Mr. SHARP. Thank you very much, Dr. Yergin. Dr. Gibbons, we will be happy to hear from you now. STATEMENT OF JOHN H. GIBBONS Mr. GIBBONS. Mr. Chairman, I am going to choose my words carefully this morning for obvious reasons. It is not the muzzle of the administration or my Board but the muzzle of a virus. I apologize for my double bass voice this morning. If I run out of my voice, my colleague Peter Blair behind me will take over, if that is okay. Well, as Dan Yergin said, "it is deja vu all over again" for many of us that have been involved in energy issues for fully two decades now. But I think we have learned a lot too. Perhaps we can use some of that wisdom here in the months ahead of us. I would like to follow on Dan's remarks by reminding you of a few principles that we think are important in thinking about energy strategies. The first principle is that the energy system changes very slowly. Major changes in energy supplies take a half century or more. The changes in demand must reflect changes in capital stock whether it be our automobile fleet, our refrigerators, or our buildings. So, that in turn also has an inherent time constraint measured in decades and not in years. On the other hand, given time, we have come to understand that energy is a highly ductile commodity. That is, in the short run it may be very brittle and break if you try to change the system very rapidly. But in the long term it can move over major dimensions given decades for that change to occur. It is a little bit like a supertanker changing directions. If you have 50 miles, you can make a right hand turn very readily. If you try to do it in 1 mile, you break the tanker. Therefore, in approaching energy policy, while we must certainly pay attention to short-term contingency plans such as the Strategic Petroleum Reserve, our main sights must stay focused on long-term goals because those represent fundamental change. The second principle is, clearly, I think we all understand, that energy supply and use are inextricably global in nature. It makes little sense to think about U.S. energy in isolation from the rest of the world. The third principle: however important and ubiquitous, energy itself is not an end. It is not a goal. It is subsidiary and derivative from broader national goals. For example, our economic well being, our environmental health, and our national security. These are the issues of our Nation, not just issues of the marketplace. Finally, in selecting energy strategies, these three overriding goals, economy, environment, security, need to be attended. Some energy strategies can be chosen which affect in a positive way all three of those goals. Other strategies may help one goal but erode or frustrate another. Well, given those principles, then what kind of key goals might be offered for a national energy strategy? Remember, if you do not have some goals rather well articulated, then it is awfully difficult to measure what kind of progress you are making. I would offer three goals this morning. The first one is to regain the momentum of reducing the energy intensity of our economy. By reducing this energy intensity, we have relaxed pressures on supplies. We help our environment. And we follow, hopefully, economic least-cost paths. The chart, figure 3 in my written testimony, and the chart on the board to my right, indicates by the yellow bars that the intensity, that is the energy per dollar of GNP of our Nation, fell quite steadily from the early 1970's until the late 1980's. The rate it fell was about 2.5 percent per year with a net saving of money as well as energy along the way. There are lots of opportunities for further improvement in that direction, especially if we have a sustained R&D program in our Nation and clear market signals about the real cost of energy. A goal, for instance, might be 2 percent per year or better continued improvement in energy efficiency in our economy. If you think carefully about global warming problems, then a prudent person would say it should be more like 3 percent. The second goal I would like to speak of is a more secure and diverse liquid fuel supply. Reflecting Dan Yergin and Winston Churchill, "the picture is worth more than a thousand words here." You see that imports on a business-as-usual future take us into the domain of import dependence that is simply not tolerable here in our own lifetime. So, what can we do to sustain domestic production of petroleum, to diversify and constrain imports? We are now nearly 50 percent dependent on imports. It accounts for 57 percent of our present balance of payments. What can we do about developing alternate fuels? The next chart, which are figures 6 and 7 in my written testimony, indicates something we can do. As you mentioned, Mr. Chairman, in your opening statement and also I believe Mr. Moorhead, you have to work on both ends of the spectrum. You have to work at keeping our supplies up and you have to work at rolling efficiency into the system. So, we have run through several scenarios of mechanisms to boost our supply, whether it be from the North Slope or alternative fuels developed domestically, and to constrain that envelope of demand by introducing more efficiency in the energy use system, primarily in the transportation sector. I think it is on such charts as this that one can measure the effectiveness, for example, of the Alaska North Slope potential. A goal that comes out of this consideration, Mr. Chairman, could be that the United States might want to commit itself to say we do not want to become more than 50 percent dependent on imported oil. If you make that single statement, that leads to a lot of actions that are described in this chart. Finally, the third goal, and my last goal would be that the Nation needs for the sake of its future to move along the path that moves us beyond fossil fuels. We now are only 12 percent reliant on nonfossil fuels. In other words, we are 88 percent dependent on fossil fuels. We used to think we had several centuries to make the transition beyond this dependence, this age of fossil fuels. Now, because of global warming and other issues we realize that that time may be much less lengthy than that. It may be 100 years. It might even be 50 years. So, what is the plan here? The plan would be to move toward less carbon dioxide per unit of energy produced and move on beyond fossil fuels entirely. The rationale being that we may have 100 years or we may have 50 years, but it is time to get started. A goal that you can choose could be 1 percent per year average shift away from our dependence on carbonbased fuels for our energy system. The reason we have to think about these long-term goals is that it takes a half a century to make a smooth transition. So, it is going to take us a half century from whenever we begin. Finally, gentlemen, a word about OTA's work on options to slow global warming, the so-called greenhouse effect. I have given a summary on the board. It is figure 8 in my testimony. Now, we know that chlorofluorocarbons and agriculture and energy, there are many contributions to global warming. But a big one, a very big one, obviously, is energy. It is central and CO2 is the main actor. Our work was to try to figure out what you could do in an economically cost effective way to slow down the amount of carbon dioxide we are producing from our energy system. We did three scenarios. One is a baseline of business as usual. If we do not do anything significantly beyond where we are now, our CO2 will increase by about 50 percent between now and the year 2015. If we take measures that we call our moderate scenario, that is, measures that are economically break even or better, then we can reduce that 50 percent increase to about a 15-percent increase over that 25 years. If we go with what we call the tough scenario, that is, options that are already technically feasible, but may cost some money, depending on where the price of energy goes, then we see that we could actually reduce the amount of carbon dioxide produced from our economy and still have our economic growth. We can reduce that CO2 by about 35 percent. We go through, in my paper today as well as in the report that lies behind it, the specific options that one would have to follow in order to achieve such a thing. It, once again, proves that if we take our time and commit our ingenuity there is great flexibility in the energy system in providing our wanted goods and services and in serving the three interrelated goals of economy, environment, and security. Last, Mr. Chairman, we do learn from the past. And if you reach all the way back to Confucius, you find he gave a very important statement. He said, "if we do not change our direction, we are liable to end up where we are headed." Thank you, sir. [Testimony resumes on p. 43.] [The prepared statement of Mr. Gibbons follows:] TESTIMONY OF JOHN H. GIBBONS HOUSE COMMITTEE ON ENERGY AND COMMERCE February 20, 1991 ENERGY POLICY CONTEXT FOR THE 1990'S: Mr. Chairman and Members of the Subcommittee: I appreciate the opportunity to testify today on the subject of our nation's longterm energy strategy. As most of you are aware, OTA has been studying energy issues for the Congress since the mid-1970's. I have attached to my testimony today a selected list of reports which we have delivered to the Congress on energy topics that are relevant to today's hearing. I might also note that at the request of this Committee, we are currently completing the assessment, Technological Risks and Opportunities for Future U.S. Energy Supply and Demand, which we expect to deliver in the two months. As we see and hear the haunting images of the war in the Middle East, many of us reflect on the events of the last decade that got us to this point. We must attribute at least some of the rationale for our military presence in that part of the world to our dependence on that region's oil reserves or, in the President's words, "U.S. economic interests there." Yet, despite the current sense of urgency about energy issues, it is imperative that energy policy be viewed from not only a short-term contingency plan but J. Gibbons: National Energy Strategy Page 2 also a long-term perspective that derives its direction from broader and more fundamental national goals of economic health, environmental quality, and national security. Therefore, as we consider the steps necessary to develop a national energy strategy, it only makes sense to develop that strategy in ways that do the best job of supporting these three and other related goals. Some energy options, particularly those that improve efficiency of production and use, may support one goal but run counter to the others. For example, increased reliance on coal could cut oil import dependence, but exacerbate problems of air pollution and global climate change. Some energy options support all three goals. Therefore, today I would like to recap the long-term U.S. policy interests in energy and offer several specific goals for your consideration. First, I want to emphasize that it is important to recognize that there are no energy "fixes" that are easy or quick,i.e., no magic bullets. We will succeed in easing U.S. oil import dependence only if we establish long-term efficiency and supply goals, and stick to the plan to achieve those goals through periods of both crisis and calm, and through periods of high and low oil prices. During the past decade, steady supplies, easy efficiency gains, and a retreat in the price of oil seduced us into largely abandoning efforts to push research in energy efficiency and supply. The present oil crisis, too, will pass, possibly again beguiling us into a false sense of energy complacency. Major changes in energy systems-and major changes are what must occur--require decades and unwavering commitment from citizens, political leaders, and industry. The good news is that, given time, energy is a flexible component of a modern economy. However, a long time is required in order to effect a major turnover of the capital stock of energy supply and consuming equipment. Short-term strategies -- either to spur production or to curb consumption are usually inefficient and traumatic. Certainly, a sensible, comprehensive energy policy must be responsive to sudden changes of events, but it must be fundamentally grounded in longterm strategies. - |