US Senate Committee on Environment and Public Works
Hearing on S. 547, Credit for Voluntary Reductions Act
3 June 1999

10:30 a.m., Faunce House, Brown University
Providence, RI

Opening Statements:

Sen. John H. Chafee, Rhode Island Statement by the witnesses:

Scott P. Rabideau
Rhode Island House of Representatives
Pascoag, RI

Ken Colburn
Director
Air Resources Division
New Hampshire Department of Environmental Services
Concord, NH

Kevin Fay
Executive Director
International Climate Change Partnership
Arlington, VA

Steven Hamburg
Ittleson Associate Professor of Environmental Studies
Brown University
Providence, RI

Peggy Fantozzi
Chair
Massachusetts Commission for Conservation of Soil, Water and Related Resources
Bourne, MA 

The subject we're gathered to hear about this morning, climate change caused by human activity and what to do about it, is very controversial. The science is challenging because we're considering the long-term future of a global system that involves interactions of atmosphere, oceans, forests and human society, and the politics is challenging because the US Government has signed a far-reaching treaty, the Kyoto Protocol of 1997, that is, regrettably, strongly opposed by much of US industry. I had the privilege of being at that Kyoto gathering in 1997.

The uncertainty and controversy seemed daunting; but it's important, it seems to me, that we struggle with this issue. If we are headed in the direction most scientists predict we're headed in, we can't afford to put off starting solutions until the day when all our questions are completely answered. If we wait around until everything is absolutely clear, no controversy, it may be well too late. Some things are certain, we know that greenhouse gases trap heat in the atmosphere. We know that greenhouse gases exist naturally and are cycled through oceans and forests. From the ice cores taken from glaciers we've been able to examine the concentration of atmospheric carbon dioxide, an important greenhouse gas over the past 400,000 years. Now, that's a long time, 400,000 years. We know that increases in carbon dioxide have always been associated with increases in temperature over that period.

In 1995, an organization of 2,500 scientists formed the intergovernmental panel on climate change, IPCC, that's a term we'll hear frequently today and in the continuing study of this matter, and this group of scientists, 2,500 of them, the IPCC issued a report summarizing the evidence gathered over the past 100 years on the greenhouse effects of carbon dioxide and other gases. They concluded there's a small but discernible human influence on global climate, and they warned that this impact may be gathering momentous. The concentration of carbon dioxide in the atmosphere has steadily increased over the past 200 years. The earth is warmed by one degree Fahrenheit over the past hundred years. It may warm another two to six degrees Fahrenheit over the next 100 years. Now, those are incredible statistics. That would be the fastest increase in temperature experienced by the species now comprising life on earth. Whether the complex ecosystems that are involved evolved over eons can adapt successfully, the change is so rapid, in other words, two to six degrees change in Fahrenheit in 100 years, can we adjust to that? It's the most important unanswered question. But we humans will face challenges as well. For instance, IPCC predicts that sea levels may rise an additional half to three-and-a-half feet in that 100 year period. All of us in Rhode Island can appreciate the significance of a result like that, an increase in sea levels of a half to three-and-a-half feet.

The bill we're considering, S.547, this morning makes only the modest beginnings on this large problem. It would encourage voluntary reductions in greenhouse gas emissions by U.S. industries by promising those industries credits for the reductions they took if a mandatory program is ever adopted. In other words, the legislation we have says if you -- we don't have any mandatory statute on the books yet about having to reduce greenhouse emissions, but some companies are willing to do it, and if voluntarily they want to do it, reduce their greenhouse emission, if subsequently legislation is enacted requiring such reductions, then the companies that have made the reductions prior thereto will get credit for it, and they're doing it voluntarily and they deserve credit for it. Now, this is a modest start, but getting a start is very important. Carbon dioxide accumulates in the atmosphere. From the perspective of climate, the ton of carbon dioxide that we voluntarily avoid emitting today is just as important as the ton that may eventually be prevented by the Kyoto Protocol of some other mandatory program.

It may be many years before our political system responds to the threat of climate change in any meaningful way. When it does, and I, for one, am convinced that we must change our course, the reductions that have been accumulated year after year from this modest beginning will pay big dividends, and the companies that take advantage of this opportunity will realize much lower compliance costs because they had a longer period to adjust their business practices.

Now, even this modest beginning, you say who can object to that, it's voluntary, you get credit later on if you make the reductions, who can complain. Well, welcome to Washington. Even this modest beginning is not without its controversy. Everyone salutes the concept of giving credit for voluntary reductions, but, indeed, there are devils in the details. What Government agency should run the program? How do we ensure that our accounting methods only count real reductions in greenhouse gases? How do we recognize projects like reforestation or preservation that sequester carbon rather than reduce emissions? Should foreign investments count? Should we give credit to the reductions that have been made since the Rio Treaty was signed in 1982? How far back do we go?

Mr. Chairman and members of the Committee on Environment and Public Works, I cannot tell you what an honor it is to have the opportunity to testify before this United States Senate Committee. As a member of the Rhode Island General Assembly, I appear before legislative committees on what seems like a daily basis. But I never imagined that I would one day testify before the U.S. Senate.

The bill that I wish to testify on behalf of is perhaps one of the most visionary pieces of legislation I have ever come across. In essence, S. 547 allows U.S. corporations to receive credit for voluntarily reducing greenhouse gas emissions or increasing the sequestration of carbon. The ingenuity of this bill is due to the fact that these credits shall be applied to future laws and regulations. It is a way for a good corporate citizen to gain recognition and a potential fiscal reward for reducing carbon emissions. This is something that many companies have been preparing for in their capital planning. Should this bill become law, it may well move up the timetable for such capital spending.

Beyond the credit for voluntary reductions is the truly unique issue of carbon sequestration. I would like to speak to how I believe this portion of the bill would positively affect my little state of Rhode Island.

All land which is undeveloped and vegetated annually sequesters varying amounts of atmospheric carbon. I will leave the issue of metric tons of carbon sequestered per acre (or hectare) to the academics that will surely testify at some point in time on this issue. Suffice to say, an acre of young, well managed forest in a temperate climate like Rhode Island's can annually sequester multiple tons of atmospheric carbon. That's correct, multiple tons of carbon are sequestered by an acre of forested land. Therefore, it is safe to presume that the permanent preservation of as little as 100 acres of open space can sustain a carbon reservoir and avoid creating a carbon source.

I would like to present you with a real world example of how land can quickly change from reservoir to source. The first picture shown within this text is an aerial photograph of a section of Warwick, Rhode Island. This photo clearly depicts a densely populated residential community, a golf course, and a large tract of undeveloped farmland. This represents perhaps the last tract of farmland within a radius of one mile or more. As of this moment, the owner of the property is in the process of subdividing his farmland to establish a residential subdivision. If you skip over and review the next photograph, I have taken the liberty to demonstrate what the property might look like after the summer of the year 2000. In one short year's time, this property will go from carbon reservoir to carbon source.

Figure #1 depicts the results of a Brown University study evaluating Rhode Island's greenhouse gas emissions from 1990-1996. Residential development was responsible for approximately 18 percent of the total increase in greenhouse gas emissions during that time period. In 1999, the enormous demand for housing in Rhode Island has driven up the value of raw land. To further complicate issues, the schools in Rhode Island are funded primarily on the local revenues received from property taxes. The result, landowners are faced with exceptionally high taxes on their open space parcels, while developers are constantly dangling large sums of money before them to acquire the properties for residential housing. It is a no win situation for the environment.

Believe it or not, 55 percent of Rhode Island is currently forested. That's right, over one half of this state consists of trees. But that percentage is dwindling rapidly. Therein lies the opportunity of S. 547.

I believe that corporate America can play a pivotal role in the preservation of open space in Rhode Island and the entire United States. The ability to acquire a greenhouse gas credit for the demonstrated sequestration of atmospheric carbon could well be the incentive necessary to motivate the boardrooms across America to take an active role in the management and preservation of the country's forests. Not only could a company receive a regulatory credit for the dedication of permanent open space, but also the marketing potential of the effort could offer a higher profile when targeting today's environmentally conscious consumer.

I realize that the environmental community will express deep concern that corporate giants may abuse such a process. Corporations and their lobbyists will bemoan the fact that there may be a tacit acknowledgement of the Kyoto Protocol in this bill.

I however applaud the sponsors of this bill and stand firm in a belief that change, true change in society, does not come from the actions of a government regulatory, CEO or a multinational corporation, or even a well meaning environmental organization. A politician with vision effects true change. We become politicians for many reasons. But first among them is the desire to improve our state, our country or even the world. This bill will change the world.

Respectfully submitted,
Scott P. Rabideau, District 60, State Representative

In New Hampshire, a state rich in natural resources, our economic livelihood has long been directly and inextricably linked to the health of our natural environment. Whether we hark back to the heyday of the timber and paper industries, or look instead at today's tourism-based economy and high quality of life, this linkage has remained a constant. Two other constants have been our state's traditional frugality; and our stubborn reluctance to control and regulate when equally favorable outcomes can be achieved by properly encouraging voluntary actions. Thus it comes as no surprise that we strongly support S.547, an initiative that shares these values. S.547, the Credit for Voluntary Reductions Act of 1999, would directly benefit both the environment and the economy, and encourage cost-effective solutions on a voluntary basis.

S.547 encourages U.S. entities business, institutions, governments, etc. to pursue actions that will mitigate the threat of global climate change. In doing so, they will provide our nation with other benefits including substantial savings in energy expenditures, reduced air and water pollution, less waste, better natural resource management, and enhanced technological competitiveness. Early voluntary greenhouse gas reduction measures will help to ensure that the legacy we leave our children and grandchildren is not one of myopic selfishness and environmental degradation, but one of sustainable stewardship and respect for our planet. This Act is not about the science of global climate change, nor is it about the Kyoto Protocol. It is not about what level of reductions is necessary, or when they must be accomplished, or what flexible mechanisms should be employed to achieve them. S.547 is about reducing uncertainty for U.S. business and other entities by ensuring that any reductions of greenhouse gas emissions that they voluntarily undertake are appropriately recognized and rewarded.

U.S. business and other entities are not making greenhouse gas reductions largely because of uncertainty about what future regulatory programs may be imposed in an effort to stabilize atmospheric concentrations of carbon dioxide and other greenhouse gases. Many are concerned that, if the example of the federal Clean Air Act Amendments of 1990 hold true, action now will not be appropriately recognized, and will result in increased burdens later. The State of New Hampshire has had direct experience with this dynamic, inasmuch as the closure of the Pease Air Force Base in 1989 was not recognized as emission reductions under the 1990 baseline of the latest Clean Air Act reauthorization. This dynamic applies even if actions now would yield cost savings, because the certain benefits today might be outweighed by the as-yet-unknown costs imposed by the future program. S.547 will encourage reductions of greenhouse gases simply by eliminating the potent disincentive of uncertainty.

How should a credit for early action program be designed? In order to be most effective, a program to encourage early action must be simple, flexible, and applicable to a broad array of emissions sources. At the same time, it needs to reflect sufficient discipline that the integrity of its credits is never in doubt. A few cornerstones are thus essential.

First, all reductions must be strictly quantifiable and subject to third party verification. The integrity of the credits hinges on the processes by which they are quantified.

Second, reductions should not be limited or tied to a particular program, a particular economic sector, or a particular greenhouse gas. Criteria for establishing credible baselines, coupled with appropriate, broadly applicable quantification and verification methodologies, should determine what constitutes a verifiable ton, not what carbon source the reduction came from. In the end, all verified tons no matter what their source or how they were reduced are equal in the eyes of the atmosphere.

Some have also suggested that only certain emission reductions should count, based, for example, on whether they reflect genuine environmental intent. I would suggest that this approach unconscionably cripples the vital linkage between economic and environmental well being that we cherish and seek to encourage. We should be less concerned with motives, and more concerned with establishing simple, workable, and effective quantification and verification protocols.

Third, just as there is a variety of ways to reduce greenhouse gas emissions, a variety of yardsticks for measuring such reductions may be necessary. Entities should certainly receive credit for absolute emission reductions below a historical baseline. In other circumstances, however, percentage reductions from a defined baseline may be appropriate, or credit for achieving very-low-emission performance standards. Reductions provided by a manufacturer's products (e.g., lower emission vehicles) might also be creditable, although we would need to ensure that they are not double-counted by purchasers.

Fourth, great care should be taken in placing a limit or cap on the number of credits available under an early reduction program. Though some upper bound may ultimately be necessary, it must be balanced against the fact that such limits could reduce the incentive for entities to participate.

Who should participate? The early credit incentives should apply across the broadest possible array of participants. In addition to the traditional industrial and electricity sectors, for example, other sectors and entities should be allowed and encouraged to participate, including transportation, residential, commercial and agriculture. Further, the program should include both carbon sinks and sources, inasmuch as carbon sequestration may provide significant opportunities for agricultural and forest products participants such as those operating in the Northern Forest Lands.

In what may be a relatively unusual suggestion, I would recommend that states and municipalities also be allowed to participate in an early emission credit program, both because they generate emissions themselves, but also because they are often left to implement whatever it is the federal government has decided. Great uncertainty prevails here as well. In the case of the Acid Rain program, the federal government dealt directly with emission sources. In EPA's proposed NOx Transport SIP call, states were assigned emission budgets, and thus had a say in how allocations were made within their borders.

In an effort to reduce such uncertainty for New Hampshire entities, including the State itself, we have introduced state legislation to create a state "registry" of voluntary greenhouse gas reductions. By having the State of New Hampshire stand with them under some potential future regulatory reduction requirements, this bill would protect New Hampshire companies and other entities by reducing the risk that they might not receive appropriate credit for greenhouse gas emission reduction activities they already undertook. This measure has received bi-partisan support in the New Hampshire Legislature, and has been strongly supported by the state's business community. To date, the bill has passed the State Senate and has been recommended to the full House by the relevant policy committee.

Similarly, municipalities should be able to receive credit for verifiable greenhouse gas reductions. The International Council for Local Environmental Initiatives (ICLEI), for example, working with 61 (1998 figure) U.S. towns and cities, has reduced greenhouse gas emissions by 5.4 million tons per year. In achieving these reductions, incidentally, these ICLEI communities have saved $27.5 million in energy and fuel costs, and also reduced 7,000 tons of criteria pollutants. If all verifiable tons are equal, then these towns and cities should also be credited appropriately. As this example shows, states and locals have substantial experience and knowledge infrastructure in achieving cost-saving emissions reductions. I urge you to tap into that experience in developing S.547.

In conclusion, S. 547, the Credit for Voluntary Reductions Act of 1999 is a crucial measure to remove existing disincentives to early, constructive environmental action. By providing legal guarantees that responsible early actors will receive appropriate credit, it will spur entities to voluntarily undertake cost-effective, multiply-beneficial strategies that include greenhouse gas reductions. We thus believe that establishing such an early reduction credit system at this time is in New Hampshire's best interest, the nation's best interest, and future generations' best interest, and we urge you to move forward with it aggressively.

Thank you for the opportunity to assist in the creation of a sound, responsible, early emission credit program. I hope you will continue to call on the considerable expertise of state and local governments in developing this ground-breaking initiative.

ICCP was organized in 1991 to provide a forum to address the issue of global climate change and to be a constructive participant in the policy debate. We continue to recognize the climate change issue as an important matter with which governments should be concerned. We are one of the largest industry coalitions in the world on this issue. A list of our member companies and associations is attached.

ICCP has consistently stressed the need to provide legally binding assurances that voluntary actions to reduce greenhouse gas emissions will be credited in any future mandatory scheme adopted by the government. Such "credits" should be granted to those companies that achieve verified reductions between 1990 and the commencement of any mandatory program.
Voluntary efforts to reduce emissions of greenhouse gases now can slow the rate of growth of emissions and contribute to the longer-term goal of achieving appropriate greenhouse gas concentration levels. In circumstances where there is marginal value in an emission reduction investment, granting credit may provide the incentive for such investments.

Companies that have already taken action or are contemplating doing so want to ensure that these contributions are not ignored when a mandatory phase of emission reductions begins. Failure to recognize these contributions could unfairly force companies to make reductions through increasingly more costly options. This would have the perverse effect of penalizing those companies who act early, while potentially benefiting competitors who save their least costly reductions to respond to regulatory mandates.

Industry's aim is to ensure that these early investments that result in emission reductions are recognized and "credited." Such credit could be used to offset future obligations that may arise from any domestic allocation, cap, tax or permit program or sold to parties unable to meet their obligations in a cost-effective manner.

ICCP has outlined a series of principles on credit for early action that we believe should guide the legislative and policy process on this issue.

ICCP Credit for Early Action Principles

Credit for early action programs will require new statutory authority. Failure to enact a credit program at the Federal level may stop companies from making commitments now and encourages a patchwork of inconsistent Federal, state, and local initiatives.
No limit should be placed on the amount of emissions reductions or enhancement of sinks for which early action credit can be earned.

Credit should be granted for actions resulting in verified emissions reductions or enhancement of sinks that occur between 1990 and the beginning of any official budget commitment period, whether or not such actions were part of a government-sponsored voluntary initiative.

A process should be established to determine and "lock-in" appropriate baselines for emission reduction activities including facility operations, product-based initiatives, and enhancement of sinks. Such a process should be flexible enough to reflect special circumstances, including unique considerations related to reductions already achieved.

Credits granted prior to a first budget commitment period should be available without discount as offsets against any greenhouse gas emission allocation, cap, tax, permit, or other requirement to limit or reduce greenhouse gas emissions that subsequently may be imposed.
Credits granted prior to a first budget commitment period should be usable in any national emission budget that may be subsequently imposed. Credits should remain with the earning entity for use at their discretion.

Emissions reductions or enhancement of sinks produced from participation in the Clean Development Mechanism, Joint Implementation, or a domestic emissions trading program should be eligible for early action credit if they occur prior to a first budget commitment period.

Credits generated from credit for early action programs should be eligible for emissions trading.

Credit accounts should be updated on an annual basis.

Credit programs should be integrated to ensure consistency and to avoid "double counting".

In February of this year ICCP sent a letter to each member of the Senate urging them to co-sponsor S.547, the "Credit for Voluntary Reductions Act." At that time we stated that the bill was a credible start in addressing the issue of credit for early action, but we also identified several issues that needed additional discussion and resolution such as how to address products that use or emit greenhouse gases and how to deal with growth.

As discussions on this issue have progressed, ICCP has come to the conclusion that, in the current political climate, efforts to enact credit for early action legislation would be enhanced by pursuing a simplified approach. We are currently having discussions with Senate staff on how to address these issues.

The goal of the legislation should be to accomplish three things:

1.Provide legal guarantees to any entity that acts voluntarily to achieve verifiable reductions related to products, processes, or operations, that it will not be disadvantaged by a future regulatory program to control greenhouse gas emissions.

2.Provide a mechanism for verifying any actions that occurred between 1990 and 1999, under Energy Policy Act Section 1605 (b), as part of the US Climate Change Action Plan, or any other activity in which the entity is able to demonstrate verifiable reductions.

3.Provide a mechanism for prospective actions which, subject to negotiation of an agreement with the government, produce verifiable reductions.

We believe that S.547 embodies these three goals.

With respect to past and future reductions, a series of principles should be delineated to guide the private sector, other entities, and government officials to use in both verifying past reductions and negotiating agreements for future reductions.

The intent of the program should be to encourage experimentation on the part of government, industry, and the environment community, and not to constrain the ability to develop new and creative methods for implementing and achieving verifiable reductions.

While this program may require flexibility in terms of the precise value of the credited reductions, it should be firm that the credits exist as a matter of legal right.

In order to ensure an open process, it should also provide for public participation in the verification procedure, notice and comment, and public disclosure of future negotiated agreements.

The program should not limit government participation by any particular department or agency. The principles of the bill could be used by any department or entity to craft verification agreements. These principles, in our view, should be consistent with those we have previously outlined and are found in S.547.

For purposes of prior acts, the bill should require all those who seek credits for prior acts to file a request with the government within 12 months of enactment. The government would be required to certify the credited reductions within 12 months after submission in a direct final rule. The direct final rule would be subject to comment and would take effect unless challenged during the comment period.

It has been suggested that supporting credit for early action legislation may unwittingly create support for the Kyoto Protocol. We do not agree. Many companies have already taken action based on the Framework Convention on Climate Change, which was ratified by the U.S. Senate in 1992. This agreement called for the US to attempt to stabilize its greenhouse gas emissions at their 1990 level by the year 2000. Those who have acted in good faith or who take action prior to any mandatory program should receive legally binding assurances that their verified reductions will be credited, regardless of the underlying basis for some future regulatory mandate.

The Energy Information Administration of the Department of Energy just released a report that summarizes voluntary actions taken in 1997. (Executive Summary is attached.) Similarly, the Environmental Protection Agency reports annually on the results of efforts under the voluntary Climate Change Action Plan. These actions amount to hundreds of millions of metric tons of carbon equivalent emission reductions.

The precedent for crediting early action was established in the 1990 Clean Air Act amendments, when companies who moved early on sulfur dioxide emissions reductions received additional consideration in the subsequent sulfur trading program. Relying on this statutory precedent is important for the climate change issue. However, given the scope of industries covered and the enormous task to be undertaken, the government should go on record now by developing the program in advance of any regulatory requirements.

Climate change presents a complex environmental challenge. The political and economic concerns raised in attempts to address the issue are significant both internationally and here in the United States. Credit for early action discussions can be neutral on whether it advances or detracts from the Kyoto Protocol.

The fact remains, though, that the United States is on record in support of responsible action to address greenhouse gas emissions. We have ratified the Framework Convention on Climate Change. Congress has funded a variety of activities under the Climate Change Action Plan and other significant government programs. It is not unreasonable to request assurance from the government that these activities, whether past or in the future, not place the voluntary actors in future regulatory jeopardy.

At this time we are discussing a voluntary and verifiable program. To the extent that some wish to see much greater detail in this legislation, to turn the discussion to the design of a pseudo-regulatory program, we would say that such detail may be unachievable.

We are prepared to work constructively to arrive at a consensus with other business groups, environment NGOs, and government officials, on a workable voluntary program.

We applaud Senator Chafee and the co-sponsors of S.547 for a commendable start. We look forward to working with you to ensure a successful conclusion.

I would like to testify with regards to Senate bill 547, Credit for Voluntary Early Action Act. Over the past two decades I have studied the effects of land-use change on carbon storage in forest ecosystems, with a particular focus on the old-field forests of New England. I have participated in the Intergovernmental Panel on Climate Change Second Assessment as a review team editor focusing on the ecological impacts of climate change. I am currently actively involved as a principal lead author in the writing of the IPCC's special report on Land-use/land-cover change. I have also worked with the Environmental Defense Fund and Trexler Associates as a consultant on the design of carbon sequestration projects.

Today, I would like to speak to the overall strengths of the concept of an early action crediting program, and then more specifically to the carbon sequestration aspects of the bill. The science underlying climate change and its impacts often baffle people, and as a result the issue is often dismissed out of ignorance rather than knowledge. In particular, the complexity of the accounting necessary to verify changes in carbon storage in natural ecosystems all too often leads people to dismiss the potential of land-use changes to reduce the increase in atmospheric concentrations of carbon dioxide.

We know enough about the global carbon cycle to be able to predict the potential impacts of energy and land-use practices on the rate of increase in atmospheric carbon dioxide concentrations. This is not to say we know everything, but rather that our knowledge is sufficiently robust to allow us to craft public policy that can have a desired outcome, such as reducing the rate of increase in the atmospheric concentrations of carbon dioxide. What we do not know is too often the focus of discussions about the global carbon cycle, and certainly there are aspects of the cycle that require further elucidation, but this uncertainty is not central to the viability of the early action legislation. The science of both climate change and carbon cycling is sufficiently well understood to provide a solid basis for the enactment of the Credit for Voluntary Early Action Act.

Our knowledge about carbon cycling is more than adequate to justify action on changing patterns of energy use and land-use practices. It is important to remember that the underlying science on which we base our understanding of the global carbon cycle originates not with the debate concerning climate change, but far earlier with the advent of silviculture and oceanography among many other disciplines. Even though it has only been during the last several decades that large numbers of scientists have focused on the carbon cycle, our underlying understanding is based on scientific discoveries accumulated over more than a half century.

S. 547 is based on sound science, science that includes the use of land-use changes to reduce greenhouse gas emissions. The Credit for Voluntary Early Action Act attempts to encourage energy users and landowners to think about how they can reduce their emissions while at the same time serving their own direct interests. The proposed legislation is designed to reduce the potential penalty involved in taking action that reduces greenhouse gas emissions. Without such legislation not only would our country not be recognizing the threat that climate change poses to our well being, but we would be making the situation even worse. If corporations and landowners do not know what year will be used as a baseline for any future domestic greenhouse gas reductions legislation, then any action to reduce emissions today could create the need for deeper cuts in the future. This disincentive keeps people from acting and we need to reverse the situation, S. 547 would do that. Without this legislation it can be argued that there is advantage for most companies and land owners to allow emissions to increase unchecked, as it would effectively position a company or landowner should mandated cuts come into play. If Congress does not provide incentives to reduce greenhouse gas emissions, the lack of incentives could actually accelerate the rate of increase in greenhouse gas emissions, making any future reductions even more difficult. The sooner there are incentives for reducing greenhouse gas emissions, the less need there will be for dramatic reductions later. The proposed act will make long-term planning viable and economically advantageous, whether it is in the energy sector or the land-use arena.

Since other members of the panel will be testifying today on the energy side of the bill I will focus my remaining remarks on the land-use side of the Act. Tens of thousands of landowners across America make decisions every year about what to do with land they own. Should they cut timber, use no-till agriculture or do nothing, let nature run its course. Each of these decisions has an impact on the global carbon cycle, albeit very small. In the aggregate the impact of all of these decisions could have a significant effect on the global carbon cycle. Since, there is consensus that we want to encourage America's landowners to make wise land-use decisions, decisions that will insure the sustainability of our natural resources for generations to come, S.547 makes a lot of sense. S. 547 could provide a powerful tool towards helping landowners make sustainable long-term land-use decisions.

As a landowner I get regular solicitations exhorting me to contact the soliciting company to find out how much the timber on my land is worth. Many of my neighbors sell their timber in just such a shortsighted manner. Yet, with a bit more planning and management it would be possible to increase both the profit of my neighbors and the productivity of their land. Maximizing carbon storage on the land is a very good metric for examining long-term sustainable management of America's lands. If we give people an incentive to maximize carbon storage on the land, what we are doing is encouraging them to remove resources in a conservative manner. If this bill if crafted wisely (I will come back to some proposed language) we can reduce the build up of greenhouse gases in the atmosphere at the same time as increasing use of best management practices, and better yet at little if any cost to the taxpayers. Some people may be concerned that by conserving carbon we will be reducing fiber, timber or agricultural production, but that is very unlikely. The value of carbon credits will not be sufficiently great to get people to take productive land out of production, but it is very reasonable to expect the value of carbon credits to be high enough to get people to manage productive lands a bit more conservatively. S. 547 would provide people with the potential to get a bit of extra revenue from managing trends wisely.

All to often we know what we should do, but we just don't quite get around to doing it. The proposed legislation will help give people a little extra push. Since, the bill involves only voluntary actions it does not require people to take actions they do not want to take. I have heard an argument against the bill based on an interpretation of the proposed legislation that assumes that landowners would be given the opportunity to benefit from intensifying land management, but this need not be the case. It is not difficult to write language for inclusion in S. 547 which requires rigorous carbon accounting, which means clearing old-growth forest or intensifying agricultural production will not yield carbon credits.

Specifically I would like to see that the land-use aspects of this legislation meet three objectives:
a. low transaction costs
b. carbon correct accounting
c. a requirement of additionality   A legislative framework that allows transaction costs to be kept low will facilitate greater participation, particularly among small landowners that own the bulk of America's land. At the same time it is critical that there is carbon correct accounting incorporated in the bill. These two requirements could create tension, but in fact are compatible. We need to be comfortable in saying that we are crediting only net increases in carbon and not simply carbon being fixed though photosynthesis. This is an important point, so let me take a moment to explain. Trees take atmospheric carbon and convert it into organic compounds through the process of photosynthesis. The annual amount of carbon that is removed from the atmosphere through photosynthesis is very large, an order of magnitude greater than annual fossil fuel emissions. Yet, almost all of that photosynthetically fixed carbon is released back into the atmosphere through respiration, so only a small amount of net carbon stays on the land. It is the net carbon sequestered that is potentially creditable. If we credit more than the amount of net carbon sequestered on the land then we have not accomplished anything relative to addressing the atmospheric build-up of greenhouse gases. I have seen proposed language for this bill that credits gross, not net, carbon.

Since, some of that net carbon is the product of past actions, and will accumulate with or without this bill, the early action bill should reward only increases in net carbon that are attributable to decisions made after the enactment of this bill. We want the bill to encourage more conservative use of the land, use that will increase the carbon sequestered on the land.

How do we meet the three criteria I have listed above? I have attached legislative language that I think meets these three objectives in an operationally viable and clear manner. The language is relatively technical, but I believe it is effective in meeting the criteria I spoke about earlier. On the land-use side we have the advantage of 100 years of accumulated knowledge in the forestry profession that we can call upon to develop viable measurement approaches to quantifying the amount of net carbon sequestered. Measuring the amount of carbon in a tree or in the soil is not magic, but rather straightforward science, well-established science.

In the language I have given you we have attempted to exploit what we know in order to establish a system that requires a landowner to measure a minimal number of variables in the field. We have assumed that getting it "right" on each parcel of land is important, but even more important is insuring that the aggregate net carbon credited is accurate. I believe the attached language does just that.

In summary, I believe the Credit for Voluntary Early Action Act can increase wise stewardship of our natural resources while greatly reducing the increase in atmospheric concentrations of carbon dioxide. It is important to get started on addressing climate change and the proposed legislation is a very logical first step. I would be happy to work with you or your staff on specific language for inclusion in this bill. Thank you for the opportunity to testify before you today.

INCREASES IN CARBON STOCKS

(A) In general._An early action agreement may provide that a participant shall be entitled to receive greenhouse gas reduction credit for the net increase in carbon stocks during the credit period within ecosystems on land owned by the participant that are additional to that which would have occurred as a result of current and projected practices in the absence of this legislation. In the case of permanent protection of mature primary forest from logging activity after the date of enactment of this Act, greenhouse gas reduction credits shall be equal to fifty percent (50%) of the carbon stock in above and below ground live biomass, measured at the end of the credit period.

(B) Calculations--

d. Additionality. Except for lands on which there is reforestation, afforestation, or permanent protection from logging activity, the amount of the carbon stock increase that is considered additional to that which would have occurred as a result of current and projected practices in the absence of this legislation shall be determined as the difference between the net increase in carbon stocks during the credit period on land owned by the participant and the product of the number of acres of land owned by the participant and the average per acre change in carbon stocks during the credit period in similar forests within the region. If the average per acre change in carbon stocks during the credit period in similar forests within the region is less than zero, it shall be regarded as zero for the purpose of this calculation. For purposes of this analysis regulations promulgated under section 4(c) shall establish average rates of change of carbon stocks by forest type, productivity class, age, and region, taking into account the most recent forest inventory and analysis data. All analysis of such average rates of change of carbon stocks shall exclude all submerchantable timber. In the case of reforestation, afforestation, or permanent protection from logging activity after the date of enactment of this Act, the full net increase in carbon stocks during the credit period shall be considered additional to that which would have occurred as a result of current and projected practices in the absence of this legislation.

e. Leakage. The net increase in carbon stocks eligible for greenhouse gas reduction credit shall be calculated by deducting any leakage of benefits due to related greenhouse gas emissions or reduced carbon stocks on land not covered by the early action agreement. If an early action agreement results in a reduction in timber supply, the amount of the deduction shall be the product of the amount of reduction in timber supply and the average carbon emissions associated with supplying similar timber. The deduction for related greenhouse gas emissions associated with land management practices shall include, but not be limited to, emissions from fossil fuel consumption, fertilizer application and land preparation activities deemed significant according to the rules developed pursuant to Section 4 (C) of this Act.

Leakage of benefits will be assumed to be zero in the case of:

a) Lands on which there is natural regeneration or establishment of plantations leading to afforestation or reforestation of agricultural lands in regions where on a net basis the forest type being regenerated is not being converted to agricultural lands during the credit period.

b) Improved forest management practices that increase carbon stocks while maintaining production of timber, fiber, and/or energy, as applicable, from the participant's lands.

c) A demonstration that the rate of increase in carbon stocks in the forests of the region has increased for the last period for which such data is available and the aggregate output of all timber, fiber, and fuel producing mills and facilities in the region has not declined, subtracting any production which relied on imports of timber or fiber from outside the region.
d) Permanent protection of forests from logging activity after the date of enactment of this Act.

(C) Limitations--

(1) Coverage.

a) Only private lands are eligible to participate in the program established by this section.

b) Landowners must enroll their entire forest land base to participate in the program established by this section. Landowners may exclude lands from enrollment if the dominant use of the property is ecosystem preservation and there are no timber management activities occurring on the property. Notwithstanding the preceding sentence, a participant may enroll preservation lands if it wishes to do so. If property excluded from consideration under this provision comes under active timber management it must be included in all future carbon accounting. If a participant purchases land during the agreement period, then the net change in carbon stocks on that land must also be included in the applicable agreement. A participant owns land if it owns a controlling interest in the timber on the land. Participants may exclude from enrollment tracts of lands smaller than 50 acres that are non-contiguous with other land owned by the participant. Changes in carbon stocks on all lands enrolled need to be included and for those lands with a net loss of carbon stocks the loss needs to be subtracted from the creditable gain in carbon stocks calculated under this section.

c) For landowners undertaking improved forest management practices, including improved forest management in conjunction with reforestation, a minimum parcel size of 5,000 acres is required to enroll as an individual. Otherwise, landowners must pool their lands together with other landowners for purposes of enrolling in the program. Such landowner pools must have a minimum enrolled acreage of 5,000 acres. These requirements for pooling and minimum tract size do not apply to landowners who enroll lands where no timber harvests will be conducted during the early action period and where activities will consist of reforestation on agricultural lands and/or improved agricultural practices. To enroll in a landowner pool, individual landowners must enroll all their land into an early action agreement.

d) Rules issued under this Act shall establish the age at which each forest type described above produces merchantable pulpwood, sawtimber or other timber products commonly sold by landowners in the region. Only lands on which the forest is older than this minimum age will be eligible, except for lands on which reforestation and afforestation takes place during the early action period. For forest management units (each not to exceed 100 acres) with multiple tree age cohorts, for purposes of this act, the age of the forest is the oldest age cohort representing at least 20% of the standing timber.

(2) Durability.

a) The participant may elect to count the greenhouse gas reduction credits accruing from their early action agreement based on the number of "ton-years" that carbon stock increases have been maintained. Each "ton-year" will be awarded a fraction of one ton of credit. The fraction shall be determined, by rule, based on the ratio of the reduction in greenhouse gas forcing over a 100 year time period as a function of the period during which a carbon stock increase of one ton has been maintained, to the reduction in greenhouse gas forcing over a 100 year time period from the permanent avoidance of the emission of one ton of carbon, taking into account the most recent findings of the Intergovernmental Panel on Climate Change.

b) If the participant elects not to count the greenhouse gas reduction credits accruing from their activities in "ton-years", the participant shall receive credit equal to the participant's net increase in carbon stocks during the credit period, as determined under this section. Under this election, if at any time after end of the credit period, and before the land covered by the agreement is accounted for under a mandatory emissions reduction program, the stock of 6 carbon on the land covered by the agreement is less than the stock of carbon at the end of the credit period, the participant shall retire a number of greenhouse gas reduction credits equal to the difference between the two amounts.

(3) Land stewardship

a) In order to prevent the establishment of forests in areas that currently support natural vegetative communities other than forests, no credits will be granted for afforestation of areas historically not forested unless those areas have been in cropland since 1990.

b) No credits shall be granted for off-site increases in carbon stocks including but not limited to those associated with paper and other wood products and landfills.

c) Credits for carbon stock increases from land-use activities should encourage wise stewardship of land, including land used in production of forest and agricultural products, land providing environmental service or land set aside for the preservation of natural areas. All lands enrolled in a program for early action carbon credits must adhere to best management practices as specified on a regional or state basis by the appropriate federal or state agency.
(4) No more then 20% of the greenhouse gas reduction credits allocated under this Act shall be awarded for carbon stock increases under this section.

(D) Monitoring, Reporting and Verification

(1) The rules issued pursuant to section 4(C) shall include monitoring guidelines that, at a minimum, provide:

a) Tables of estimated greenhouse gas emissions associated with land management activities that result in a significant indirect increase in greenhouse gas emissions (e.g. fertilizer production, herbicide production, fossil fuel consumption).

b) Guidelines that identify all carbon stocks on a participant's lands that may be decreasing during the credit period. All carbon stocks that may be decreasing must be monitored. Monitoring of carbon stocks that are increasing is at the discretion of the participant.

c) Guidelines that ensure accurate and transparent monitoring based on statistically robust inventory, soil sampling, ecological survey, and other applicable scientific techniques.

d) Requirements to perform monitoring in the first year of the early action agreement, the last year of the credit period, and at least once every three years during the credit period. Procedures for estimating baseline carbon stocks on the participant's lands included in an early action agreement.

f) Procedures to allow appropriate estimation of carbon stocks using tables and models derived from USES Forest Inventory and Analysis data for the appropriate region, forest type, age, stand management history, and site productivity for tracts of land included in an early action agreement.

(2) The rules issued pursuant to section 4.(C). shall include reporting guidelines that, at a minimum, provide that:

a) Participants shall report claimed net increases in carbon stocks during the credit period to the appropriate government agency, which will then evaluate the participants' compliance with the guidelines. If not in compliance, the participant will be notified and advised what remedial actions are needed. Participants may not receive greenhouse gas reduction credits until they are in compliance with the guidelines issued under this Act.

b) Each participant's report must be supported by a report from a recognized independent third party auditor. The auditor must verify the carbon credits using a statistically robust evaluation of a valid subsample of the participants lands.

(3) Participants who own less than 50,000 acres will be eligible for monitoring and verification assistance.

DEFINITIONS

(1) Afforestation - Conversion of non-forest to forest on lands that have, historically, not contained forests and did not in 1990.

(2) Reforestation - Conversion of non-forest to forest on lands which had, historically, contained forests but which had been converted to some other use as of 1990.

(3) Carbon Stocks - Living biomass carbon, dead biomass carbon, and soil carbon (organic and mineral soils) .

(4) Baseline Carbon Stocks - the average amount of carbon stocks (in tons carbon) estimated to be present on a participant's land during the participant's base period.

(5) Ecosystems - include above and below-ground living biomass, soils (organic and mineral), and necromass. Forest -- Land at least 10 percent occupied by forest trees of any size or formerly having had such tree cover and not currently developed for non-forest use. Lands developed for non-forest use include areas for crops, improved pasture, residential, or administrative areas, improved roads of any width, and adjoining road clearing and powerline clearing of any width. The land must be a minimum of one acre in area. Roadside, streamside, and shelterbelt strips of timber must have a crown width of at least 120 feet to qualify as forest land; and unimproved roads, trails, streams, and clearings within forest areas are classified as forest land if they are less than 120 feet wide (USDA Forest Service 1972).

(6) Tree -- A woody plant usually having one or more perennial stems, a more or less definitely formed crown of foliage, and a height of at least 12 feet at maturity.

(7) Mature primary forest -

(8) Region - Region shall be defined by the US Forest Service Inventory and Analysis survey unit(s) in which the participant's lands are located.

(9) Ton-year- One ton-year represents the maintenance of a carbon stock of one ton for one year.

(10) Best management practices - sustainable land-management practices that conserve resources while maintaining long-term productivity

We, the conservation districts are strongly supportive of Senate Bill 547 and applaud its adoption of a voluntary incentive-based problem solving approach We, as your constituent based, local connection to non-regulated and regulated landowners, business operators and land managers, recognize the value of and need for this type of approach. The Conservation Partnership consisting of USDA/Natural Resources Conservation Service (NRC S), state environmental agencies and local volunteers have been practicing implementation of best land use practices and delivery of technical assistance throughout the country for more than 60 years.

Senate Bill 547 as proposed

--will diminish the regulatory and financial risk for voluntary, "common good" actions initiated by corporate leaders, business owners, farmers and foresters. The passage of this bill will allow industry to put a real value on credits, rather than current speculative value.

--puts the marketplace in the driver's seat to determine new cost-effective ways to reduce greenhouse gas emission and sequester more carbon . The passing of this bill will result in a market based/market driven commodity that has real value to the buyer and to the seller. Passage of this bill will lessen a governmental role both in terms of regulation and potential subsidy.

--provides direct one for one credit to an entity if it reduces its aggregate emissions from U.S. sources below the applicable baseline and/or a one for one credit if an entity increases its net sequestration above the applicable sequestration baseline. The passage of this bill would provide investment security and promote a land use ethic to all involved in the process.

--recognizes the need to require that government credits are issued for verifiable and legitimate actions that contribute to climate stabilization. The passage of this bill would require performance standard evaluation based on scientific documentation and monitoring from credible sources. The Conservation Partnership, recognizing NRCS for its technical expertise, is ready to serve in this capacity now as evidenced by the information provided in the attachments to this testimony and would be the perfect connection given its existing local delivery system linked to state and federal agencies.

--recognizes the need and opportunities for domestic and oversees sequestration activities.

--provides the mechanism whereby businesses and landowners can serve their own economic self-interest while bringing about environmental improvements and promoting a sustainable land use ethic for all.

--creates opportunities to deal with an existing problem in a creative and flexible manner. Passage of this bill does not establish federal performance standards but allows for local, state and regional climate (soils, vegetation, rainfall and temperature) characteristics to be evaluated for credit in the verification process. This is significant and necessary for state support, recognition of state efforts to date (like the 1998 Coalition of Northeast Governors conference) and scientific validation.

This bill does not

- promote regulation
--inhibit private enterprise
--require linkage to existing or proposed international agreements
--restrict private business options
--subsidize commercial interests
--create additional bureaucratic layering.

Although we strongly support Senate Bill 547 as proposed, we believe that it could be significantly improved by inserting language that specifically

1) urges the President to

--recognize a leadership role for USDA/NRCS and the Forest Service to share in setting guidelines for the Voluntary Credit System. These agencies should rely on their internal technical expertise as well as their Partnership capabilities and connection to the private sector

--recognize technical expertise within USDA/NRCS, EPA, NOAH, DOI/Forest Service, etc in the development of region and/or state specific guidelines for credit validation, verification and monitoring

--instruct federal agencies to revisit their own land management policies and practices to encourage minimization of greenhouse gas emissions and maximization of best land use practices for carbon sequestration on federal lands as well as other public lands that receive federal dollars

2) recommends Congress to allocate funding for regionally located Demonstration Projects partnering greenhouse gas emitters, landowners providing carbon sinks, and federal technical expertise to provide preliminary scientific baseline information

In addition to this direct testimony, I would call your attention to the attachments provided. Included are letters of support for Senate Bill 547 from the National Association of Conservation Districts, the National Association of Resource Conservation and Development Councils and USDA/Natural Resources Conservation Service, with general information about the Conservation Partnership also provided.

If you have any questions on any items of my testimony or the attachments please let me know so that I can provide clarification and follow up. Also if I may be of assistance to you or your staff in following through with the recommendations made please let me know.

In closing, I would take this opportunity to thank the Committee and the authors and sponsors of Senate Bill 547 for their efforts in bringing this issue forward. I would also like to express the sincere appreciation of the Conservation Partnership here in New England, the East Region and across the nation for Senator Chafee's support of our efforts and his constant championing of the environment for its own sake as well as for the common good. He and his staff are to be commended for their relentless efforts to do the right thing for the common good in a way that makes common sense. I have family ties to Bristol and Providence and therefore have taken pride in Senator Chafee's service to Rhode Island but as a resident of Massachusetts I can tell you that I am honored to lay claim to him as a New Englander and as a United States Senator. I say thank you for myself, for my family, for this region and for future generations.