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Full story News Briefing with Clinton Administration Officials
Subject: Global Warming President's Initiatives for Tax Cuts/research
Money to Help Curb Greenhouse Gas Emissions ****note: This Briefing
Embargoed Until President's*** **radio Address Tomorrow Morning,
Saturday, 10:06 A.M. Est,*** **january 31, 1998*** Briefers: Federico
Pena, Secretary, U.S. Department of Energy John K. Scholz, Assistant
Secretary, Tax Analysis, U.S. Treasury Department Gene Sperling,
Assistant to the President and Chair, National Economic Council Todd
Stearn, Assistant to the President/staff Secretary the White House
3:12 P.M. Est Friday, January 30, 1998
Federal News Service - Washington Package Fri, Jan 30 1998 [...]
THIS IS A RUSH TRANSCRIPT.
---------------------------------------------------------------
STAFF: Good afternoon.
As you know, the president's radio address tomorrow will be on the
subject of climate change. He is going to talk about some of the
proposals that he's going to have in the budget on that subject. This
briefing is embargoed until the president's radio address is delivered
tomorrow morning at 10:06 a.m. THIS IS AN EMBARGOED BRIEFING.

Our briefers are Gene Sperling, the president's senior economic
adviser; Energy Secretary Federico Pena; Karl Scholz, who is the
deputy assistant secretary for Tax Analysis -- secretary of Treasury
that is; and Todd Stearn, who is the staff secretary here at the White
House, who has been coordinating our effort on climate change for
quite a long time now.  And some will give statements; some will be
available for Q&A.

Gene.

MR. SPERLING: Hi.

Today, the president is unveiling a $6.3 billion package designed to
address the issue, the challenge, of climate change; $6.3 billion,
which is designed to provide positive incentives and research to
reduce greenhouse-gas emissions. It is divided between 3.6 billion
(dollars) in tax cuts over the next five years and 2.7 billion
(dollars) in increased R&D spending. This is -- when the president
announced his position at the National Geographic auditorium, he
promised that there would be at least $5 billion of combined tax cuts
and R&D in his new budget. This is 1.3 billion (dollars) more than
that. And we think that this is the -- this package is a very good
example of what we spoke about when we said that there were win-win
opportunities for positive incentives that would clearly show how we
can address the issue of climate change and strengthen our economy at
the same time.

I am going to in a moment turn over the mike to Secretary Pena, who is
going to go through the R&D portion. And we have John Karl Scholz, who
is the, I think, heir-apparent secretary of Treasury -- (scattered
laughter) -- but currently the deputy assistant secretary at Treasury
for tax policy and really the administration workhorse on tax policy,
will be here to go through some of the specific tax cuts that are in
here, including the solar roof tax credit, which the vice president is
announcing today.

Let me focus on one aspect of our plan before I turn it over to
Secretary Pena -- and I should also say Todd Stearn will be here to
answer any other questions people have on our diplomatic or
congressional strategy.

One aspect I'd like to focus on before I turn it over to Secretary
Pena, however, is a tax incentive that we are announcing to inspire
the production and marketing of fuel-efficient cars that could help
reduce greenhouse gas emissions significantly.

The transportation sector now accounts for one-third of the greenhouse
gas emissions in the United States and is the fastest growing sector.
Between 1990 and 2010, the transportation sector is expected to
increase 43 percent, relative to 24 percent for building and 21
percent for the industries. Therefore, it is important that part of
our initiative at each step focus on what we can do to slow down the
growth in greenhouse gas emissions in the transportation sector.

The Clinton administration and the auto industry have been working
together for some time to reduce those emissions. Five years ago the
president and the auto industry launched our Partnership for a New
Generation of Vehicles, what we refer to as PNGV, which was to develop
a production prototype of a family car with three times the fuel
economy of today's comparable car by 2003, 2004.

To provide strong incentives for Americans to purchase these efficient
cars, our budget will propose the following set of tax cuts related to
-- to the automobiles: In the year 2000, the president's budget
proposes a tax credit of $3,000 for any vehicle that gets twice the
base fuel economy for its size class. The $3,000 credit would be
available for purchasing the qualifying vehicles after December 31,
1999. The credit amount would phase down to $2,000 in 2004, $1,000 in
2005, and would phase out in 2006.

We also propose a $4,000 tax credit for each vehicle that gets three
times the base fuel economy for its class. The $4,000 credit would be
available for purchases of qualifying vehicles after December 31, 2002
and before January 1, 2007. These credits amount to $660 million over
five years, and would be available for all qualifying vehicles,
including cars, minivans, sport utility vehicles, pickup trucks, and
electric vehicles.

I'd like to make one important point, though, which is: Our goal with
this tax incentive is straightforward. We want to provide an incentive
for the automobile industry and for the American consumer to -- to
produce and to purchase the cars of the future that can help us reduce
greenhouse gas emissions and address the climate change problem that
this country and the world faces.

What we put forward, as to its exact details and designs, is a
proposal for consideration.  We very much want to work with the Big
Three, with environmental groups, with the UAW to ensure that what
we're doing is the best targeted to reducing greenhouse gas emissions
and done in a way that does not disfavor our industries or our
workers.

And so while we put this proposal out for consideration, we plan, over
the next several weeks, to consult closely with all interested parties
and to remain -- be open-minded as to what is the best way to ensure
that we have a targeted tax cut for a new generation of cars that can
address the climate change issue.

Our goal is to be as effective as possible in reducing climate change,
greenhouse gas emissions. And we look forward to working with all
parties in making sure that our legislative proposal that we will
pass, hope to pass this year, has as much support and is as effective
as possible.

With that, I'd like to turn it over to Secretary Pena. I think that as
you will see, day in, day out as we address climate change, that
Secretary Pena will in very many ways be the point person for this
administration on the R&D initiatives that we want to take on, and for
future efforts down the road that will deal with the energy industry
and our energy future as it affects climate change.

So with that, I give you Secretary Pena.

SEC. PENA: Thank you very much, Gene.

Let me, before I address the R&D aspects of the president's
announcement, put this in a broader context.

Please recall that when the president announced our position on
greenhouse gases as we were going into Kyoto, he said we were going to
have a three-staged process. In stage one, which was from between 1998
and about 2004, we would invest in technology, provide tax cuts, look
at our own federal use of energy, and take some other steps to begin
to reduce both energy use and reduce greenhouse gas emissions. And
then in phase two, between approximately 2004 and 2008 or so, we would
try to work out the specific mechanisms of international trading,
joint implementation, which are additional international tools to help
us reduce the effort in reducing greenhouse gas emissions; and then in
phase three, commit ourselves to the binding aspects of the Kyoto
protocol.

So it's in that context that the president is making the
announcement.

Let me talk about the $2.7 billion the president has announced for R&D
spending. It has three aspects to it. Number one, it will complement
the deployment of new technologies that will reduce greenhouse gas
emissions from the (tech/tax ?) side. Secondly, it will complement our
ongoing efforts to better understand the science of climate change, to
develop new technologies that will improve energy efficiency and
otherwise reduce greenhouse gas emissions. And thirdly, the technology
budget will help move technologies from the laboratory, from the
workbench on the shop floor, and then out into consumers homes and to
our vehicles.

The technology investment is $472 million for 1999, and this is, of
course, above the 1998 current investment. The Department of Energy is
requesting the bulk of that increase, with about $330 million of
additional resources. And over five years, the total investments rise
to $2.7 billion, with almost $1.9 billion for the Department of
Energy's research and development program.

You have heard the president speak, I think very eloquently -- and
I've talked about this myself -- about our belief of the role that
technology can plan in helping us reduce greenhouse gas emissions. We
will invest in new technologies that will use energy more efficiently
and cut energy bills. We're going to bring down the cost for clean
renewable energy sources, such as solar and wind power. Let me give
you a few examples.

As you know, the president announced that by 2010, we would install
one million solar roofs, either photovoltaic or hot water systems, in
that time frame. Today the vice president, in California, is going to
be addressing that issue. But let me say, we are very confident that
we will not only meet the one million solar roof target, we will
exceed it. The Department of Energy's budget request includes $100
million in fiscal year '99 to improve the performance and to reduce
the price of solar and other renewable energy sources. We will partner
with the private sector so that the private sector will take the lead
in bringing these new technologies into our factories and into our
homes. Let me give you an example of that.

Gene alluded to the Partnership for a New Generation of Vehicles. We
have a goal of developing a mid-sized car that will get us 80 miles to
the gallon with the same safety, comfort and pricing considerations
that consumers want in cars today. A production prototype is expected
by the year 2004. But let me emphasize that we've already seen the
major car companies announce that they're going to be marketing cars
which are much more fuel efficient than today, getting 50 to 60 miles
per gallon, as early as 2001. So the Climate Change Technology
Initiative will include $277 million for the Partnership for a New
Generation of Vehicles, which is up from the current amount we're
investing -- $227 million.

Let me give you three examples of what happened just a few weeks ago
when the automakers announced their new vehicles, where this
partnership helped contribute to their breakthrough technologies.

Number one. General Motors announced an advanced battery for their
EV-1, which will take them from 70 miles to 140 miles per charge. That
is a direct result of the partnership that the Department of Energy's
labs formed with General Motors.

Secondly, there was an announcement by all three manufacturers about
the use of lightweight materials which will reduce the weight of cars
by 30 to 50 percent. A direct result of our partnership.

Thirdly, there was an announcement of an advanced diesel hybrid car
which is linked to an electric motor, and that came directly out of
our Partnership for a New Generation of Vehicles program.

So those are some examples of what we already know is working with the
current investments we've made in the last several years, which gives
us a very high degree of confidence that these new technological
investments are going to pay off in years to come.

We are also going to cut the federal government's use of energy. Today
the federal government is investing $8 billion a year in our own
energy bill. Our goal is to reduce energy by our federal buildings by
30 percent by the year 2005. We have recently announced a $750 million
energy savings performance contract, where private companies come into
our federal buildings, make their own investments at their own cost
with new technologies to reduce our own energy costs. We then take
those savings and pay the private company back for the investments
that they make. It is already working. That's going to be a very
important part of our strategy.

Thirdly, in terms of appliances. We're going to reinvigorate the way
in which we set new standards for appliances. Some time ago we made a
decision about new standards for refrigerators. Refrigerators today
are three times as efficient as those made in the 1970s. But in three
years, because of the recent standard we issued, new refrigerators
will run on the energy it takes to light a 50-watt bulb, which is
one-fifth the energy of old appliances.

Another example of the kind of technology that we're supporting is
something called the horizontal axis washing machine. Some of you may
have learned about this very recently.  The companies that are making
these machines, which use half the amount of water and half the amount
of electricity, cannot keep up with demand on the part of consumers.

A very important part of the research that is new, that we have not
invested in in the past very much, is carbon sequestration, or
capturing carbon dioxide in forms where it does not enter the
atmosphere. We are investing in a number of strategies which range
from capturing CO2 in trees, other plant matter, oil and gas wells, in
aquifers or the ocean. Our DOE budget will increase to $30 million,
from about almost nothing, to allow us to move on carbon
sequestration.

Let me conclude my comments by simply saying that almost every month,
we observe a new technological breakthrough, whether in fuel cells or
cars or appliances or other technology. And we have seen that when we
partner with the private sector, we can make extraordinary
breakthroughs in new technologies that reduce energy consumption and
also clean up the atmosphere. So we have a very high degree of
confidence that the president's announcement is going to move us in a
long way of ultimately reaching the goals and the objectives of the
Kyoto protocols that were agreed to very recently.

I'll be happy to answer your questions in a moment.

Thank you.

    Q     Federico Pena.

SEC. PENA: Sam Donaldson. (Cross talk.)

MR. SCHOLZ: In our hand-out, we described briefly the nine tax
incentives that we have that supports the president's Climate Change
Technology Initiative. The tax incentives are organized around the
four major carbon-emitting sectors of the economy. I am just going to
very briefly go over a couple highlights.

For buildings, an important energy-emitting sector, we are providing a
tax credit, a 20-percent tax credit, for energy-efficient building
equipment. This is going to provide a subsidy for extremely efficient
fuel cells, central air conditioners, gas and electric water heaters,
and gas and electric heat pumps.

For industry, we are providing a 10-percent investment tax credit for
combined heat and power systems, frequently called co-generation
equipment. This is a very promising energy-saving innovation that we
think that -- investment tax credit will stimulate and yield great
dividends.

For transportation, Gene has already mentioned the tax credits for
highly fuel-efficient vehicles.

And for electricity, the president proposes to extend the tax credit
for electricity produced from wind and biomass (sp).

There are several other initiatives that we are happy to talk about in
questions and answers.  But those are several highlights from the tax
portion of this initiative.

SEC. PENA (?): Questions?

    Q     Is it possible, at all, to put a rough calculation on what
    percentage all this will bring to the United States toward meeting
    the goal of (President Clinton ?) at Kyoto? Or is that just too
    amorphous?

SEC. PENA: We can't quantify that for you today, and let me tell you
why.

Our strategy in reaching the goals of Kyoto, include not only
technology investment and the tax incentives we've talked about today,
but they also include international trading. They include joint
implementation and some other strategies. So we need to sort of give
you a total picture of how each of those strategies once implemented
and working, will get us to meet the goal that was agreed to in Kyoto.
And today because we're only dealing with one aspect of it, we can't
give you a very precise figure.

But we are very confident that in combination, all of these strategies
are going to ensure that we meet the goal that we agreed to in Kyoto.

    Q     What do you say to the rumblings in Congress that this is a
    back-door way of implementing the deal without submitting it for
    ratification?

SEC. PENA: Between -- a back-door deal of --

    Q     A back-door way of implementing the treaty without getting
    it ratified in the Senate?

SEC. PENA: It is a good public policy to reduce the $8 billion we
waste every year, on the part of the federal government, in using
energy -- irrespective of Kyoto. It is a good public policy to find a
way to make power plants that use three units of coal to only produce
one unit of power. It is a good public policy to have refrigerators
and washing machines and light bulbs that are much more energy
efficient than we have today. These are things we ought to be doing
anyway, to reduce the federal budget, to reduce the cost to consumers,
and also to clean up our environment. So, in that sense, this
three-stage process that the president outlined when he made his
announcement makes a lot of sense and will methodically get us to a
point, before we enter the third stage of binding commitments, to make
sure we're making significant progress both in the science and in the
technology.

MR. SPERLING: Can I just add one thing to that?

SEC. PENA: Yes, please do.

MR. SPERLING: The Kyoto -- is -- what's significant about Kyoto was
signing on to binding commitments. There's -- at best I know, always
been a -- for Kyoto efforts, PNGV included, supported by both parties,
to take -- you know -- voluntary steps by this country, particularly
in ways that were this type of win-win strategy to try to address the
issue of climate change. Implementing -- what we said was that we
would not even send the Kyoto treaty to the Senate until there was
significant developing country participation. So there's nothing that
we're doing here that is in any way locking the country into a binding
commitment without ratification by the Senate. This is -- this is the
type of voluntary, win-win effort that -- that I think has had support
for years from people on both sides of the aisle.

    Q     Why did the administration not take a consumption-tax
    approach, basing a tax on how much individual fuel contributes to
    air pollution or climate change?

MR. SPERLING: We prefer tax incentives. (Laughter.)

    Q     But, there was an energy conservation group yesterday that
    released a report arguing that that would be the most effective
    way in the long run of actually reducing emissions, by, in effect,
    reducing consumption, if you tax all the fuels according to how
    much they don't pollute.

MR. SPERLING: We -- we have always balanced what's best for the
economy with our goals for reducing greenhouse gas emissions, and we
think this is -- we think this is the right strategy. We are not
interested in using tax increases -- that's not an option that we
spent any time considering. We said from the beginning that our focus
was going to be on providing incentives. We are still having a price
incentive, but we're doing it by giving people a positive price
incentive to both produce and purchase and consume products that
people use that are efficient and would reduce greenhouse gas
emissions.

So we just disagree as to the strategy for going forward. We want to
press these tax incentives and R&D investments, and we think that
these are, as we said, the type of win-win scenarios that we feel that
we can get support across the board from and start to make some
efforts to address this problem even this year.

    Q     Some of the environmental groups have said that $6.3 billion
    is a good start, but not too much different from past budgets,
    that's there's been money before for R&D. Why is this different
    this year? And also, why $6.3 billion? Can you talk about how you
    arrived at that figure? Why not $3 billion, why not $10 billion?

MR. SPERLING: Well, what we did was -- because the president was going
to make his speech in October, what we did was that we had both the
people working on climate change, together with the budget team, and
we looked at what we felt was good policy -- and the secretary talked
about this -- reflecting some of the recommendations from the PCAST
recommendation, and also what we could do based on the recommendations
that we'd gotten from the interagency group that was working on the
tax cuts, and what we could fit into the budget in light of the fact
that we are in the second year of a balanced budget plan. And we felt
at that time that we could safely say that we would be able to fit $5
billion into our budget. As we went through, we found that we were
able to do more, and the president and the vice president both wanted
to try to go above that goal.

So I don't think it's much different than any other priority. You try
to do the most you can in light of other competing priorities and the
budget constraints. And in this case, I think we also were guided by
some of the recommendations -- not all, but most, probably
 ...
Copyright 1998, Federal News Service - Washington Package.  All rights
reserved. TRANSCRIPT BY: FEDERAL NEWS SERVICE 620 NATIONAL PRESS
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