ADDRESS TO 2006 CLEAN CITIES CONGRESS AND EXPO
May 8, 2006Phoenix, Arizona – Today, U.S. Senator John McCain (R-AZ) spoke at the 2006 Clean Cities Congress and Exposition. Follows is a transcript of his remarks entitled An Energy Vision for the U.S.:
I would like to begin by thanking you all for having me here today. In particular, I would like to recognize the Alternative Fuel Vehicle Institute and the Valley of the Sun and Tucson Regional Clean Cities for all of their hard work towards putting this event together.
My friends, I believe that our nation stands at a crossroads in its history. For decades we have been living lives of abundance, with little regard for our natural resources or global health. But we are now facing hard choices in our energy policy. Future generations – my children and grandchildren, along with yours – will have to live with the decisions we make today. And so it is time for us to make some tough and – hopefully – smart choices regarding our energy use and production before it is too late.
One aspect of our nation’s energy puzzle that has recently received a tremendous and deserved amount of attention is our dependence on oil. The only thing longer than the gas lines many of us experienced in the ‘70s is the procession of Washington politicians queued up to talk about gasoline prices. As prices at the pump hover at the three dollar level – one gas station in the Phoenix area recently advertised regular unleaded at $3.38 a gallon – many politicians have circled around so-called “solutions” to high gas prices that really solve nothing at all. The $100 rebate idea that was floated by some of my colleagues, for example, took flight for not much longer than the first flight of the Wright brothers.
Anyone paying the cost of a fancy meal just to fill up their tank knows that gas prices right now are too high. But those prices reflect a reality that is unavoidable: Our nation’s economy is heavily, deeply, thoroughly dependent on oil. In 1993, we consumed 17.2 million barrels of oil per day. Ten years later, we were at 19.8. Today, the U.S. consumes almost 21 million barrels every day, over 636 million barrels per month, and 7.6 billion barrels per year. And our dependence on oil only continues to grow.
The world’s economy, too, is heavily, deeply, thoroughly dependent on oil. Global oil demand grew by about a million barrels per day every year between 1991 and 2002. That demand is expected to rise by another 1.6 million barrels per day in 2006. This means that the world is expected to consume over 85 million barrels of oil per day, or just over 31 billion barrels per year. And world consumption will only continue growing, in large part because of the economic expansion of Asian economies like China and India. China’s auto industry, for example, is just now taking off. Currently, only about 8 people out of 1,000 in China own a car. By contrast, over 600 out of 1,000 people own cars in the U.S. If the number of car owners in China – a country of 1.3 billion people – continues to grow, that alone will make the demand for oil skyrocket even higher.
So the logical question is: Where do we get all the oil to meet such great demand? Here is where the news gets grim. Oil supplies are tightening and will certainly vanish over time. Some experts actually believe that we have already reached the height of oil production, what they call “Hubbert’s Peak.” Others think we may have another 20 or 30 years before we hit that peak. But either way, we face the reality that oil supplies will fall in this century. So the answer to high gas prices cannot be to produce more oil – the supply is simply not there to do that.
To make matters worse, the supplies that are available are often located in the most unstable parts of the world – like Iran, Nigeria, Venezuela, and Russia.
Any economist will tell you that growing demand and limited supplies mean one thing: higher prices. And that’s particularly so for oil, which accounts for about half of gasoline’s price at the pump and which is traded on efficient markets that operate 24 hours a day. For example, oil contracts are traded on the New York Mercantile Exchange, and like other markets for commodities, financial players like investment banks and hedge funds sometimes drive the price up or down. When world events suggest that oil supplies might be interrupted – because of suicide bombings in Nigeria or because Iran’s president continues his nuclear threats – these markets react, and sometimes quite suddenly and sharply.
Today’s gas prices are nothing less than a call to action to wean ourselves off of oil. But that’s cold comfort for consumers who are facing pain at the pump today. In the short run, we can only hope for greater stability in oil producing countries, which will temper the oil markets. We can also send the markets a strong signal that America is serious about reducing our dependence on oil and turning to alternative sources of fuel. Let’s consider just a few of our options.
One way that many of us in Washington have proposed cutting down demand is by increasing corporate average fuel economy standards – or CAFÉ standards. The idea is that if the government by statute or rule can make cars, trucks, and SUVs more fuel efficient, then consumers will use less gas and our environment will be less polluted. I support increasing fuel economy, and I have long supported increasing CAFÉ standards. But I would submit that mandating higher fuel efficiency standards as a solution to the existing gas price is not the solution, despite the call by nine out of ten politicians in DC for just such an action.
The good news is that in the short-run the market does appear to be working to the benefit of consumers and the environment. As prices have increased, so has consumer demand for fuel efficient vehicles like the Ford Escape Hybrid, which gets 33 miles a gallon, and the Honda Civic Hybrid, which gets an average of 50 miles per gallon. In addition, there are indications that demand for inefficient vehicles is dropping. This, in turn, drives increased production of hybrid vehicles and other fuel efficient cars. Improving the fuel economy of our nation’s car and light truck fleet is a critical part of our effort to reduce our dependence on oil and reduce greenhouse gas emissions. I encourage consumers to demand fuel efficient vehicles and auto manufacturers to heed those calls for greater efficiency.
Others have suggested that the solution is to increase domestic supply by drilling in the Arctic National Wildlife Refuge – ANWR. There are several reasons that cause me to oppose ANWR development. Aside from the adverse environmental impact of such drilling, even the most reliable estimates conclude that the refuge could only meet about 2 to 5 percent of the nation’s oil needs, at best. Drilling in ANWR simply won’t keep up with demand – our only real solution is to move away from our reliance on oil and towards other fuels.
Take ethanol, for example. Right up front I should say that I have long opposed government subsidies for ethanol. Ethanol production, in my view, can and should stand on its own. And every year the industry shows further signs that it can live without government support.
Corn-based ethanol production has become more energy efficient in recent years due to the technological advances in ethanol conversion and increased efficiency in farm production. Ethanol is a clean-burning, biodegradable, and renewable fuel. Clearly, it is a good alternative and supplement to gasoline. And the market is showing this. There is increasing demand for ethanol as we move away from MTBE as a fuel additive and as we look for a substitute for gasoline.
As a result, ethanol companies are seeing record profits. Archer-Daniels-Midland is a case in point. ADM recently reported third-quarter profits of almost $348 million, up 29 percent from the same quarter a year ago. This increase in earnings was fueled in large part by its corn processing division, which includes its ethanol business.
In addition to current methods of producing corn-based ethanol, venture capitalists and entrepreneurs are working on more, innovative ways to produce ethanol – including cellulosic ethanol, which can be produced from several agricultural and forestry products.
One significant challenge that ethanol faces, however, is distribution. Fewer than 1,000 of the nation’s 170,000 filling stations currently sell E85, the 85 percent ethanol blend. In fact, I am told that Arizona has only four gas stations that offer E85 – three of them are in Tucson. So we need to explore options for making ethanol more widely available for consumers so that they can benefit from the advances that we have made and continue to make in the production of the fuel.
Brazil, I should note, expects to become energy self-sufficient this year in large part because of sugar cane-based ethanol. This move to ethanol has been fueled in large part by auto manufacturers’ wide introduction of flex-fuel technology into that market. A flex-fuel engine lets a consumer choose between gasoline and ethanol, and now, fewer than three years after the technology was introduced, more than 70 percent of the automobiles sold in Brazil have such engines, which have entered the market generally without price increases.
Brazil also shows us that a robust renewable fuels industry in America can be achieved. Already, there are 5 million flex-fuel cars on our roads, and there are plans to produce more. This is an encouraging development. Our domestic ethanol industry continues to grow; since 2001, the U.S. industry has averaged an annual growth rate of more than 20 percent. But ethanol isn’t the beginning or the end of the solution, and there are other sources of fuel – such as natural gas and biofuels like biodiesel and biomethane – that can and should be part of our move away from oil and towards sustainable alternative energy sources.
In the Phoenix area, for example, we’re using more natural gas for our public works fleet, transit buses, and taxis, shuttles, and rental car buses at the airport. Today, the City and the surrounding communities that operate natural gas-powered vehicles displace more than 20 million gallons of gasoline and diesel each year. This makes economic sense – natural gas is less than $2 per gallon. Natural gas is also the bridge to hydrogen, which is a long-term alternative that we must continue to explore.
I know that it is difficult to look at the price that you’re paying for gas today and see it as an opportunity, but I think that the challenges we face today are just that. Out of this crisis may be born new technologies, more jobs, a better environment, and a diversification of our energy sources. I invite you to seize this opportunity and to exhibit the courage and determination that will be required to take on this challenge and move our country towards the creation of stable, affordable, and cleaner sources of energy for our economy.
I have focused on gasoline prices, but we also must turn our attention to the critical issue of global warming. Climate change is real and is having a major impact on our way of life. For many years, we have heard about the impacts of climate change. We were told that they would first manifest themselves in the Polar regions. I have visited the Polar regions and found these claims to be true. I have seen first hand the impacts on the people of the Arctic region. As we speak, they are fighting against the impacts of climate change to maintain their way of life.
Several years ago, Senator Lieberman and I started the fight to get climate change legislation passed. We sought to establish a cap and trade system to reduce the emission of greenhouse gases. Our proposal would achieve these reductions through the use of a market-based trading system. Twice we have forced votes on our legislation and twice we have failed. Despite our failures, we will continue our fight to get meaningful legislation passed.
While there are still a few skeptics of climate change, the evidence supporting the cause of rising global temperatures as human-induced is overwhelming. Almost any credible organization will tell you that the evidence is growing and becoming clearer every day.
Despite the reluctance by the Administration to do anything meaningful about climate change, top government scientists have conducted their research and stated their positions. Just last week, the Administration’s Science Program issued the first of 21 reports deemed as the National Assessment.
The report states that research to detect climate change and attribute its causes shows clear evidence of human influences on the climate system. The Chief Editor and Director of the NOAA National Climatic Data Center, Dr. Thomas Karl, said, “The evidence continues to support a substantial human impact on global temperature increases. This should constitute a valuable source of information to policymakers.”
Now, if we can get the policy and the science programs connected, we may be able to meaningfully address this problem of climate change.
To address this problem, there is no doubt that technology must be a big part of the solution. Now, more than ever, our lives are heavily dependent upon technology.
Our legislation would promote a number of clean technologies, including nuclear power. We believe, as many others do, that nuclear power is a key technology for the future of our country. The new plant designs that are being proposed are safer and represent a new generation of innovation. They take advantage of earlier plants that have been in operation for many years.
I firmly believe that nuclear power is a key technology for addressing climate change. As we develop strategies to reduce greenhouse gas emissions, we simply cannot ignore this emission-free technology. While there are other sources of low or zero emission power sources, they simply do not have the power density to match that of nuclear power plants. The International Energy Agency estimates that the world’s energy consumption is expected to rise over 65 percent within the next 15 years. If the demand for electricity is met using traditional coal-fired power plants, not only will we fail to reduce carbon emissions as necessary, the level of carbon in the atmosphere will skyrocket, intensifying the greenhouse effect and the global warming it produces.
I know that some of our friends in the environmental community maintain strong objections to nuclear energy, even though it supplies nearly 20 percent of the electricity generated in the U.S. and much higher proportions in France, Belgium, Sweden and Switzerland – countries that aren’t exactly known for their environmental disregard. But the fact is, nuclear is CLEAN, producing ZERO emissions, while the burning of fossil fuels to generate electricity produces approximately 33 percent of the greenhouse gases accumulating in the atmosphere, and is a major contributor to air pollution affecting our communities.
The idea that nuclear power should play no role in our energy mix is an unsustainable and, frankly, irresponsible position, particularly given the urgency and magnitude of the threat posed by global warming which most regard as the greatest environmental threat to the planet.
I strongly believe nuclear energy can and should play an even greater role, not because I have some inordinate love affair with splitting the atom, but for the very simple reason that we must support sustainable, zero-emission alternatives such as nuclear if we are serious about addressing the problem of global warming.
Despite the continuing debate over the science of climate change in Washington, DC, others are taking action. I certainly applaud the efforts of mayors across the country to reduce greenhouse gas emissions. The fact that an agreement can be reached by 227 U.S. mayors representing 44 million people is simply amazing. If the 227 mayors can do it, why can’t 100 U.S. Senators?
Let me also note that the U.S. states are also taking action. Seven Northeast states – Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont – agreed to implement a “cap-and-trade” program to lower carbon dioxide emissions from power plants late last year. Now, I understand that the State of Maryland will be joining them. California, Washington and Oregon have also taken steps to reduce greenhouse gas emissions.
Here in the state of Arizona, Governor Janet Napolitano has established the Arizona Climate Change Advisory Group which was charged with developing recommendations for greenhouse gas emissions. Their recommendations to the Governor are due by the end of June.
We have also seen industry become more active in this area. Many U.S. companies are already operating under a mandatory system. If they have operations in countries that have signed onto the Kyoto Treaty, they are subjected to the reductions requirements as any other company in the country.
Let me close as I have before with a simple argument. Let’s say that the climate skeptics are right – that the science we are relying upon is wrong – yet we enact legislation to reduce greenhouse gas emissions. What harm will that action cause? Clean air and a more competitive industrial base.
On the other hand, let’s say that the science is accurate yet we fail to enact legislation to reduce greenhouse gas emissions. What harm will that inaction cause? Melting of the polar ice caps with the accompanying sea level rise, extinction of many animal and plant species, shut-down of he ocean circulating system, more extreme weather events, social and political upheaval, and unimaginable mitigation costs.
Given the high stakes involved – the future of our children and our grandchildren, not to mention the future of the planet as we inherited it – which approach are you willing to bet on?
Thank you again for inviting me to share with you my views on our energy future.
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