Mr. Chairman, members of the committee:

There are two main issues that should be considered when assessing the prospects for increased export potential for American energy technology of all types.

First, what are the actual dynamics of the present market environment, and how will those market conditions change under a variety of policy regimes, such as "cap and trade" or other methods to enact a higher price band for carbon-based energy?

Second, what are some of the cross-cutting factors that will come to bear on how trade flows will unfold in the real world? The main two factors in this category are incipient trade protectionism or retaliation for policies such as carbon-content "border-adjustment" tariffs that are contemplated in Waxman-Markey, but also the status of intellectual property rights for energy technology innovations that American companies may bring to the marketplace over the next several decades.

Above all, policymakers should regard with skepticism claims of net new jobs in the energy sector that depend on subsidies or mandates. Ironically there is an economic term for such policies: unsustainable. Congress should resist schemes in which business profits are more dependent on the political marketplace in Washington rather than the competitive marketplace outside Washington. Most genuine energy efficiency improvements--jet aircraft engines come to mind as an excellent example--are sufficiently market-driven that they need neither subsidies nor mandates.

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Steven F. Hayward is the F. K. Weyerhaeuser Fellow at AEI.