ready, the pool of allowances needs to be 
sufficient for steel, and needs to be stable.
    Second would be the cost of energy. Climate policy is going 
to increase the cost of energy. The steel industry uses coal, 
electricity, and natural gas in large quantities. At least no 
one that we've talked to can estimate how much these costs are 
going to go up, but the fact is, they are going to go up, and 
as a result of climate policy, to a degree not experienced by 
our international competitors, so there needs to be a means to 
deal with that. The present bill falls short in this area, and 
when you consider that energy costs are 20 percent of the cost 
of steelmaking, you can understand that a large increase there 
goes right at the competitiveness issue.
    And, thirdly, an effective border adjustment measure would 
account for the difference in the burden of strict carbon 
policy here, versus other places around the world. And these 
points are elaborated on in the written testimony.
    In summary, we would urge the House not to consider a one-
size-fits-all solution. Strong and competitive steel companies 
provide a lot of well-paying jobs for their employees and their 
suppliers' employees. We need to keep making steel here in the 
U.S., and we've worked for a long time, the last 20 years, the 
men and women in our industry, to get to this point of climate 
leadership, and we'd like to keep it. Thank you.
    [Mr. Kavanagh's prepared statement is included in the 
appendix at page XX.]
    Ms. Dahlkemper. Thank you very much, Mr. Kavanagh. Coming 
from Western Pennsylvania, my District, we've got a lot of 
steel in that area, and certainly appreciate your input into 
this discussion going forward.
    I just have a couple of questions here. Mr. Johnson, I also 
come from very much of an agriculture district, too. And 
farmers have often been the leaders in conservation efforts. 
And many times, without public policies driving these 
practices. As part of a potential cap and trade scheme, I know 
that the NFU supports rewarding farmers who have already 
employed such operations. How would you respond to critics that 
believe giving carbon credits to so-called early actors defeats 
the goal of reducing the overall emissions?.
    Mr. Johnson. Well, thank you, Madam Chair. There are 
several responses to that. First of all, the broader that you 
can make the offset market, the more efficient economically 
your climate change legislation is going to become. Secondly, 
it is the early actors who really led us-- who brought us to 
this dance, if you will. They showed us the ways to try and 
figure out how to have a reduced carbon footprint.
    Those are the last people that you want to penalize. They 
are the first ones that ought to be rewarded. They took a lot 
of risks on the front-end of this thing in order to go to these 
new--adopt new technologies, and new practices that have proven 
to be beneficial for climate change kinds of issues. So, we 
want to be sure that we don't, in any way, penalize them. So, 
there needs to be a mechanism to make sure that that happens.
    Ms. Dahlkemper. Any thoughts on that mechanism?.
    Mr. Johnson. Well, yes. I mean, one of the mechanism-- 
first of all, the thing that I described in my testimony is 
that you need to pick a baseline, a static sort of--a time, a 
period in time in which okay, practices that are performing 
after that time, you allow offsets, allow them to participate 
in the offset market. If they're before that time, you have to 
disallow them. But, if they're early actors before that time 
line, that is really the rationale for carving out a portion of 
the allowances that would likely be sold in the market, and 
allocating them back to the sector, so that those revenues 
could be used to compensate those early actors in a fashion 
similarly to the folks that acted later.
    Ms. Dahlkemper. Okay. Thank you, Mr. Johnson.
    Mr. Johnson. You're welcome.
    Ms. Dahlkemper. Mr. McNamara, the green roofing products 
and services can provide small roofing firms with a way to 
diversify their business model. Beyond new roofs, have you 
found retrofitting or replacing less efficient energy products 
to be an increasingly important part of your business? And what 
has been the drive or demand for such services, if that's so?
    Mr. McNamara. Yes, that has certainly been the case. We've 
seen, certainly, over the last five or ten year period, and 
with everybody with increased energy costs, obviously, as well, 
continue to move towards greater levels of insulation on either 
projects that we specify and install ourselves, or projects 
that we're involved with that are being specified by others. We 
see greater and greater levels of insulation that are provided 
on rooftops, and that, along with other energy-efficiency 
measures, such as I referred to before in terms of daylighting, 
which works with bringing in sunlight to reduce the energy 
requirements for electric lighting, and cool roofs, or 
reflective roof surfaces, as well, have become more and more 
popular.
    Ms. Dahlkemper. Okay. Thank you.
    Now, Mr. Sharp, given the recent volatility in energy, many 
large entities have taken steps to reduce their energy 
consumption; ultimately, the greenhouse gas emissions. However, 
for many small firms, these investments remain out of reach. 
Can you talk about the type of clients that purchase your 
technologies?
    Mr. Sharp. Well, one of the clients--we tend to work with 
larger facilities. I'm sorry. We tend to work with larger 
facilities, which tend to be sort of universities, colleges, as 
well as corporations, and things of that nature. But we do get 
down into small businesses, as well, who have larger 
facilities. And, to that extent, the paybacks involved with 
this type of technology are relevant to them, as well, so that 
is a very appropriate use of funds. In reality, it becomes a 
major financial investment that pays off at excellent rate, so 
it's a good investment for them. So, it's really not out of 
reach of them, it really is able to be achieved. And it may 
require some financing, but they're easy to finance, based on 
the paybacks.
    Ms. Dahlkemper. So, obviously, as the prices come down, 
more and more small firms are going to-
    Mr. Sharp. Yes. I think a lot of the technology is within 
reach now. I mean, a lot of the--I mean, obviously, there's a 
range of different investments people can make, and different 
types of energy solutions. But there's a lot of very low-cost, 
or no-cost things that people can do, as well as things that 
have excellent paybacks in a one to five year period, which is, 
obviously, good business to invest in.
    Ms. Dahlkemper. And, Mr. Kavanagh, could you just expand a 
little bit on the R&D opportunities out there for small 
businesses, as you were talking about the CO2 emissions?
    Mr. Kavanagh. Sure.
    Ms. Dahlkemper. And what you see happening right now, and 
where you see that can go?
    Mr. Kavanagh. Okay. Thank you.
    Right now, we're engaged in research projects to develop 
ways of making steel that don't emit CO2, and that means 
replacing carbon as a fuel. So, that means using green 
electricity, using hydrogen, alternatives like that. So, that 
research now is going on at Massachusetts Institute of 
Technology, and University of Utah. And around such technology 
centers of those two universities are small, independent, but 
really excellent technology companies that we pull in to solve 
the technical problems as the research advances. And then what 
happens is, as the market for these technologies grow, and they 
become closer to commercial use, and then in commercial use, 
those companies that have helped in the development, they also 
grow, and they provide jobs, and the technology becomes 
pervasive regionally, and then nationally. So, that's how the 
research infrastructure in our industry, and many others, 
works, and how it supports new small business.
    Obviously, the steel industry, as it exists now, has a very 
robust small business infrastructure that as long as we're 
healthy, they're healthy, so it works on two levels.
    Ms. Dahlkemper. Okay. Thank you very much.
    Mr. Kavanagh. You're welcome.
    Ms. Dahlkemper. I yield to Mr. Graves.
    Mr. Graves. Thank you.
    Mr. Johnson, you said that you all support the cap and 
trade legislation, and Congress doing something, rather than 
the EPA doing something. Right now, on the cap and trade 
proposal, there is no credits for agriculture. In fact, it's 
left up to the EPA to do it. How do you plan on addressing 
that?
    Mr. Johnson. Well, thank you very much for the question. We 
hope that you all might figure out a way to address that in the 
legislation. Very seriously, many of us in the ag community-I 
understand that the plan here is that the various committees 
have jurisdiction, will take up different parts of this bill. 
And our hope is that especially members of the Agriculture 
Committee will soon convene and make their recommendations to 
do the kinds of things that I asked for in my testimony, I 
think that others have asked for, as well.
    We don't really have an issue with EPA sort of having 
oversight over the cap and trade system, if you will. But we 
believe very strongly that USDA, the law needs to require that 
USDA is the one who writes the standards for offsets, who 
establishes the criteria for which they will be granted, 
provides the technical assistance to farmers, all those sorts 
of things.
    I think if Congress were to pass something that had EPA 
doing all of that relative to offsets for agriculture, a lot of 
our members would be, frightened might be a little too strong, 
but they'd be very, very concerned. They'd much prefer to work 
with USDA. That's where the expertise is, as well.
    Mr. Graves. Question for you, and for Mr. Yoder. I'll start 
with Mr. Yoder.
    If cap and trade moves more towards cleaner fuels, and 
that's kind of--that's pushing us in a big way towards natural 
gas, getting our electricity from natural gas, and some 
estimates, we're seeing at least in Missouri, that energy 
prices could go up, or prices for that energy could go up as 
much as 30 percent. Well, have you guys thought about, your 
organizations thought about what that's going to do to our 
fertilizer prices? I mean, you've got to have anhydrous ammonia 
before you can produce any other fertilizer, and the majority 
of our nitrogen sources are coming from anhydrous. And if those 
prices--I don't know if we can stand as an industry another 30 
percent increase, particularly in industry that is a price-
taker on both ends, or price-taker for all of our inputs, and 
price-taker for all of our output. We have no control over 
either side.
    Mr. Yoder. There's no question that our inputs will go up, 
especially fertilizer. In agriculture, we're very energy-
intensive, just like the steel industry. Virtually everything 
we do has got to do with energy, again, whether it's natural 
gas, or whether it's fertilizer from--well, that is natural 
gas, as well as other things that emit greenhouse gas, like 
potassium and phosphorous.
    That's really why, as we look at this whole thing, our 
costs are going to go up, even if agriculture would remain an 
uncapped entity, we will be profoundly impacted by everyone 
else's carbon footprint, and our costs will go up dramatically. 
That's really why it's important, we think, you put a good 
solid, viable cap and trade system in place, so we can recover 
some of those costs. And that we can go ahead and deliver the 
best value for food, and feed, and fuel in this country, in the 
world, for that matter. But that's really what we're looking 
for as an offset to combat some of those extra costs.
    At the same time, as we do this, I just would like to add 
this, we have to make sure that this is a simplistic enough 
approach that we can have a way that's easily verified.
    One of the things that I have in my written testimony is 
the fact that we've been doing some international work. Like I 
said, I was in Bosnia, Poland last year, and talked to a lot of 
people about agriculture's role, and they have lots of 
questions, and I'm actually going on an exchange with a group, 
the Environmental Defense Fund, in July. And we're going to 
involve other international countries, as far as this whole cap 
and trade.
    Just like Mr. Kavanagh mentioned, it doesn't do us any good 
to have a very expensive, and complicated cap and trade system 
here, if the rest of the world is not going to be on the same 
page. So, it's important that, as you think about developing a 
cap and trade system, or whatever direction that Congress 
chooses to go, that it reflects what's workable in the entire 
globe. And I think that's why it's important for us to just 
keep things on a simplistic basis, make sure it's real, make 
sure it's verifiable, but keep the credits fungible, or 
interchangeable, whether it's a credit created here in the 
United States, or created in China, or wherever. But they need 
to be the same, but that's really getting back to the original 
point. We have to make sure that we have a mechanism that we 
can recover some of that additional cost, so we don't have to 
pass that on to the consumer for food.
    Mr. Graves. Mr. Johnson.
    Mr. Johnson. I would agree very much with what was just 
said. We believe that it's just a matter of time before this 
country does something relative to climate change. Much of the 
rest of the world is there. If we do nothing, if Congress does 
nothing on this issue, we now have a Supreme Court ruling 
directing EPA, not saying they can, but directing them to do 
something. That strikes us as being a far worse alternative 
than sitting down around the table and figuring out okay, if 
we're going to do something on this, how should we do it, how 
should we make it best benefit agriculture, while we know costs 
are going up?
    There is really no question that we're going to see fuel 
prices increase, our fertilizer prices, in particular, are 
likely to go up, as you indicated. Those costs are going to go 
up. If we can get agriculture at the table, and get the Ag 
Committee to weigh-in very quickly with the kinds of 
recommendations that we're making, it provides us an 
opportunity to not only do the right thing here in this 
industry, but also to recoup a significant number of those cost 
increases. How much? I don't know that anybody can answer that, 
but, clearly, we're going to be better off if we do something, 
as opposed to letting EPA regulate it. That's our view, anyway.
    Mr. Graves. Real quick, Mr. McNamara. You mentioned that 
with the increased cost of materials, that it's going to have 
an impact on your industry, and with cap and trade. Just out of 
curiosity, most of our roofing materials right now are asphalt-
based. I mean, what is that going to do to homeowners or 
consumers out there, and all those roofs, millions, and 
millions, and millions of roofs out there that have to be taken 
care of?
    Mr. McNamara. A lot of shingles out there, and rooftops, 
for sure can be impacted. There are three areas that come to 
mind, in terms of input cost that would be affected in our 
industry. Number one certainly are the asphalt products that 
relate to shingles on steep roofs, which are covering the 
country, as you mentioned. Millions of rooftops with that, 
steep roofs, and then also even on low-slope or flat roofs, we 
have asphalt-based products that are still a very major portion 
of systems that are put in place yet today. Asphalt, liquid 
asphalt and then also rolled goods that are roofing products 
with that.
    Another area is insulation for our industry that is 
produced through the use of quite a bit of energy, either 
through the drying or blowing agents required to produce the 
rigid board insulation, foam board, and other types of rigid 
insulation.
    And then the third area that comes to mind for us in terms 
of energy cost, and input costs for us, are simply the fuel 
costs that we also incur, as was mentioned, for both the fleets 
that we operate, our trucks, our cranes that we operate, and 
then the rooftop equipment that to use. It's very backbreaking 
work, so usage of rooftop equipment is critical in our 
industry.
    Mr. Graves. Thanks.
    Chairwoman Velazquez. Mr. Bright.
    Mr. Bright. Madam Chairman, thank you very much. And, 
panelists, thank you for your time in discussing an issue of 
great significance to the small businesses throughout our 
communities out here. And, as all of you know, over 70 percent 
of the jobs in this country are provided by small business. And 
it's important that as Congress considers climate change 
legislation, the interests of small businesses, and family 
farms throughout the country are protected. As we move forward 
on climate change, we must tread carefully, striving for a 
bipartisan consensus, with a full understanding of the 
consequences of both inaction, and action.
    And with that, Mr. Kavanagh, determining which entities 
will be regulated under a cap and trade system is a key issue 
for the small businesses out there in the business community. 
Considering many small businesses are considered low emitters, 
would it be your opinion that only the larger, or largest 
emitters be regulated?
    Mr. Kavanagh. Well, certainly, that's the place to start, 
sir. And I don't know if I can comment, not being an owner of a 
small business, if I could comment on how they should be 
regulated. But, certainly, I think I've pointed out that there 
are strong relationships between large and small emitters 
within the economy. And on hearing the previous statements from 
the gentlemen to my left, I think they've made the point that 
it's still not a one-size-fits-all package, and that some 
common sense, and customization would need to occur.
    Mr. Bright. How do we determine the proper threshold at 
which greenhouse gases should be regulated, in your opinion? 
And where should that threshold be, or do you have an opinion 
today?
    Mr. Kavanagh. I don't have an opinion on whether the 
threshold that's established, which is 25,000, is too high, or 
too low. It seems to be, from the coalitions that we're part of 
in the industrial sector, that it's not unreasonable.
    Mr. Bright. Good. Any other panelists want to kick in your 
opinion on that?
    Mr. Johnson. The only thing I might add is that, and it 
kind of gets back to the issue of if nothing happens here, what 
will EPA do under the Clean Air Act. I was a meeting earlier 
this morning where a former EPA employee said that under the 
Clean Air Act, their target for regulating emitters begins at 
25 tons, not 25,000 tons, but 25 tons. That's way too low. I 
mean, that would have an enormous deleterious impact across our 
whole industry, and so we're certainly--it kind of gets back to 
the point that we think it makes a whole lot more sense to cap 
the large emitters, and then to allow these market forces that 
we've been talking about through offsets and things like that, 
to help provide incentives to get the kind of reductions from 
other sectors of the economy, such as agriculture.
    Mr. Bright. Okay. Thank you.
    Mr. Yoder, as a farmer, in your opinion, what role could 
the U.S. Agriculture sector play in helping to reduce 
greenhouse gases through offsets, if any?
    Mr. Yoder. Well, one of the things that we can do, is we 
can devise a system, a protocol that can create these 
incentives for farmers to go ahead and sequester carbon. And 
that's the thing that I would encourage us all to think about, 
and not just think in a very narrow pattern, that there's lots 
of things out there that we can possibly do in the future that 
we haven't even thought about today. So, one of the things that 
originally we're thinking of is sequestering carbon in soil by 
conservation tillage, as we go through, and we can improve it 
with, as I said in my earlier testimony, with some real 
scientific evaluation, and what's possible.
    What the USDA can do, though, is, I think, as EPA sets our 
parameters of what needs to be done, and what is a real and 
verifiable credit, USDA, I think their role would be to design 
a protocol that they could put in place, that they could go 
ahead and implement, give to the farmers, because we have 
contact with them all the time, anyway. And then they could be 
part of the verification system, and it could be very, very low 
cost.
    The biggest thing that we have to do in all this, is 
regardless of where that threshold is that you were talking 
about before is, if we limit the amount of credits that can be 
created out there, as we know we can--agriculture alone can 
come up--can mitigate up to 20 percent of the total greenhouse 
gases, let's take the lid off, and let's create those low cost 
ones, so it'll cost everyone less to participate.
    Mr. Bright. How do we insure that for farmers, the value of 
any cap and trade legislation exceeds the cost?
    Mr. Yoder. Well, that's a big thing. Obviously, if it costs 
more to implement than you get back out of it, then it's not 
going to be a win for anyone. That's why it's really important 
to have--instead of basing it on the project, base it on 
protocols, and things like that, that are scientifically 
proven. It greatly inhibits the cost overruns, and makes it 
more efficient. So, yes, if we can't get as much as what it 
costs to do, then nobody wins.
    Mr. Bright. Okay. Thank you very much. Madam Chairman, I 
believe my time has elapsed.
    Chairwoman Velazquez. Yes. Mr. Luetkemeyer.
    Mr. Leutkemeyer. Thank you, Madam Chairwoman.
    The title of today's hearing is, ``Climate Change Solutions 
for Small Business and Family Farmers''. And from that, you 
would infer that a solution would be something that we would 
look for, if we had a problem. And my concern is that, at this 
point, I don't know that we have a problem based on sound 
science. And it's difficult for me to look for solutions 
whenever we're grasping to find a problem. And it's a little 
frustrating to-I know you gentlemen are all doing a good job 
here of trying to work within a system that's being proposed, 
and it's a little difficult for me to frame questions whenever 
I have a concern about the basic premise of what we're doing 
here.
    So, with that being said, my concern is, I've talked to a 
lot of my energy-producing folks in my own district, or in my 
state. I've got three major public utilities that produce most 
of the electricity in our state, and a number of rural co-ops 
I've talked to. And those folks say that we're going to raise 
our costs from 40 to 125, 150 percent for the cost of 
electricity in our state, which is 80-85 percent produced by 
coal. So, in that situation with us, it looks like the impact 
is going to be pretty significant.
    Mr. Kavanagh, you indicated that 20 percent of the 
production of iron or steel is energy, so we're looking at 20 
percent increase in the price of your product. Is that correct?
    Mr. Kavanagh. Yes, if energy costs doubled-
    Mr. Leutkemeyer. Is 100 percent.
    Mr. Kavanagh. Yes, that's right. That would be a 20 percent 
increase.
    Mr. Leutkemeyer. How devastating would that be to your 
industry?
    Mr. Kavanagh. Well, it would be a tremendous impact, 
because, if you say that right now a ton of steel costs $500, 
let's say. So, that means it's going to cost $600, and you have 
steel coming in from other parts of the world that is still 
going to cost $500, so you're at $100 per ton, that's a huge 
disadvantage. And, obviously, it's more than could be absorbed 
and eaten to retain market share, and presence, and all of 
that. I mean, you would--the consequence for the steel industry 
of a case like that, our only response to using less energy is 
to shut production off. So, we would shutdown the hot end, the 
melting ends of our plants, and that's where all the emissions 
come from, most of the energy is used. But it's also where most 
of the jobs are. And because steel demand is still going to 
increase, because all of the change in our economy is steel-
intensive to support climate policy, the steel is going to come 
from somewhere else. Okay? So that steel is going to get made, 
and it's going to get made in a place that's more damaging to 
the environment than making it here.
    Mr. Leutkemeyer. So, what you're saying is that if this 
goes in place, and we anticipate that the costs as what they've 
been projected out to be, it will probably decimate the steel 
industry in this country. Is that what you just said?
    Mr. Kavanagh. Yes, it is. At that level, yes, it is.
    Mr. Leutkemeyer. Mr. Johnson, Mr. Yoder, you'd like to 
apply the implications of how it's going to affect the total 
cost of production for farmers? Are we going to be able to 
survive?
    Mr. Johnson. Well, of course we're going to survive. I 
mean, there is not much question, everybody I know eats, and 
that's what agriculture is mostly about, is producing food. So, 
we'll figure out a way to survive.
    Mr. Leutkemeyer. I guess my question, let me reframe my 
question. I guess my question is, are we going to be able to 
produce food for ourselves, or are we going to have import it, 
because you no longer can compete on an international basis, 
because of the cost of production here in this country?
    Mr. Johnson. Sure.
    Mr. Leutkemeyer. Just as steel.
    Mr. Johnson. Well, you know, as we indicated--as I 
indicated in my opening remarks, we think there's really not 
much question about what costs are going to go up for 
agriculture. Fuel costs are going to go up, energy costs are 
going to go up, fertilizer costs are going to go up.
    The premise of your question seems to be that there's no 
reason for that to happen, because there's a disagreement among 
the scientific community. That's not really an area that I have 
expertise to talk about. But I will say that you've got the 
international scientific bodies that have come to the 
conclusion that climate change is a real thing, and it needs to 
be dealt with.
    We have a U.S. Supreme Court ruling now that is directing 
EPA under the Clean Air Act to deal with it.
    Mr. Leutkemeyer. Let me interrupt just one second. The crux 
of my question is this. Because of what's going on, what kind 
of impact are those rules going to have on you? Is it going to 
cause us to continue to not be able to expand, or be able to 
utilize our farming ground in this country? And, if so, how 
much of an impact is it going to have, because at the end of 
the day, in order for us to find a solution, if there is a 
problem, we've got to find a way to mitigate that impact.
    Mr. Johnson. Yes. That is the principal reason that we are 
here suggesting the robust use of offsets in climate change, 
because as these costs increase relative to the policy choices 
that are made here, and in other places around the world, there 
needs to be an opportunity for farmers, and ranchers to recoup 
some of those costs. And the prescription that we've sort of--
that I've outlined in my testimony is that we want agriculture 
to be able to use offsets as one of those methods for adding 
some income to the bottom line, instead of it just being a cost 
contributor. And we would argue very strongly that USDA has the 
expertise in that area, and that they should be weighing in on 
it.
    Mr. Leutkemeyer. I'm over my time. Thank you, Madam Chair.
    Chairwoman Velazquez. Time has expired, but I will allow 
for the gentleman to respond.
    Mr. Yoder. Just quickly, I'd like to say, Congressman, that 
that's why it's so important to do this correctly. If it's done 
wrong, it could be horrible for agriculture. It could be 
detrimental, and put people out of business. So, that's why 
it's so important to have a real robust program for offsets, 
and plentiful offsets, so that, especially in this time--this 
country is really reeling from economic downturns. The last 
thing we want to do is thwart any kind of recovery with this 
new obligation to make changes. So, the least amount of pain 
that we can cause, and that would be with a robust cap and 
trade system, where plentiful offsets can be bought, so that 
that transition cannot thwart that movement of steel being 
bought away from this country, and so forth. So, it can be done 
terribly wrong, and have horrible consequences, or it can be 
done in a less impactive way, where we can all survive.
    Mr. Leutkemeyer. Thank you.
    Chairwoman Velazquez. I just want to say that I have to 
leave the room to go and vote in my Financial Services 
Committee, but I really appreciate you coming here. This is a 
very important topic, and I just want to make sure that the 
voice of small businesses is represented, and that we get it 
right, because it's important. Especially now, given the fact 
of how our economy is doing. We need to get this economy 
growing again. And with this, it offers some opportunity to 
create new jobs.
    So my question, Mr. McNamara, is, in your testimony, you 
highlighted how NRCA supports measures to promote cool roof, 
but express concern about insuring flexibility based on region. 
How can Congress promote the use of these roofs, while 
maintaining the flexibility the industry seeks?
    Mr. McNamara. Yes. Very simply, this is simply a matter 
between different climates in the U.S., areas such as my part 
of the country in Wisconsin, where we have winters which we're 
looking more for heat absorption from the outside than we are 
losing, trying to reflect or avoid heat during our cold 
winters, and so forth, and dealing with snow loads. And, so, 
really it's just a matter of being able to promote those. In 
the areas in the south, whether it's a city like Atlanta, or 
Florida, or what have you, and realizing those differences 
throughout the country.
    Chairwoman Velazquez. Good.
    Mr. Yoder, NCGA has been engaged in developing guidelines 
for climate change legislation. And I understand your 
organization has worked with agricultural leaders on creating a 
framework to reduce emissions. Who are your industry partners, 
and what is the consensus you have been able to develop?
    Mr. Yoder. Well, actually, it's been difficult to get all 
commodity groups engaged in climate. Because, as some know, 
it's controversial of whether it's real or not, but the point, 
in fact, is it's here. There's enough scientific knowledge that 
we need to engage in this, and there's going to be some climate 
legislation. So, we have worked very closely with other 
organizations, like the Soybean Association, and the Wheat 
Growers Association, and National Farmers Union, and Farm 
Bureau, and while we all have maybe a different perspective, we 
all are at least engaging in trying to figure out what's best 
for our industry. So, yes, we've got some details to work out, 
but at least we're all finally talking.
    Chairwoman Velazquez. That's important.
    Mr. Sharp, small firms attempting to develop energy-
efficient technologies are confronted with two major 
challenges. The first is, developing the technology, and the 
second one is moving this product to the market. As you point 
out, small firms often struggle to cross the chasm. How was 
your firm able to address this challenge? And, do you believe 
that there are ways to assist entrepreneurs overcome this 
obstacle?
    Mr. Sharp. I think the simple answer would be persistence, 
and money, because it takes time to get through this, 
particularly with newer technologies that people aren't aware 
of. So, I think, looking at it from a policy standpoint, I 
think part of this is helping to create incentives. As I said, 
I think the--when people look at these new technologies, the 
concern is not that it's expensive, it's really more on the 
lines of--because the paybacks typically are quite good for a 
lot of the technologies that have been proposed. But what 
happens, is that the people in industry look at this, and they 
well, okay, it's supposed to be a three-year payback, but in 
reality, perhaps it's six, maybe it's nine. I really don't 
know. Do I believe what they say? So, the ability then is, if 
there are incentives, whether that's from utilities, or from 
the government, that then creates a situation where that nine-
year payback that I think it might be, they can offset it down 
to maybe more like three years.
    In time, obviously, as people then try the technologies, 
they realize gee, there really is a three-year payback. And, at 
that point, the incentives become less important, the economics 
fuel it. But, I think in that early stage, with new 
technologies, and maybe there's a--whether that's a time frame, 
or something, the ability to have some incentives around that 
is very important.
    For us, it's been just persistence, pushing hard. I mean, 
it's taken a lot of cash, more than my investors ever expected. 
But, in the end, as I say, if people hear it for the sixth 
time, it suddenly becomes obvious. You've got to get through 
that period in that time, and other assistance in the form of 
incentives may be a way to help that.
    Chairwoman Velazquez. Thank you.
    Mr. Kavanagh, it has been stated that regulations reducing 
greenhouse gas could adversely impact our nation's 
manufacturing sector. And while recognizing these concerns, it 
also seems there is potential for business opportunities with 
the creation of new energy system, and a green grid. Do you 
believe that the domestic steel industry can play a role in 
greening our economy?
    Mr. Kavanagh. Absolutely. Not only from the side that the 
components of the green grid are very steel-intensive, and if 
you make them with the steel that has the lightest CO2 
footprint, i.e., domestic steel, then that's a great 
contribution to greening of the grid. And then we get the 
benefit on the other side, also, is by using energy that's much 
more green. That lowers the carbon footprint of our industry, 
and flows all the way down through small businesses, as the 
gentlemen to my left have made that point many times. So, 
certainly, I think achieving a sound and functioning green 
grid, there's a major role for steel. Thank you.
    Chairwoman Velazquez. Okay.
    Mr. McNamara, there are a number of policy tools to 
encourage the adoption of energy-efficient practices. What is 
the most effective way, in your opinion, to accelerate energy-
efficient roofing, in order to reduce carbon emissions?
    Mr. McNamara. Well, the piece of legislation that we have 
being proposed, GREETA, the Green Roofing Energy Efficiency Tax 
Act, I think is a wonderful measure to do that. It's a win for 
all. It, number one, for building owners brings down the 
depreciation term, like I had mentioned previously, from an 
unrealistic period of 39 years, down to a realistic period of 
20 years. A study we had done at the time that we proposed 
this, done by Ducker Worldwide, an industrial research firm, 
found that average roof lives were really 17.5 years, so a 20-
year period would seem to be very reasonable. And then we have 
the opportunity to marry that along with a increase in energy-
efficiency, and making that a benchmark requirement in order to 
obtain, and be able to utilize the 20-year period. And so, as I 
mentioned, I think it would be a win for all parties.
    Chairwoman Velazquez. Okay. Mr. Johnson, the National 
Farmers Union instituted a carbon credit program in conjunction 
with the Chicago Climate Exchange. How many of your farmers are 
involved in this program? And, do you think this program can be 
a model for Congress in cap and trade legislation?
    Mr. Johnson. We have about 4,000 members that are 
participating in the Chicago Climate Exchange Offset program 
right now. I do believe that can be a model that should be 
used. Our view is that the model that is most appropriate there 
is the marketplace part of that model.
    One of the things that CCX had to do in order to create 
this market, have it function, was they also had to have put in 
place a scientific panel that would establish the protocols, 
and then they put another system in place to verify compliance, 
all those sorts of things. That's really not a role that the 
market, itself, should play. Those procedures should be done by 
USDA.
    Chairwoman Velazquez. Why is that?
    Mr. Johnson. Because they don't have that expertise. I 
mean, they had to get it. I mean, the Chicago--the role that 
the CCX should play, should be a role of handling the money, 
being the market exchange, if you will, so that there are fair 
prices, so there's transparency, all those kinds of things. The 
scientific--there have been questions raised by some about 
whether they used the right science, all those sorts of things. 
The way you avoid those questions is, you have those decisions 
made by the scientists, as we would propose it, they should be 
at USDA. These are the real experts. They've done lots and lots 
of research. The research is peer reviewed. It's accepted 
widely, not only in this country, but in other countries, as 
well. So, it's kind of a long answer, but I think the model of 
the CCX is a very good model for trading offsets. It's a good, 
efficient mechanism, doesn't take a lot of resources to do it. 
It's very efficient, but it needs to be coupled with something 
that everyone can have a high degree of confidence in. And 
that, in our judgment, is the scientists at USDA.
    Chairwoman Velazquez. Thank you. Mr. Thompson.
    Mr. Thompson. Madam Chairwoman, Ranking Member Graves, 
thank you for holding this thoughtful and timely hearing.
    Now, I represent one of the most rural districts this side 
of the Mississippi, and the number one economic driver for the 
Commonwealth of Pennsylvania remains agriculture. And, as is 
for my district. From the northeastern dairy farmers, to 
timbering harvesting in the Allegheny National Forest, to 
mushrooms and tomato farms in the southeast, the Commonwealth 
has over 63,000 farms, many of which are mom and pop 
operations, just like my history, my family of dairy farmers 
back a generation ago. As you can imagine, proposals increase 
taxes on small businesses, and any move towards a cap and trade 
policy, frankly, scares me, and puts my constituents, those 
small farmers who are back home, or the backbone of 
Pennsylvania's economic engine, in a very tough position, when 
we're looking at what looks like very unacceptable costs 
proposed for speculative benefits, just impacting the 4 percent 
of carbon dioxide emissions, or the scientific consensus is 
that humans contribute towards.
    Evenly so, in Pennsylvania, the Pennsylvania Utility 
Commission, has removed decades of old rate caps that come off 
in 2010, and it will cause electric rates to increase 30-40 
percent above the current price. Now, that paired with the 
federal increase brought on by--federal tax increase brought on 
by cap and trade, I'm afraid my constituents, farmers, 
manufacturers, families, are going to face unnecessary burdens, 
even more so during a time of economic downturn.
    Now, we're hearing proposals to switch to cleaner burning 
natural gas as a fuel, and I support this move. However, at 
current prices, and limited production capacities, this seems 
haphazard, especially for the agriculture industry that depends 
on natural gas as a feedstock for fertilizer. Now, just last 
summer we witnessed some of the highest energy costs in memory. 
Energy prices that threatened to make America non-competitive 
in comparison to our neighbors globally.
    Now, there are proposals on the table to open up areas, 
both on-shore and off-shore, as a means to supply this much 
needed natural gas. And, in turn, prices would be reduced, and 
jobs would be created, and our nation could lower its 
dependence on foreign imports.
    Because natural gas burns clean, there undoubtedly would be 
an increased demand if cap and trade, or a carbon tax should be 
instituted. And, so, relative to the gentleman representing the 
farming-related industries, I know Mr. Graves had gone down 
this road in terms of--I just wanted to affirm, in terms of the 
price of fertilizer, and the impact, I assume there's a 
consensus that as they agree that the price of fertilizer will 
go up as demand for natural gas goes up, could you briefly 
describe how fertilizer costs respond to the increase or 
decrease of natural gas prices?
    Mr. Yoder. Well, it's very much tied to that. I mean, as 
natural gas prices go up, we experience some of the highest 
nitrogen costs that we've ever had in the history of the United 
States. So, it's very, very susceptible to that. And that's why 
I still want to go back and say, we saw record amounts of 
fertilizer costs go up in the last two years. And they've been 
down some this past spring, but they're still at record 
amounts. And it's just run away, whether it was speculative, or 
whether it was real, but it hit the pocketbook here. And it 
scares all farmers about the viability, and that's why it's 
just adamant that we--if we're going to go down this road, that 
we're going to have to have some sort of mechanism to offset 
those additional costs, or we won't survive, absolutely. And I 
hear what you're saying, I know this is farms.
    I'm an independent businessman, myself, and I paid--I used 
less fuel last year than I've ever used in history as far as 
gallonage, but I still paid way more than I ever did. So, all 
these things are going to have to be considered. That's why 
it's absolutely imperative that we be careful as we go through 
this. But, in my mind, a cap and trade program would be much 
less cost-prohibitive to our survival, versus a carbon tax. 
And, as I understand it, those are our two alternatives. And I 
just think that one offers an offsetability, and the other one 
is just flat, a higher cost of doing business.
    Mr. Thompson. Mr. Johnson, any opinion?
    Mr. Johnson. Well, yes, I agree with what was just said. I 
just happen to have come from a meeting earlier with someone 
from the Fertilizer Institute, and so I've got a chart in front 
of me that shows fertilizer prices, FOB Gulf Coast from 
December of `07 to the current time. About $350 a ton in 
December of `07, it peaked right around harvest time of `08, as 
you know, at about $900, dropped to $100 as of the first of the 
year, and now has come back up to around $300. The whole point 
of saying that is, this is a very volatile market. And 
fertilizer prices are tied to it, and so we see them yo-yo'ing 
all over the place.
    It does underscore the point that was just made, and that 
we have made repeatedly, at least the two of us representing 
production agriculture; that it's important that we have a 
robust offset program that provides some income opportunities 
for farmers, besides just cost increases. And that's really the 
message that we want to get through here today, and to 
encourage folks in the Ag Committees, and others, to, as 
quickly as possible, weigh-in on this bill, so that the 
interests of agriculture can be dealt with in a very positive 
fashion.
    Mr. Thompson. Thank you, Mr. Johnson.
    Mr. Johnson. Thank you.
    Chairwoman Velazquez. Mr. Graves, do you have any more 
questions?
    Mr. Sharp, at a recent roundtable on climate change, a 
major issue discussed was meeting workforce needs in a green 
collar economy. Can you talk about workforce challenges you see 
with this transition to a green economy?
    Mr. Sharp. Well, I think the--in many respects, green jobs 
are, in some cases, no different than normal jobs, other than 
that they are in industries that have a green focus, such as 
energy-efficiency, or maybe in the renewables industry. In 
fact, many times, like roofing or other areas, these are 
opportunities that are no different than other ones, other than 
the fact that they're in areas that people are now pursuing in 
the green jobs area. So I think it's not as big a challenge in 
terms of training or things like that, and I think a lot of the 
skills that people need are ones that they already have. It's 
more of a marketing focus to look at how do I develop products 
that are focused on climate change, focused on energy-
efficiency. And I see the industry making that shift. It's 
actually moving now to saying all right, I was making a product 
that was of some type. I can make some changes to it, now it 
cuts the carbon emissions, and many times those are easy 
changes to make. It's having the interest, and the will to do 
it. And I think that provides opportunities then for what 
become green jobs.
    Chairwoman Velazquez. How do you think we should insure 
that both rural and under-served areas are able to take 
advantage of these new opportunities?
    Mr. Sharp. Well, I think that may be in the form of 
incentives around some of these newer technologies, number one. 
I think in terms of being able to help people develop 
innovations, and help them bring them to market, as I was 
saying earlier, so I think that's one way that it could be 
done.
    I think in some of those under-served areas the costs of 
labor are going to be less, so that provides opportunities to 
provide a more economic approach.
    Chairwoman Velazquez. Okay. Well, let me just take this 
opportunity to thank you all. This is an issue that's not going 
away, and we'd rather be at the table, and something is going 
to happen. And we have to make sure that the concerns, and 
issues that are important to the small business sector are 
represented and discussed.
    As you know, here in Washington, when we pass legislation, 
so many--often we find unintended consequences, so I hope that 
we could be proactive in having an open, honest discussion as 
to what legislation is drafted, and passed here reflects the 
issues of everyone that is going to be, in one way or another, 
directly, or indirectly impacted by such legislation. So, I 
want to thank the witnesses for today's testimony.
    The Committee will continue to play an active role as 
climate change legislation goes forward. In coming days, I will 
be writing to our colleagues on the Energy and Commerce 
Committee, with a number of recommendations for how legislation 
can be crafted in a way that protects the needs of small 
businesses.
    Now, thank you, again, and the Committee, and the hearing 
stands adjourned. Thank you.
    [Whereupon, at 3:25 p.m., the Committee was adjourned.]

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