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44–771 PDF 2008

S. HRG. 110–523

INTERNATIONAL CLIMATE CHANGE

NEGOTIATIONS: RESTORING U.S. LEADERSHIP

HEARING

BEFORE THE

COMMITTEE ON FOREIGN RELATIONS

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

NOVEMBER 13, 2007

Printed for the use of the Committee on Foreign Relations

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

COMMITTEE ON FOREIGN RELATIONS

JOSEPH R. BIDEN, JR., Delaware, Chairman

CHRISTOPHER J. DODD, Connecticut

JOHN F. KERRY, Massachusetts

RUSSELL D. FEINGOLD, Wisconsin

BARBARA BOXER, California

BILL NELSON, Florida

BARACK OBAMA, Illinois

ROBERT MENENDEZ, New Jersey

BENJAMIN L. CARDIN, Maryland

ROBERT P. CASEY, JR., Pennsylvania

JIM WEBB, Virginia

RICHARD G. LUGAR, Indiana

CHUCK HAGEL, Nebraska

NORM COLEMAN, Minnesota

BOB CORKER, Tennessee

JOHN E. SUNUNU, New Hampshire

GEORGE V. VOINOVICH, Ohio

LISA MURKOWSKI, Alaska

JIM DEMINT, South Carolina

JOHNNY ISAKSON, Georgia

DAVID VITTER, Louisiana

ANTONY J. BLINKEN, Staff Director

KENNETH A. MYERS, JR., Republican Staff Director

(II)

CONTENTS

Page

Dobriansky, Hon. Paula J., Under Secretary for Democracy and Global

Affairs; accompanied by Dan Reifsnyder, Deputy Assistant Secretary, Bureau of Oceans Environment Science, Department of State, Washington,

DC .......................................................................................................................... 5

Prepared statement .......................................................................................... 7

Kerry, Hon. John F., U.S. Senator from Massachusetts, opening statement ..... 1

Lugar, Hon. Richard G., U.S. Senator from Indiana, opening statement ........... 3

Pershing, Dr. Jonathan, director, Climate, Energy, and Pollution Program,

World Resources Institute, Washington, DC ..................................................... 59

Prepared statement .......................................................................................... 61

Sandor, Dr. Richard, chairman and CEO, Chicago Climate Exchange, Chicago, IL .................................................................................................................. 54

Prepared statement .......................................................................................... 56

Wirth, Hon. Timothy, President, United Nations Foundation, Washington,

DC .......................................................................................................................... 49

Prepared statement .......................................................................................... 51

ADDITIONAL STATEMENT SUBMITTED FOR THE RECORD

Claussen, Hon. Eileen, president, Pew Center on Global Climate Change,

Washington, DC ................................................................................................... 88

(III)

(1)

INTERNATIONAL CLIMATE CHANGE

NEGOTIATIONS: RESTORING U.S. LEADERSHIP

TUESDAY, NOVEMBER 13, 2007

U.S. SENATE, COMMITTEE ON FOREIGN RELATIONS, Washington, DC.

The committee met, pursuant to notice, at 2:34 p.m., in room

SD–419, Dirksen Senate Office Building, Hon. John F. Kerry, presiding.

Present: Senators Kerry, Bill Nelson, Menendez, Casey, Lugar,

Hagel, Corker, and Murkowski.

OPENING STATEMENT OF HON. JOHN F. KERRY, U.S. SENATOR

FROM MASSACHUSETTS

Senator KERRY. This hearing will come to order.

I appreciate, enormously, all of the witnesses for our two panels

being here.

This is a topic which some of us have been working on for many

years—former Senator Wirth is here, and he will testify. He and

I and Al Gore and John Heinz and John Chafee and a group of people were deeply involved in this issue back in the 1980s. In fact,

I think Senator Gore and I had the privilege of hosting the first

hearings on global climate change in the Commerce Committee

back then. And, since then, we, all of us, traveled to Rio for the

so-called Earth Summit and the original United Nations Framework Convention on Climate Change. And, subsequently, I attended a number of the COP Conferences—specifically, Buenos

Aires and The Hague—and went to Kyoto for those negotiations,

which Senator Wirth played such an integral role in with Stu

Eizenstat, the Vice President, and others.

So, this is a path well journeyed, so to speak. And what strikes

me is as remarkable, in a sense, is that, back in 1992 in Rio, a

hundred-and-whatever-it-was, 50-something, 60-something, nations

came together and agreed then that we had to do something about

it, but agreed that it would be voluntary at that time. And, indeed,

there was much to learn about the science, and much to learn

about the modeling.

Since then, we have learned a great deal. This topic has earned

its way into the G–8 discussions, it’s earned its way into the highest level of U.N. discussions. President Bush held a major economies meeting only months ago here. It has seen Al Gore become

the recipient of the Nobel Peace Prize. It has seen an enormous

awareness grow, on a global basis. Nation after nation after nation,

President after President, Prime Minister after Prime Minister, FiVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 CLIMATE sforel1 PsN: sforel1
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nance Minister, Environment Minister, Trade Minister, Economic

Ministers—are all in the same place, having made a decision that

they buy into the latest conclusion of the IPCC, of the United Nations, that anthropogenic—manmade—causes are the primary—not

the exclusive, but the primary cause of the climate impacts that we

see, the warming that we see taking place. And there is no question, scientifically, whatsoever, that that warming is taking place.

I have spent a lot of time talking to and meeting with scientists,

from Jim Hansen, who is one of our premier scientists on this

topic, to Bob Corell, to John Holdren, and others, and to listen to

these people whose lives are dedicated to science, who are, by nature, as scientists, conservative, because a scientist is conservative,

in that they don’t draw conclusions that are speculative, they draw

them based on scientific experiment and input, and they are all increasingly alarmed.

The latest report of the United Nations cuts off at 2005. Since

2005, there has been a significant increase of scientific reporting,

almost 2 years of it. And, indeed, in Valencia this week, they will

be meeting to, sort of, put forward the final summary, if you will,

of those reports that will help us all digest where we’re heading as

we go to the Bali Conference.

I would just quickly comment that each and every one of those

reports shows a greater level of alarm by scientists, alarm that is

expressed not in their conclusions, but in what Mother Earth is

demonstrating to us in what is called ‘‘feedback.’’ All of the feedback from Earth itself is occurring at a greater rate and at a higher

degree than those scientists had predicted. And, therefore, they are

alarmed. Ice is melting faster. The Greenland ice sheet, that was

stable in 1990, is now seeing about 100 billion metric tons of meltoff a year. There are astonishing changes in migration patterns.

The head of the Audubon recently reported to me that their—gardeners—gardeners from, you know, Nebraska and from Kentucky

and from Tennessee and elsewhere—are reporting to them a migration of growth patterns—you know, the crops that grow, the trees,

the bushes, the flowers, all those changes that are taking place—

a 100-mile swath of migration pattern now evidenced in the United

States. Changes in species migration are significant—in South

Carolina, there would be no duck hunting today if they didn’t have

farm ducks. This is one of the great duck-hunting States of our

country. Arkansas, population of ducks apparently dropped from

1.23 million down to about 125,000 or so. You can run the list.

Perhaps the most alarming are two reports. One about the increased impact of tropical deforestation, which adds about a quarter of the world’s CO2. A second report by Russian scientists that

says that, in Siberia—and we know this in Alaska—the pockets of

methane that have been frozen for several hundred thousand

years, that are now melting, are releasing, and have the potential

of releasing, unbelievable amounts of methane into the atmosphere.

Methane, as we know, is 20 to 30 times more potent than CO2. And, finally, the CO2 oceans have been storing CO2 for as long

as they have been there, but most recently in the industrial revolution—they’ve provided a sink, a storage place, for almost a quarter

of the Earth’s CO2. And now we see reports from scientists that—

and I was chairman of the Ocean Subcommittee for a number of

3

years; we used to hear these reports 15 years ago—that there’s evidence that that is already happening in the Antarctic and a few

other places—that the oceans are at full capacity.

So, we’re witnessing dramatic, stunning, unbelievable changes in

the atmosphere around us. And, globally, we’re going to have a

unique opportunity—in a few weeks, at Bali—for the United States

to regain a position of global leadership, for the world to come together and do what we were unable to do with Kyoto.

Kyoto, many of us knew, was a flawed agreement at the time

that it was drafted. I managed the vote on the floor of the Senate.

I was the manager when that 95-to-0 vote took place, which has

always been misinterpreted. It was never a rejection of action to

address global climate change, as some wanted to interpret, never

a rejection of the concept of a multilateral treaty; it was a rejection

of the notion that there can be an adequate solution that isn’t

global, that it could include just industrial countries—given the

rapid rate at which the less-developed world is coming online and

the Annex B countries, particularly, are coming on line. We all

have to be part of the solution, but, as Kyoto recognized and the

framework recognized, at different levels, conceivably in different

ways. That’s the test. That’s what we’re here to think about.

This treaty expires in 2012. Most European nations—Europe as

a whole—is going to be at the 8-percent-below level. Different countries contribute to that in different ways. But we’ve remained outside it. We didn’t ratify it. It isn’t a treaty for us. So, the question

is, here today, to talk openly about where we go at Bali: What will

the position of the United States be? And I will be privileged, together with Senator Boxer on this committee, and who is chair of

the Environment and Public Works Committee, to lead a delegation

that will go to Bali in order to help contribute the Senate’s thinking on these issues. And my hope is that today we can get an outline from both the administration itself, as well as people who have

been deeply, deeply involved in this issue for a long period of time,

about what we ought to be looking for, what we could hope to

achieve there, and how we can advance this cause.

Senator Lugar.

OPENING STATEMENT OF HON. RICHARD G. LUGAR, U.S.

SENATOR FROM INDIANA

Senator LUGAR. Well, thank you very much, Mr. Chairman.

I join you in welcoming Secretary Dobriansky and our distinguished witnesses on the second panel.

For too long, the climate-change debate has pitted implacable

skeptics against so-called ‘‘green idealists,’’ and yet, safeguarding

the environment should not be viewed as a zero-sum game, where

limited resources and attention compete with programs devoted to

more immediate goals. To the contrary, progress on preventing climate change is interlinked with energy security, air quality, technology advancements, rural development, and export opportunities

for American business.

I have urged the Bush administration and my colleagues in Congress to return to an international leadership role on the issue of

climate change. Along with Senator Biden, I have cosponsored Senate Resolution 30, a resolution that advocates United States parVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 CLIMATE sforel1 PsN: sforel1
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ticipation in multilateral forums that attempt to achieve global solutions to the problem of greenhouse gases.

It’s critical that the international dialogue on climate change and

American participation in those discussions move beyond the disputes over the Kyoto protocols. Even those who are skeptical of

prevailing climate-change science should recognize that absenting

themselves from climate-change discussions is counterproductive.

Many nations and businesses across the globe are moving to respond to climate change in innovative ways. How the United States

participates in these efforts will profoundly affect our diplomatic

standing, our economic potential, and our national security.

I want to stress the importance of the Senate’s unique constitutional authority to give its advice and consent to any treaties negotiated by the executive branch. During the 1980s, President

Reagan had the foresight to establish an official Senate Observer

Team to monitor arms-control talks and provide advice during the

negotiation process. In doing so, he laid the groundwork for strong

bipartisan cooperation on these agreements when they came to the

Senate. A similarly farsighted approach is needed with regard to

international negotiations on climate change.

The United States should recognize that steps to address climate

change involve economic opportunities, not just constraints. Thanks

to new technology, we can control many greenhouses gases with

proactive, progrowth solutions. Such technology represents an enormous opportunity for U.S. exports.

We also need to anticipate the continued growth of financial markets for carbon credits. There is a strong possibility that the United

States will join these international markets in some manner before

any new climate—change agreements are concluded. We need to

start discussions on how to ensure that these markets are transparent and credible.

In that regard, I look forward to hearing from our second panel

of distinguished witnesses, including Richard Sandor, chairman

and CEO of the Chicago Climate Exchange. I must admit that I’ve

listed the walnut trees on my Indiana farm on the Chicago Climate

Exchange. I’ve tried to highlight for American farmers and foresters the opportunities of participating in the markets for carbon

sequestration. The innovative approach of these markets is an important tool in our broader climate-change policy.

I thank Senator Kerry very much for chairing this hearing, and

I look forward to the testimony of our witnesses.

Senator KERRY. Senator Lugar, thank you very much for your

thoughtful and important contribution to this dialogue.

And I want to just thank Senator Menendez quickly. This topic

normally is under the jurisdiction of his subcommittee, but he

agreed that this was of sufficient importance to have the full committee hear it, and I want to thank him for his graciousness in understanding that and agreeing to do it this way.

Secretary Dobriansky, we welcome you here. Secretary Dobriansky, as everybody knows, is Secretary for Democracy and Global

Affairs, and we look forward to her participation. And Dan

Reifsnyder is with her, has briefed some of us up here—myself, I

know—and been involved in these discussions and negotiations for

a long time. We welcome you. Thank you.

5

STATEMENT OF HON. PAULA J. DOBRIANSKY, UNDER SECRETARY FOR DEMOCRACY AND GLOBAL AFFAIRS; ACCOMPANIED BY DAN REIFSNYDER, DEPUTY ASSISTANT SECRETARY, BUREAU OF OCEANS ENVIRONMENT SCIENCE,

DEPARTMENT OF STATE, WASHINGTON, DC

Ms. DOBRIANSKY. Mr. Chairman, thank you. I’ve submitted a

longer testimony for the record.

Climate change is a serious problem, and humans are contributing to it. We are at a critical moment. Addressing global challenge requires substantial global reductions in greenhouse gas

emissions, and we are committed to doing our part.

At this December’s climate conference in Bali, we will work with

our partners to launch a new phase in climate diplomacy. We seek

a Bali roadmap that will advance negotiations under the U.N.

Framework Convention on Climate Change and develop a post2012 framework that effectively addresses climate change and

strengthens our energy security. The United States is committed to

concluding this effort by 2009.

I recently attended a meeting of key heads of delegation in

Bogor, Indonesia, to prepare the way for a successful meeting in

Bali. I was very encouraged to hear broad support for a Bali roadmap and for a 2009 end date.

At the Bogor meeting, ministers identified four key elements that

a Bali roadmap will need to address: Mitigation, adaptation to the

impacts of climate change, finance, and technology. We enter the

Bali meeting with an open mind, prepared to consider ideas proposed by our negotiating partners in pursuit of a post-2012 framework that successfully rises to the scale and the scope of this challenge. Our deliberations will be guided by two considerations. A

post-2012 framework must be environmentally effective and economically sustainable.

Emissions are global, and the solution, to be effective, will need

to be global. We want the world’s largest emitters, including the

United States, to be part of a global agreement. An approach in

which only some are acting is not environmentally effective.

A future framework must be flexible and accommodate a diverse

range of national circumstances. A future framework must also be

cost effective and economically sustainable. We must develop and

bring to market clean energy technologies at a cost that countries

can justify to their citizens.

The Major Economies process launched by President Bush in

May 2007 is intended to contribute to progress toward a global

agreement under the U.N. Framework Convention on Climate

Change. Our aim is to find a formula that can work for all major

economies and achieve consensus next year on key elements for a

post-2012 framework.

The September 27–28 Major Economies Meeting here in Washington marked an excellent start. We brought together 17 economies, representing some 80 percent of the world’s economy, energy

use, and greenhouse gas emissions. U.N. representatives were also

at the table with us. The major economies agreed that we would

convene again in the new year informed by our deliberations in

Bali.

6

We believe the Major Economies process will make a positive

contribution to efforts under the U.N. Framework Convention by

focusing on certain key elements of a future global framework. We

can work together to develop a long-term global goal for emissions

reductions. We can identify national plans that will put us on the

path toward this global goal, with each country designing its own

mix of binding, market-based, and voluntary measures. We can

identify technology development and deployment strategies for key

sectors, such as advanced coal technologies and second-generation

biofuels, working with the private sector, civil society, and international partners. We can explore ways to improve our measurement and accounting systems. We can discuss options for financing

and eliminating barriers to trade in key energy goods and services.

And we could address forestry, adaptation, and technology access.

Let me just highlight these last three issues—forestry, adaptation, and technology access—because they will be critical to our discussions in the U.N. Framework Convention on Climate Change

and the major economies.

Avoiding deforestation is a priority for Indonesia and many other

developing countries, and it will be a focus of discussions in Bali.

The United States is an international leader in promoting forest

conservation. For example, under the Tropical Forest Conservation

Act, we have concluded, with 12 countries, Debt for Nature Agreements that are generating some $163 million to help conserve up

to 20 million hectares of important tropical forests around the

world. We are combating illegal logging and the export of illegally

harvested forest products in Africa, Asia, and Latin America

through the President’s Initiative Against Illegal Logging. And

through the Congo Basin Forest Partnership, we have contributed

some $68 million to better manage 80 million hectares, an area the

size of Texas, in the world’s second-largest tropical forest.

Adaptation is an increasing priority, both at home and internationally, and we are promoting effective planning as part of

broader development strategies. The United States is leading such

efforts with Global Earth Observation System of Systems, which

gives communities early warning of natural disasters and improves

decisionmaking for agriculture, coastal development, and other economic sectors that are affected by climate variability and change.

And to accelerate the uptake of clean energy technologies around

the world, President Bush has proposed a new International Clean

Technology Fund. Secretary Paulson is working with international

partners in developing a new approach for spurring investments in

the global energy infrastructure that reduce greenhouse gas emissions.

Another administration initiative that is engaging key economies

in dealing with climate change is the Asia Pacific Partnership on

Clean Development and Climate. This is a public-private partnership to promote economic growth, enhance energy security, and

mitigate greenhouse gas emissions. Under this partnership, countries that account for some 50 percent of the global economy, emissions, and energy use are putting clean technologies into widespread use. Canada just joined China, India, South Korea, Japan,

Australia, and the United States in this partnership. Through the

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ing U.S. firms have been working, for example, with Chinese electricity producers, to move them toward U.S. levels of efficiency,

which reduces emissions and toxic air pollution and fosters new

trade relationships. The APP has brought to India state-of-the-art

U.S. technologies for mining and preparing coal in ways that reduce sulfur dioxide emissions, cut greenhouse gas emissions, and

increase mine safety. And throughout APP countries, we are fostering best practices in the cement, aluminum, and steel sectors

that save money, reduce emissions, and increase international investment. Advanced coal technologies are a particular focus within

and beyond the APP. The United States has invested more than

$2.5 billion to research and develop clean coal, since 2001.

In conclusion, the scale of climate change calls for comprehensive

international action for generations to come. We are engaged,

serious, pragmatic, and committed to continued leadership,

internationally.

Finally, I’d like to introduce Dan Reifsnyder, who is a Deputy Assistant Secretary in the Bureau of Oceans Environment Science at

the State Department. He was deputy negotiator of the U.N.

Framework Convention on Climate Change in 1989, and has participated in almost every Conference of the Parties. He will be with

us in Bali.

Thank you, Mr. Chairman, and I look forward to your questions.

[The prepared statement of Ms. Dobriansky follows:]

PREPARED STATEMENT OF DR. PAULA DOBRIANSKY, UNDER SECRETARY FOR

DEMOCRACY AND GLOBAL AFFAIRS, U.S. DEPARTMENT OF STATE, WASHINGTON, DC

Mr. Chairman and members of the committee, thank you for the opportunity to

appear before you today.

When President Bush hosted the Major Economies Meeting on Energy Security

and Climate Change in September 2007, he stressed that climate change is a real

problem, and humans are contributing to it. He also underscored that the United

States takes climate change very seriously, for we are both a major economy and

a major emitter.

Addressing this global challenge requires substantial global reductions in greenhouse gas emissions. Meeting this long-term challenge requires a long-term commitment by the international community. And we are committed to doing our part.

As a party to the United Nations Framework Convention on Climate Change

(UNFCCC), the United States shares with the other 190 Parties to the Convention

its ultimate objective of stabilizing greenhouse gas concentrations in the atmosphere

at a level that would prevent dangerous anthropogenic interference with the climate

system in a timeframe that allows ecosystems to adapt, ensures that food production

is not threatened, and enables economic development to proceed.

We look forward to the U.N. Climate Conference in Bali, Indonesia, in December,

where we will work to advance negotiations. The Bali conference will mark the beginning of an important process toward a new global framework. In developing a

new post-2012 framework on climate change, we seek a global approach that is environmentally effective and economically sustainable. This framework should involve

a real effort and commitment of major economies in accordance with their national

circumstances.

There is broad international consensus that climate change is best addressed as

part of an integrated agenda that promotes economic growth, advances energy security, reduces pollution, and eradicates poverty—as well as mitigates greenhouse gas

emissions.

The President has put forth a comprehensive climate-change policy. Our robust,

flexible approach involves the promotion of international cooperation, near-term

policies and measures to slow the growth in greenhouse gas emissions, the advancement of climate change science, and vigorous efforts to accelerate low-carbon and

no-carbon technology development and deployment. As Secretary Rice has said, we

will need a technological revolution.

8

1See http://www.asiapacificpartnership.org/ and http://www.state.gov/g/oes/climate/app/.

The President has requested, and Congress has provided, substantial funding for

climate-change science and observations, technology, international assistance, and

incentive programs—approximately $37 billion since 2001. The President’s fiscal

year 2008 budget requests nearly $7.4 billion for climate-related activities.

President Bush has consistently highlighted the importance of international cooperation in developing a global response to the complex and long-term challenge

of climate change. On May 31, he called upon the world’s major economies, from

both the developed and developing world, to work together toward a global goal on

long-term greenhouse gas reductions. This initiative recognizes that the major

emerging economies must join together in a common effort, and that economic

growth, energy security, and climate change must be addressed in an integrated and

sustainable way.

The first Major Economies Meeting (MEM) on September 27–28, 2007, in Washington, DC, was attended by the personal representatives of leaders from 17 major

economies and the United Nations. In his speech during the MEM, President Bush

emphasized, among other things, that these countries would work within the U.N.

process to strengthen programs addressing energy efficiency and to advance the

global transfer and adoption of clean energy technologies.

Progress toward a global emissions reduction goal will be underpinned by midterm national targets and programs. In addition, participants will work on sectoral

approaches to low carbon power generation, transportation, and land use and steps

to disseminate technologies by creating an international clean energy fund and

removing trade barriers. The President also proposed strengthening climate-related

efforts that benefit all countries, including promoting adaptation to climate change,

reversing deforestation, and promoting clean energy technology.

By the end of 2008, the Major Economies process will generate a detailed contribution to a post-2012 framework. Our aim is for the Major Economies process to

advance negotiations toward a global agreement under the UNFCCC by 2009. Leaders from all G–8 and APEC countries have embraced the Major Economies process

as a constructive input to the global effort.

Under President Bush’s leadership, the United States is successfully carrying out

a number of international collaborations—including the Asia-Pacific Partnership on

Clean Development and Climate (APP), the Carbon Sequestration Leadership

Forum (CSLF), the Group on Earth Observations (GEO), the Generation IV International Forum (GIF), the Global Nuclear Energy Partnership (GNEP), the International Partnership for a Hydrogen Economy (IPHE), the Methane to Markets

Partnership (M2M)—and our 15 bilateral and regional partnerships which involve

79 nations and the European Union.

Our results at home compare well with those of other industrialized nations. For

the years 2001–2005, inclusive, the U.S. population grew by 5 percent and our GDP

grew by 12 percent, while greenhouse gas emissions increased by 1.6 percent. Latest

estimates show that from 2005–2006, our economy grew 2.9 percent, while energyrelated carbon dioxide emissions decreased 1.3 percent.

The Annex to this statement details selected U.S. programs addressing climate

change.

As President Bush indicated at the Major Economies Meeting, climate change is

one of the great challenges of our time. In taking on this challenge, the United

States is engaged, serious, and pragmatic. Leading international efforts to address

climate change will continue to be one of our top priorities.

ANNEX

SELECTED INTERNATIONAL AND DOMESTIC COMPONENTS OF THE U.S. APPROACH TO

GLOBAL CLIMATE CHANGE

A. Promoting international cooperation

Asia-Pacific Partnership on Clean Development and Climate (APP) 1: The AsiaPacific Partnership for Clean Development and Climate (APP), launched in January

2006 in Sydney, Australia, by ministers from Australia, China, India, Japan, Republic of Korea, and the United States, is one of our most consequential multilateral

initiatives. It is a multi-stakeholder partnership working to generate practical and

innovative projects promoting clean development and the mitigation of greenhouse

gases. Through engaging private industry as well as government officials, the APP

is using public-private partnerships to build local capacity, improve efficiency and

reduce greenhouse gas emissions, create new investment opportunities, and remove

9

2See http://www.asiapacificpartnership.org/2ndMinisterial/New%20Delhi%20Communique%20

strawman%20%2014%20Oct%2007FINAL.pdf. 3See http://www.asiapacificpartnership.org/2ndMinisterial/Flagship%20brochure%20FINAL.

pdf. 4See http://www.whitehouse.gov/news/releases/2007/05/20070531-9.html.

5See http://www.cslforum.org/ and http://www.fe.doe.gov/programs/sequestration/cslf/. CSLF

members are the United States, Australia, Brazil, Canada, China, Colombia, Denmark, European Commission (EC), France, Germany, Greece, India, Italy, Japan, Mexico, Netherlands,

Norway, Republic of Korea, Russian Federation, Saudi Arabia, South Africa, and the United

Kingdom.

barriers to the introduction of clean energy technologies in the Asia-Pacific region.

What makes the approach unique is that APP activities are identified and supported

using an innovative ‘‘bottom up’’ approach. Together, APP partner countries account

for about half of the world’s population, economic output, energy use, and greenhouse gas emissions.

The APP has created eight task forces to achieve the Partnership’s goals: (1)

Cleaner fossil energy; (2) renewable energy and distributed generation; (3) power

generation and transmission; (4) steel; (5) aluminum; (6) cement; (7) coal mining;

and (8) buildings and appliances. The Task Forces, with representatives from both

the public and private sectors, have each prepared an Action Plan.

At the New Delhi ministerial meeting on October 15, 2007, the original six APP

Partners warmly welcomed Canada as the seventh member of the Partnership. Ministers also released a communique 2 which summarizes the accomplishments of the

Partnership since its inaugural Ministerial meeting in Sydney. Ministers also recognized the eight Task Force Action Plans and their accompanying 110 projects.

Agreement was reached on a Flagship portfolio of 18 projects and activities that best

exemplify the achievements of the Partnership.3 In addition, the Partners endorsed

the Asia-Pacific Energy Technology Cooperation Centre. The meeting concluded with

an event with industry in which representatives from the private sector discussed

opportunities for collaboration with Ministers and high level representatives

present.

The President’s fiscal year 2008 budget request includes $52 million to support

APP.

Major Economies Meeting: On May 31, 2007, the President called upon the world’s

major economies, both from the developed and developing world, to work together

to develop a global goal on long-term greenhouse gas reductions.4 This international

initiative recognizes that the major emerging economies must develop and participate in an effective global strategy, and that economic growth, energy security, and

climate change must be addressed in an integrated way. The United States in September hosted the first of a series of meetings with other countries—including rapidly growing economies like India and China—to establish a new framework for the

post-2012 world. Progress towards a global emissions reduction goal will be underpinned by midterm national targets and programs that are tailored towards each

participant’s current and future energy needs, and that will be subject to a robust

review process. In addition, participants will work on sectoral approaches to energy

intensive industries and concrete steps to promote the development and deployment

of clean energy technologies. The President believes that by encouraging and sharing cutting-edge technologies, the major economies will build the capacity to meet

realistic reduction goals.

As part of his international initiative, the President also proposed strengthening

climate-related initiatives at the U.N. that benefit all countries, including adaptation to climate change, deforestation and technology. Finally, the President’s initiative addresses practical action necessary to advance the global development and deployment of clean energy technologies. This could include low-cost capital sources

to finance investment in clean energy, mechanisms to share government-developed

technology at low cost, or in some cases, no cost at all, and elimination of market

barriers.

Carbon Sequestration Leadership Forum (CSLF) 5: CSLF is a U.S.-launched initiative that was established formally at a ministerial meeting held in Washington, DC,

in June 2001. The Forum is focused on the development of improved cost-effective

technologies for the separation and capture of carbon dioxide (CO2) for its transport

and long-term safe storage. Its purpose is to make these technologies broadly available internationally, to identify and address wider issues relating to carbon capture

and storage. CSLF, which includes 21 countries and the European Commission

(EC), has endorsed 19 international research projects, 13 of which involve the

United States, and approved a technology roadmap to provide future directions for

international cooperation.

10

6GEO has 71 countries and the EC as Members, as well as 46 Participating Organizations

(see http://earthobservations.org). 7See http://usgeo.gov/docs/EOCStrategicPlan.pdf. 8See http://www.ne.doe.gov/genIV/neGenIV2.html. GIF member countries include the United

States, Argentina, Brazil, Canada, France, Japan, Republic of Korea, South Africa, Switzerland,

and the United Kingdom, with the OECD-Nuclear Energy Agency and the International Atomic

Energy Agency as permanent observers. In July 2006, the GIF voted unanimously to extend offers of membership to China and Russia. These two countries officially signed the GIF Charter

in November 2006 at the Policy Group meeting in Paris and have one year to sign the Framework to become full members. 9See http://www.gnep.energy.gov/.

10See http://www.energy.gov/media/GNEPJointStatement.pdf. 11See http://www.gnep.energy.gov/gnepPRs/gnepPR091607a.html. 12http://www.gnep.energy.gov/pdfs/gnepSOP091607.pdf. 13See http://www.iphe.net/. IPHE Partner members are the United States, Australia, Brazil,

Canada, China, EC, France, Germany, Iceland, India, Italy, Japan, New Zealand, Norway, Republic of Korea, Russian Federation, and the United Kingdom.

Group on Earth Observations (GEO) 6: Of particular importance is the need for a

broad global observation system to support measurements of climate and other environmental variables. On July 31, 2003, the United States hosted 33 nations including many developing nations at the inaugural Earth Observation Summit, out of

which came a commitment to establish GEO and an intergovernmental, comprehensive, coordinated, and sustained Global Earth Observation System of Systems

(GEOSS). While the use and benefits of these observations are extensive, the climate applications of the data collected by the system include the use of the data

to create better climate models, to improve our knowledge of the behavior of CO2

and aerosols in the atmosphere, and to develop strategies for carbon sequestration.

The United States was instrumental in drafting a ten-year implementation plan for

a GEOSS, which was approved by nearly 60 nations and the EC at the 3rd Earth

Observation Summit in Brussels in February 2005. The United States also released

its contribution through the Strategic Plan for the U.S. Integrated Earth Observing

System in April 2005 to help coordinate a wide range of environmental monitoring

platforms, resources, and networks.7 The 4th GEO Plenary session and Ministerial

Summit will be held in Cape Town, South Africa, November 28–30, 2007.

Generation IV International Forum (GIF) 8: GIF, formally established in July

2001, is a multilateral collaboration comprised of 10 countries and EURATOM (the

European Atomic Energy Community) to fulfill the objective of the Generation IV

Nuclear Energy Systems Initiative. GIF’s goal is to develop the fourth generation

of advanced, economical, safe, and proliferation-resistant nuclear systems that can

be adopted commercially no later than 2030. Six technologies have been selected as

the most promising candidates for future designs, some of which could be commercially ready in the 2020 to 2030 timeframe. GIF countries are jointly preparing a

collaborative research program to develop and demonstrate the projects.

Global Nuclear Energy Partnership (GNEP) 9: GNEP is a groundbreaking new

effort that seeks to develop a worldwide consensus on enabling expanded use of economical, carbon-free nuclear energy to meet growing electricity demand. It has two

major goals: (1) To expand carbon-free nuclear energy to meet growing electricity

demand worldwide; and (2) to promote nonproliferation objectives through the leasing of nuclear fuel to countries which agree to forgo enrichment and reprocessing.

A more fully closed fuel cycle model envisioned by this partnership requires development and deployment of technologies that enable recycling and consumption of longlived radioactive waste. The GNEP initiative proposes international partnerships

and significant cost-sharing to achieve these goals.

On May 21, 2007, U.S. Department of Energy (DOE) and senior energy officials

from China, France, Japan, and Russia issued a joint statement in support of

GNEP.10 At the second GNEP Ministerial held September 16, 2007, in Vienna, Austria, U.S. DOE Secretary Bodman and senior international officials from 16 nations

agreed to increase international nuclear energy cooperation through the GNEP.11

China, France, Japan, Russia, and the United States—the original GNEP partners—as well as Australia, Bulgaria, Ghana, Hungary, Jordan, Kazakhstan, Lithuania, Poland, Romania, Slovenia, and Ukraine signed a ‘‘Statement of Principles,’’

which addresses the prospects of expanding the peaceful uses of nuclear energy, including enhanced safeguards, international fuel service frameworks, and advanced

technologies.12

International Partnership for the Hydrogen Economy (IPHE) 13: Recognizing the

common interest in hydrogen research that many countries share, the United States

called for an international hydrogen partnership in April 2003, and in November

2003, representatives from 16 governments gathered in Washington to launch

IPHE. The Partnership’s 16 countries and the EC are working together to advance

11

14See http://www.epa.gov/methanetomarkets/ and http://www.methanetomarkets.org/. Methane to Markets member governments include the United States, Argentina, Australia, Brazil,

Canada, China, Colombia, Ecuador, Germany, India, Italy, Japan, Mexico, Nigeria, Poland, Republic of Korea, Russian Federation, Ukraine, the United Kingdom, and Vietnam. The EC became the 21st Partner in September 2007. 15http://yosemite.epa.gov/opa/admpress.nsf/eebfaebc1afd883d85257355005afd19/

9574895bfc44bcc852573850047d278!OpenDocument. 16 Bilateral partners include Australia, Brazil, Canada, China, Central America (Belize, Costa

Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama), European Union, Germany,

India, Italy, Japan, Mexico, New Zealand, Republic of Korea, Russian Federation, and South

Africa. 17See http://www.sdp.gov/sdp/initiative/cei/28304.htm. 18See http://www.sdp.gov/sdp/initiative/cei/44949.htm.

research, development, and deployment of hydrogen and fuel-cell technologies, and

develop common codes and standards for hydrogen use. The IPHE Steering Committee has officially recognized 23 collaborative projects to advance the Partnership’s goals, and through the IPHE, the U.S. has assisted Brazil and China in developing hydrogen roadmaps.

Methane to Markets Partnership 14: In November 2004, the United States and representatives from 13 countries launched the Methane to Markets Partnership, which

is led on the U.S. side by EPA, with active participation from the U.S. Department

of Agriculture (USDA), U.S. Agency for International Development (USAID), U.S.

Trade and Development Agency (TDA), and the State Department. This Partnership, now with 20 member countries and the EC and over 640 public and private

sector organizations, focuses on advancing cost-effective, near-term methane recovery and use as a clean energy source to enhance economic growth, promote energy

security, improve the environment, and reduce greenhouse gases. The Partnership

is targeting four major methane sources: Landfills, underground coal mines, natural

gas and oil systems, and agriculture (animal waste management).

The Methane to Markets Partnership Expo was held in Beijing, China, from October 30 to November 1, 2007, to celebrate the third anniversary of the Methane to

Markets Partnership.15 Over 700 participants from 34 countries—representing government, private sector, and nongovernmental organizations—shared expertise and

developed strategies to advance cost-effective, near-term projects to reduce methane

emissions. The Expo’s ‘‘International Methane Capture Marketplace’’ was the first

international forum devoted entirely to methane project opportunities and technologies, and showcased 91 potential projects in multiple sectors.

The Partnership has the potential to deliver by 2015 annual reductions in methane emissions of up to 50 MMTCE or recovery of 500 billion cubic feet of natural

gas—equivalent to removing 33 million cars from the roadways for one year, planting 55 million acres of trees, or eliminating emissions from fifty 500 megawatt coalfired power plants; or providing enough energy to heat approximately 7.2 million

households for one year. These measurable results, if achieved, could lead to stabilized or even declining levels of global atmospheric concentrations of methane.

Bilateral and Regional Partnerships 16: Since 2001, the United States has established 15 climate partnerships with key countries and regional organizations that,

together with the United States, account for almost 80 percent of global greenhouse

gas emissions. These partnerships encompass over 400 individual activities, and

successful joint projects have been initiated in areas such as climate change research and science, climate observation systems, clean and advanced energy technologies, carbon capture, storage and sequestration, and policy approaches to reducing greenhouse gas emissions.

Clean Energy Initiative 17: At the 2002 World Summit on Sustainable Development (WSSD) held in Johannesburg, South Africa, the United States launched a

‘‘Clean Energy Initiative,’’ whose mission is to bring together governments, international organizations, industry and civil society in partnerships to alleviate poverty

and spur economic growth in the developing world by modernizing energy services.

The Initiative consists of four market-oriented, performance-based partnerships:

• Global Village Energy Partnership (GVEP) 18 is an international partnership

with over 700 public and private sector partners including the World Bank, the

U.N. Development Programme, and leading energy companies. The U.S. implementation of GVEP, led by the USAID, is a 10-year initiative that seeks to increase access to modern energy services for those in developing countries in a

manner that enhances economic and social development and reduces poverty.

Through U.S. Government support for GVEP and other energy access programs,

12.9 million people have received increased access to modern energy services

since the 2002 Johannesburg Summit.

12

19See http://www.sdp.gov/sdp/initiative/cei/29808.htm and http://www.pciaonline.org/. 20See http://www.unep.org/pcfv/. 21See http://www. sdp.gov/sdp/initiative/c17707.htm. 22 ITER member countries include the United States, China, European Union, Japan, Russian

Federation, and the Republic of Korea. (See https://www.iter.org/ and https://www.usiter.org/

index.shtml. 23See http://www.whitehouse.gov/news/releases/2003/01/20030130-18.html. 24See http://www.globalbioenergy.org/. GBEP partners are Canada, China, France, Germany,

Italy, Japan, Mexico, Russian Federation, the United Kingdom, and the United States of America, the International Energy Agency, U.N. Food and Agriculture Organization (FAO), U.N. Conference on Trade and Development, U.N. Department of Economic and Social Affairs, U.N.

Development Programme, U.N. Environment Programme, U.N. Industrial Development Organization, U.N. Foundation, World Council for Renewable Energy, and the European Biomass Industry Association. The FAO is hosting the GBEP Secretariat in Rome with the support of the

Government of Italy.

• Partnership for Clean Indoor Air (PCIA) 19: Poor air quality caused by indoor

and outdoor air pollution is related to approximately 1.6 million deaths annually and more than 3 billion people in the developing world face an increased

environmental health risk due to breathing elevated levels of indoor smoke from

home cooking and heating practices. The PCIA currently has over 140 public

and private partners working together to increase the use of affordable, reliable,

clean, efficient, and safe home cooking and heating practices to reduce the burden of disease. The partners are contributing their resources and expertise to

improve health, livelihood and quality of life by reducing exposure to indoor air

pollution, primarily among women and children, from household energy use.

Ten U.S.-funded PCIA pilot projects have already resulted in: (1) More than

800,000 households educated about the health impacts of indoor air pollution

from household energy use; (2) over 237,000 people with reduced exposure to

indoor air pollution from cooking and heating; and (3) in the 58,000 homes in

which improved cooking and heating have been adopted, over 440,000 people

demonstrated an increased knowledge of indoor air pollution and mitigation

solutions.

• Partnership for Clean Fuels and Vehicles (PCFV) 20: The PCFV is working with

developing countries to reduce vehicular air pollution by promoting the elimination of lead from gasoline, reducing sulfur from fuels, and introducing clean

technologies into new and existing vehicle fleets. The U.S. Environmental Protection Agency (EPA) is a founding member and leading supporter of the PCFV,

which has over 80 members from governments, industry, and civil society, representing more than 30 countries. Since the 2002 World Summit on Sustainable

Development, PCFV has assisted in the elimination of lead in gasoline in the

49 countries of sub-Saharan Africa, providing health benefits for over 733 million people. The Partnership’s future targets include the global elimination of

lead in gasoline by 2008, and the global reduction of sulfur in fuel to 50 parts

per million or below globally.

• Efficient Energy for Sustainable Development (EESD) 21: The EESD initiative

aims to improve the productivity and efficiency of energy systems in developing

countries, while reducing waste and pollution, saving money and improving reliability through energy-efficient and clean processes and technologies and production modernization. With more than 80 organizations committed to furthering the objectives of the EESD, this partnership has focused on project

development, public leadership by example, building local commercial infrastructure for self-sustaining financing and developing sustainable integrated energy community systems.

ITER 22: In January 2003, President Bush announced that the United States was

joining the negotiations for the construction and operation of the international fusion experiment known as ITER.23 On November 21, 2006, the representatives of

China, EU, the Republic of India, Japan, the Republic of Korea, the Russian Federation and the United States of America signed the ITER Joint Implementation Agreement, which entered into force on October 27, 2007. If successful, this multi-billiondollar research project, which is to be sited in Cadarache, France, and completed

in 2016, would advance progress toward producing clean, renewable, commercially

available fusion energy by the middle of the century.

Global Bioenergy Partnership (GBEP) 24: The 2005 G–8 Summit at Gleneagles,

Scotland, helped launch the GBEP, an Italian initiative to support wider, cost-effective biomass and biofuels deployment, particularly in developing countries where

biomass use is prevalent. The United States is actively supporting GBEP and is

leading work on developing common methodologies for measuring the GHG benefits

13

25See http://www.reeep.org/. 26See http://www.ren2l.net/. 27See http://www.state.gov/r/pa/prs/ps/2007/may/84115.htm. 28See http://www.ipcc.ch/.

of biofuels. GBEP partners include ten governments and nine international organizations and the United Nations Foundation.

International Biofuels Forum (IBF): The IBF is a joint project of Brazil, China,

India, the United States and the EC, was launched on March 2, 2007, to develop

strategies to promote the sustained use and production of biofuels around the globe.

The forum has created a mechanism to structure the dialogue among some of the

biggest producers and consumers of biofuels to address energy security and global

warming issues and to use biofuels as an instrument for development. IBF is working closely with GBEP to create common standards and codes for bioenergy products, which would help facilitate world trade.

Renewable Energy and Energy Efficiency Partnership (REEEP) 25: REEEP seeks

to accelerate and expand the global market for renewable energy and energy-efficiency technologies. To date, REEEP has funded over 100 projects in 44 countries

that address market barriers to clean energy in the developing world and economies

in transition. These projects provide new business models, policy recommendations,

risk mitigation instruments, handbooks, and databases for advancing renewable energy and energy efficiency, in addition to delivering measurable greenhouse gas reductions. To further REEEP’s agenda, the U.S. has been especially active in developing best practices for financing energy efficiency and renewable energy projects

and an open network of affiliated organizations for distributed peer production of

models and tools for energy smart community planning and development.

Renewable Energy Policy Network for the 21st century (REN21) 26: REN21 is a

global policy network, which connects governments, international institutions and

organizations, partnerships and initiatives, and other stakeholders on the political

level with those ‘‘on the ground,’’ and is aimed at providing a forum for international

leadership on renewable energy. Its goal is to allow the rapid expansion of renewable energies in developing and industrial countries by bolstering policy development and decisionmaking on subnational, national, and international levels. To

date, REN21 has produced several notable renewable energy analyses, the most

noteworthy being its comprehensive ‘‘REN21 Global Status Report.’’ The United

States serves as one of the 13 national government entities on REN21’s Steering

Committee.

Washington International Renewable Energy Conference 2008 (WIREC 2008): On

May 1, 2007, Secretary of State Condoleezza Rice announced that the State Department will host the WIREC 2008 in March 2008.27 WIREC 2008, which will held in

Washington, DC, March 4–6, 2008, will be the third global ministerial level event

on renewable energy and will be a key opportunity for government, industry and

civil society leaders to advance the integration of renewable energy and advance

shared goals for climate, sustainable development and energy security. The event

builds upon outcomes from the 2002 World Summit on Sustainable Development

and the Bonn (2004) and Beijing (2005) Renewable Energy Conferences. The timing

for WIREC 2008 is optimal, because many countries have established leadership positions in renewable energy technology development, manufacturing and market

adoption through innovative policies.

WIREC 2008 will focus on rural development, finance, commercialization/market

adoption, research and development, as well as other cross-cutting issues. It includes a ministerial level meeting for governments (federal and local), the private

sector and civil society, and a co-located, but separately managed trade show and

exhibition. WIREC 2008 will also provide an opportunity to advance renewable energy globally by bringing world leaders together to raise issues, exchange information, share experiences and best practices, and provide a global platform to highlight

and promote strategies for significant development and rapid scaleup of renewable

energy systems worldwide, including second generation biofuels.

Other examples of our engagement across the globe in advancing climate change

science and addressing greenhouse gas emissions include our participation in the

Intergovernmental Panel on Climate Change (IPCC), the Global Environment Facility (GEF) and activities under the Tropical Forest Conservation Act.

Intergovernmental Panel on Climate Change (IPCC) 28: The IPCC was established

by the World Meteorological Organization (WMO) and the United Nations Environment Programme (UNEP) in 1988 to assess scientific, technical and socio-economic

information relevant for the understanding of climate change, its potential impacts

14

29 U.S. Department of Treasury, Treasury International Programs, Justification for Appropriations, FY 2008 Budget Request, pp. 43–44, and 65 (see http://www.treas.gov/offices/internationalaffairs/intl/fy2008/fy2008-budget.pdf). 30 U.S. Department of Treasury, Treasury International Programs, Justification for Appropriations, FY 2008 Budget Request, pp. 1, 23, 27, and 68 (see http://www.treas.gov/offices/international-affairs/intl/fy2008/fy2008-budget.pdf). TFCA agreements have been concluded with

Bangladesh, Belize, Botswana, Colombia, Costa Rica, El Salvador, Jamaica, Panama (two agreements), Paraguay, Peru and the Philippines. On July 3, 2007, in response to the Indonesian

Government’s request, the United States Government announced that Indonesia is also eligible

to participate. 31See http://www.climatevision.gov/.

and options for adaptation and mitigation. It is open to all members of the United

Nations and of WMO.

We are extremely pleased that the IPCC shares this year’s Nobel Peace Prize. The

United States has played an active role in the IPCC since its establishment and has

provided more of its funding than any other nation. Dr. Susan Solomon, a senior

scientist at the National Oceanic and Atmospheric Administration’s Earth System

Research Laboratory in Boulder, Colorado, serves as co-chair of the IPCC Working

Group I, which assesses the scientific basis of climate change. The United States

hosts the Working Group’s Technical Support Unit and hundreds of U.S. scientists

have participated in the preparation of the IPCC’s Fourth Assessment Report, which

is due to be completed next week in Valencia, Spain.

Global Environment Facility (GEF) 29: U.S. participation in the GEF, the financial

mechanism under the UNFCCC, is another example of our engagement across the

globe of addressing the threat of poverty and greenhouse gas emissions. Launched

in 1991, the GEF provides funding (largely grants) for projects that provide global

environmental benefits and support sustainable development. Since its inception, it

has approved over $6.8 billion in grants, leveraging over $20 billion in pledged cofinancing to support more than 1,600 projects in over 160 countries, with about 33

percent of cumulative allocations supporting the reduction or avoidance of greenhouse gas emissions. For fiscal year 2008, the administration is requesting $80.0

million for the second of four payments toward a total U.S. contribution of $320 million pledged during the fourth replenishment (GEF–4) and $26.8 million to clear a

portion of outstanding U.S. arrears.

Tropical Forest Conservation Act (TFCA) 30: Many of our international activities

also help to promote the biological sequestration of CO2, an important tool for addressing climate change that can have benefits both for conservation and climate

change. The TFCA authorizes debt relief for low- and middle-income countries with

tropical forests to support conservation of endangered forests. Since 2000, the

United States has concluded 13 TFCA agreements with 12 countries that will generate more than $163 million to protect tropical forests during the next 10 to 25

years. Under the TFCA debt swap mechanism, a unique public/private partnership

has evolved in which environmental NGOs such as The Nature Conservancy, World

Wildlife Fund, and Conservation International have provided additional funds totaling approximately $12.1 million for debt reduction, increasing the size of individual

agreements, and contributing additional expertise in the management of resulting

programs. Seven of the 12 TFCA agreements so far provide for debt swaps. In fiscal

year 2008, the administration has requested a total of $20 million for TFCA.

B. Near-Term Polices and Measures to Slow the Growth of Greenhouse Gas Emissions

In February 2002, President Bush set an ambitious national goal to reduce the

greenhouse gas intensity—that is, emissions per unit of economic output—of the

U.S. economy by 18 percent by 2012, a goal we are on target to meet. When announced, this commitment was estimated to achieve a reduction of 100 million additional metric tons carbon equivalent (MMTCE) emissions in 2012, with more than

500 MMTCE emissions in cumulative savings over the decade. To meet the President’s goal, the administration is now implementing numerous programs—including

voluntary partnerships, consumer information campaigns, incentives, and mandatory regulation—including the following:

Climate VISION (Voluntary Innovative Sector Initiatives: Opportunities Now) 31:

In February 2003, President Bush announced that 12 major industrial sectors and

The Business Roundtable had committed to work with four of his Cabinet agencies

(the Departments of Energy, Transportation, and Agriculture and the Environmental Protection Agency) to contribute to meeting his 18-percent intensity reduction goal by improving the energy efficiency or greenhouse gas emissions intensity

of its sector. Today, business and trade associations representing 14 energy-intensive industry sectors that account for approximately 40 to 45 percent of total U.S.

15

32See http://www.epa.gov/climateleaders/. 33See http://www.epa.gov/otaq/smartway/index.htm. 34See http://www.energystar.gov/. 35See http://www.epa.gov/greenpower/.

greenhouse gas emissions have issued letters of intent to meet specific targets. Participating sectors include: Aluminum, automotive manufacturers, cement, chemical

manufacturing, electric power, forest products, iron and steel, lime, magnesium,

minerals, mining, oil and gas, railroads, and semiconductors. Climate VISION partners have issued letters of intent to meet specific targets that in 2012 alone could

avoid an estimated 90 million metric tons of carbon dioxide equivalent.

Climate Leaders 32: Announced in February 2002, Climate Leaders is an EPA

partnership encouraging individual companies to develop long-term, comprehensive

climate change strategies. Under this program, partners set corporate-wide greenhouse gas reduction goals and inventory their emissions to measure progress. Climate Leaders has grown to include 147 partners whose revenues add up to almost

10 percent of the United States gross domestic product and whose emissions represent more than 8 percent of total U.S. greenhouse gas emissions. EPA estimates

that GHG reductions by Climate Leaders Partners will prevent more than 11

MMCTE per year—equivalent to the annual emissions of more than 7 million cars.

SmartWay Transport Partnership 33: Launched in February 2004, the SmartWay

Transport Partnership is a public-private partnership that aims to reduce greenhouse gas emissions, fuel consumption, and criteria pollutants from ground freight

transportation operations. Over 600 companies, including some of the nation’s largest shippers and carriers, have joined SmartWay. The efforts of these companies,

which include the use of fuel efficient technologies and anti-idling devices, improved

aerodynamics, and the next generation single-wide tires, will reduce greenhouse gas

emissions and fuel consumption. Additionally, there are over 80 diesel truck and

locomotive engine idling reduction projects being implemented around the country.

SmartWay is broadening its reach to include other modes of freight transportation

throughout the global supply chain, such as ocean shipping and air cargo. EPA estimates that by 2012, the companies that participate in the Partnership will cut CO2

emissions by up to 66 million metric tons (18.0 MMTCE) per year, and nitrogen

oxide emissions by up to 200,000 tons per year. It will save about $9 billion in fuel

costs and as much as 150 million barrels of oil per year—enough oil to heat 17 million houses for one year.

ENERGY STAR 34: Recognizing the importance of energy efficiency, EPA established the voluntary ENERGY STAR® program in 1992, and has partnered with

DOE since 1996 to accelerate the adoption cost-effective, energy-efficient products

and practices in the residential, commercial, and industrial sectors. Since the inception of the program, more than 2 billion ENERGY STAR qualified products across

more than 50 categories have been purchased, more than 30,000 commercial buildings have been benchmarked for energy usage, close to 725,000 new homes have

been constructed to ENERGY STAR specifications, more than 28,000 existing homes

have been retrofitted, and hundreds of industrial partners have lowered their energy use using ENERGY STAR tools.

EPA has recently revised the specifications for many product categories including

computers, computer monitors, and imaging equipment; has added new products to

the ENERGY STAR family including commercial icemakers, commercial dishwashers, external power supplies and battery chargers; and is in the process of updating the requirements for televisions. In addition, DOE recently updated the qualification requirements for ENERGY STAR residential clothes washers, dishwashers

and refrigerators. EPA has also extended its standardized measurement system for

energy use in buildings and facilities to include about 75 percent of the commercial

square footage in the United States and about 6 industrial sectors. In 2006 alone,

Americans, with the help of ENERGY STAR, prevented 37 million metric tons of

greenhouse gas emissions roughly equivalent to the annual emissions of 25 million

vehicles and saved about $14 billion on their utility bills.

Green Power Partnership 35: Introduced in 2001 as part of the President’s National

Energy Policy, the EPA’s Green Power Partnership is designed to increase the adoption of clean energy supply technologies across the United States. The Partnership

assists organizations in demonstrating environmental leadership by choosing electricity products generated from renewable energy sources. It now has more than 750

partners committed to purchasing more than 10 billion kilowatt-hours of green

power by the end of 2007, which would be enough electricity to power more than

600,000 average American homes annually. Achieving this goal will avoid the equivalent CO2 emissions associated with more than 1.1 million passenger cars each year.

16

36See http://www.epa.gov/chp/. 37See www.epa.gov/cleanenergy/stateandlocal/. 38See http://www. epa.gov/methane/voluntary.html. 39See http://www.epa.gov/highgwp/.

Combined Heat and Power (CHP) Partnership 36: Launched in 2001, EPA’s Combined Heat and Power Partnership provides technical assistance to promote CHP

projects along each step of the project development cycle in order to make investments in CHP more attractive. EPA also educates industry about the benefits of

CHP, provides networking opportunities, and works with state governments to design air emissions standards and interconnection requirements that recognize the

benefits of clean CHP. The Partnership now includes over 200 partners and through

2006 had assisted more than 250 projects representing 3,568 megawatts of new

CHP capacity in a variety of sectors, including university campuses, heavy industry,

and the hospitality industry, among others. On an annual basis, these projects will

prevent the emissions of approximately 2.67 million metric tons CO2 equivalent.

This is equivalent to the annual emissions of more than 1.7 million cars, or the sequestration from more than 2.6 million acres of forest.

EPA State Clean Energy-Environment Partnership 37: In 2005, EPA launched the

State Clean Energy-Environment Partnership Program, designed to help states

adopt a variety of clean energy policies and deploy clean energy programs, including

both energy efficiency and renewable energy initiatives. Through the State Clean

Energy-Environment Partnership program, states use comprehensive guidance on

successful, cost-effective policies and initiatives; measurement and evaluation tools

for co-benefits of the policies; and peer exchange opportunities to explore and advance new policies. The partnership is working with 15 states which represent

about 50 percent of the U.S. population and energy consumption and more than half

of all U.S. greenhouse gas emissions.

EPA Domestic Methane Programs 38: The EPA works in collaboration with the private sector and state and local governments to implement several voluntary programs that promote profitable opportunities for reducing emissions of methane, a

potent greenhouse gas and clean energy source, from landfills, coal mines, oil and

gas systems, and agricultural operations. EPA’s methane programs, including the

Landfill Methane Outreach Program, Coalbed Methane Outreach Program, Natural

Gas STAR, and AgSTAR, are designed to overcome a wide range of informational,

technical, and institutional barriers to reducing emissions, while creating profitable

methane recovery and use opportunities. The collective results of EPA’s methane

programs have been substantial. U.S methane emissions in 2005 were 11.5 percent

below 1990 levels, in spite of economic growth of more than 55 percent over that

time period. EPA expects that these programs will maintain emissions below 1990

levels in the future due to expanded industry participation and the continuing commitment of the participating companies to identify and implement cost-effective

technologies and practices.

EPA High Global Warming Potential Gas Partnership 39: A set of voluntary partnerships between EPA and industry is substantially reducing U.S. emissions of high

global warming potential (high GWP) gases—including perfluorocarbons (PFCs),

hydrofluorocarbons (HFCs), and sulfur hexafluoride (SF6). The high GWP partnership programs involve several industries, including HCFC–22 producers, primary

aluminum smelters, semiconductor manufacturers, electric power companies, magnesium smelters and die-casters, and mobile air conditioning. These industries are

reducing greenhouse gas emissions by developing and implementing cost-effective

improvements to their industrial processes. EPA High-GWP Partnership Goals

include:

• PFC Reduction/Climate Partnership for the Semiconductor Industry—Reduce

PFCs 10 percent below 1995 baseline by year-end 2010.

• Voluntary Aluminum Industrial Partnership—A direct carbon intensity (TCE/

ton) reduction of 53 percent from 1990 levels by 2010.

• SF6 Emissions Reduction Partnership for the Magnesium Industry—Eliminate

SF6 emissions by the end of 2010.

• Mobile Air Conditioning Partnership—Reduce HFCs 50 percent and improve

fuel-efficiency by 30 percent.

To date, these voluntary programs have achieved significant emission reductions

and industry partners are expected to maintain emissions below 1990 levels beyond

the year 2010 despite sizable expansion in many of these industries that would ordinarily be accompanied by higher emission levels.

Targeted Incentives for Greenhouse Gas Sequestration: The USDA provides targeted incentives through its conservation programs to encourage wider use of land

17

40See Office of Management and Budget, ‘‘Fiscal Year 2008 Report to Congress on Federal

Climate Change Expenditures,’’ May 2007, p. 25 at http://www.whitehouse.gov/omb/legislative/

fy08climatechange.pdf. 41See http://www.nrcs.usda.gov/programs/crp/. 42See http://www.nres.usda.gov/programs/csp/. 43See http://www.nres.usda.gov/programs/cig/. 44See http://www.eia.doe.gov/oiaf/1605/frntvrgg.html and http://www.pi.energy.gov/enhancing

GHGregistry/index.html.

management and production practices that sequester carbon and reduce greenhouse

gas emissions. USDA also provides financial and technical assistance to help farmers install renewable energy systems and make improvements in energy efficiency

that help reduce greenhouse gas emissions. In 2007, USDA’s Farm Bill reauthorization proposals would provide approximately $4.4 billion in conservation activities on

agricultural lands, and this level of funding represents an increase of about $1.6 billion from 2002.40

Through the Conservation Reserve Program (CRP),41 USDA encourages farmers

to remove environmentally sensitive lands from production, and also encourages installing vegetative covers that sequester carbon. In addition, CRP gives landowners

the right to sell carbon credits generated from lands enrolled in the program; current enrollment is 36.8 million acres. In 2006, carbon sequestration on CRP lands

was estimated at 50.6 million metric tons CO2. Additionally, reductions in CO2 and

nitrous oxide (N2O) emissions associated with reduced field operations and less use

of nitrogen fertilizers were estimated at 9.0 million metric tons carbon dioxide

equivalent.

The Conservation Security Program (CSP) 42 promotes the conservation and improvement of soil, water, air, energy, plant and animal life on Tribal and private

working agricultural lands. CSP has emerged as a significant contributor within the

area of carbon management through enhancement activities that promote carbon sequestration. Since its inception in 2004, over 22.4 million collective acres have been

engaged in soil management activities to improve carbon levels in soils.

Finally, USDA provides Conservation Innovation Grants (CIG) 43 to fund the application and demonstration of innovative technologies and approaches to conservation issues. Many of the awards made through the program have greenhouse gas

benefits. For example, farm-level wind and solar power projects reduce CO2 emissions, and new technologies for livestock manure management and fertilizer application reduce methane and N2O emissions.

Improved Corporate Average Fuel Economy (CAFE) Standards: On April 1, 2003,

the Bush administration finalized regulations requiring an increase in the fuel economy of light trucks for Model Years 2005 to 2007, the first such increase since 1996.

The increase from 20.7 miles per gallon to 22.2 miles per gallon by 2007 more than

doubles the increase in the standard that occurred between Model Years 1986 and

1996. The new increased fuel economy standards are expected to save approximately

3.5 billion gallons of gasoline over the lifetime of these trucks, with the corresponding avoidance of more than 30 million metric tons of CO2 equivalent (8.2

MMTCE). The administration also promulgated a new round of standards in March,

2006. The new standards cover model years 2008–2011 for light trucks and raise

fuel economy to 24 miles per gallon for model year 2011. The rule is expected to

save 10.7 billion gallons of gasoline over the lifetime of these vehicles, thereby reducing GHG emissions by 73 million metric tons of CO2 equivalent (19.9 MMTCE).

Energy Policy Act of 2005 Tax Incentives to Reduce Greenhouse Gas Emissions:

The Energy Policy Act of 2005 includes over $14.5 billion in tax incentives from

2005 to 2015. Many of these tax incentives and credits will have significant greenhouse gas reduction benefits and are designed to spur investments in clean energy

infrastructure, enhance domestic energy security, and promote deployment of conservation and energy efficiency technologies, renewable energy and alternative

motor vehicles. The Act also provides authority to DOE to issue loan guarantees for

a wide range of advanced technologies that avoid, reduce, or sequester greenhouse

gas emissions. Further, it provides standby support coverage to indemnify against

certain regulatory and litigation delays for the first six new nuclear plants. In addition, the Act establishes 16 new appliance efficiency mandates and a 7.5 billion gallon renewable fuel requirement by 2012.

Voluntary Greenhouse Gas Emission Registry (1605(b)) 44: The Voluntary Reporting of Greenhouse Gases Program, authorized under Section 1605(b) of the Energy

Policy Act of 1992, provides a means for utilities, industries, and other entities to

establish a public record of their greenhouse gas emissions and the results of voluntary measures to reduce, avoid, or sequester greenhouse gas emissions. For the

2005 reporting year, 221 U.S. companies and other organizations reported that they

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45See http://www.whitehouse.gov/stateoftheunion/2006/aci/ and http://www.ostp.gov/html/budget/2008/ACIUpdateStatus.pdf. 46See http://www.whitehouse.gov/stateoftheunion/2006/. 47See http://www.whitehouse.gov/stateoftheunion/2007/initiatives/energy.html. 48See http://www.whitehouse.gov/news/releases/2007/05/20070514-2.html. 49See http://www.whitehouse.gov/omb/legislative/fy08climatechange.pdf. 50See http://www.eia.doe.gov/neic/press/press284.html.

had undertaken 2,379 projects and reduced or sequestered 294 million metric tons

CO2 equivalent (80.2 MMTCE) of direct reductions, 67 million metric tons CO2

equivalent (18.3 MMTCE) of indirect reductions, 8 million metric tons CO2 equivalent (2.2 MMTCE) of reductions from carbon sequestration, and 13 million metric

tons CO2 equivalent (3.5 MMTCE) of unspecified reductions. In April 2006, new

guidelines were issued for the program. The new guidelines, which went into effect

in 2007 for the 2006 reporting year, will strengthen the program by encouraging

comprehensive, entity-wide reporting of emissions and emission reductions, including sequestration, and by increasing the measurement accuracy, reliability, and

verifiability of reports.

American Competitiveness Initiative (ACI) 45: President Bush announced the

American Competitiveness Initiative (ACI) in his 2006 State of the Union Address.46

Its goals are to increase federal investments in research and development, strengthen education, and encourage entrepreneurship. A centerpiece of the ACI is the commitment to doubling the investment in key Federal agencies that support basic research programs in the physical sciences and engineering over the next 10 years.

As part of the ACI, the fiscal year 2008 Budget does include $4.4 billion, a 7-percent

increase over last year’s Budget, for the Department of Energy’s (DOE’s) Office of

Science. The Initiative overall commits $50 billion to increase funding for research

and $86 billion for research and development tax incentives, some of which will be

directed toward investments in clean energy technology research including solar,

bioenergy, wind, hydropower, and hydrogen and fuel cell technology. The ACI will

enhance cutting-edge basic research, helping to advance U.S. competitiveness by inspiring a new generation of American innovation through world-leading initiatives

in high end computation; bio-energy research centers; fourth generation light

sources; and nanotechnology.

Twenty in Ten Initiative 47: President Bush announced his Twenty in Ten Initiative in his 2007 State of the Union Address. The goal is to reduce the Nation’s gasoline consumption by 20 percent in 10 years by: (1) Increasing the supply of renewable and other alternative fuels by setting a mandatory fuels standard to require

the equivalent of 35 billion gallons of renewable and other alternative fuels in 2017,

nearly five times the 2012 Renewable Fuels Standard mandate established by the

Energy Policy Act of 2005, to displace 15 percent of projected annual gasoline use

in 2017; and (2) reforming and modernizing CAFE standards for cars, and extending

the light truck rule to reduce projected annual gasoline use by up to 8.5 billion gallons in 2017, a further 5-percent reduction in gasoline use. As a result of the recent

Supreme Court decision in Massachusetts v. EPA, on May 14, 2007, the President

directed EPA and the Departments of Transportation, Energy, and Agriculture to

take the first steps toward regulations using the 20-in-10 plan as a starting point

and to complete this regulatory process by the end of 2008.48

President’s Budget 49: As noted earlier, from fiscal year 2001 to the end of fiscal

year 2007, the U.S. Government will have devoted nearly $37 billion to climate

science and observations, technology, international assistance, and incentive programs. President Bush’s fiscal year 2008 budget calls for nearly $7.4 billion for climate-related activities, includes $3.9 billion for the Climate Change Technology Program, over $1.8 billion for the Climate Change Science Program, $212 million for

climate change-related international assistance programs, and nearly $1.4 billion for

energy tax provisions that may reduce greenhouse gas emissions.

We expect these efforts will contribute to meeting the President’s 10-year goal to

reduce the Nation’s greenhouse gas intensity by 18 percent, which represents an average annual rate of improvement of about 1.96 percent. According to EPA data reported to the UNFCCC Secretariat, U.S. greenhouse gas intensity declined by 1.9

percent in 2003, by 2.4 percent in 2004, and by 2.4 percent in 2005. Put another

way, from 2004 to 2005, the U.S. economy increased by 3.2 percent while greenhouse gas emissions increased by only 0.8 percent. Further, a May 21, 2007, preliminary ‘‘flash estimate’’ by the Energy Information Administration of energy-related

CO2 emissions—which account for more than four-fifths of total greenhouse gas

emissions—shows an absolute drop in these emissions of 1.3 percent and an improvement in CO2 emissions intensity of 4.5 percent in 2006.50 Although we are only

a few years into the effort, we are on track to meet the President’s goal.

19

51See http://www.climatescience.gov.

Progress in the U.S. compares favorably with progress being made by other countries. ‘‘Greenhouse Gas Emission [GHG] Trends for Developed Country Parties to

the U.N. Framework Convention on Climate Change for the Years 2001–2005, Inclusive’’ (Attachment 2) and ‘‘Carbon Dioxide [CO2] Emission Trends for Developed

Country Parties to the U.N. Framework Convention on Climate Change for the

Years 2001–2005, Inclusive’’ (Attachment 3) show how GHG and CO2 emission

trends in the U.S. compare to other industrialized countries based on national data

reported to the UNFCCC Secretariat. These data, which include countries that have

obligations under the Kyoto Protocol, indicate that for the years 2001–2005, inclusive, the major developed economies of the world are at about the same place in

terms of actual greenhouse gas emissions. In some countries, emissions are increasing slightly, in others they are decreasing slightly. No country is yet able to decrease its emissions massively. Note that the U.S. has seen its actual greenhouse

gas emissions increase by 1.6 percent—slightly more than that for the EU. In contrast, U.S. CO2 emissions over the same period increased by 2.5 percent—less than

the increase for the EU.

C. Advancing Climate Change Science

The President established the U.S. Climate Change Science Program (CCSP) 51 in

2002 as part of a new ministerial-level management structure to oversee public investments in climate change science and technology. The CCSP incorporates the

U.S. Global Change Research Program, established by the Global Change Research

Act of 1990, and the Climate Change Research Initiative, established by the President in 2001. The Program coordinates and integrates scientific research on global

change and climate change sponsored by 13 participating departments and agencies

of the U.S. Government. It is responsible for facilitating the development of a strategic approach to federally supported climate research, integrated across the participating agencies. The President’s budget requests $1.836 billion for CCSP in fiscal

year 2008.

Since CCSP was created in 2002, the program has successfully integrated a wide

range of the research and climate science priorities of the 13 CCSP agencies. CCSP

has taken on some of the most challenging questions in climate science and is developing products to convey the most advanced state of knowledge to be used by federal, state and local decisionmakers, resource managers, the science community, the

media, and the general public.

Twenty-one Synthesis and Assessment Products are identified in the Strategic

Plan to be produced through 2008. The first of these, ‘‘Temperature Trends in the

Lower Atmosphere: Steps for Understanding and Reconciling Differences,’’ was released in April of 2006 and answers a set of key questions related to ongoing observations of the Earth’s temperature. This report was an important addition to the

IPCC Working Group I Fourth Assessment Report. This year, two more reports have

been released. In July, the program released ‘‘Scenarios of Greenhouse Gas Emissions and Atmospheric Concentrations and Review of Integrated Scenario Development and Application,’’ which in part used computer-based models to assess the economic and technological impacts of limiting greenhouse gas emissions. In October,

a report was released that summarized our current understanding regarding the effects of climate change on energy production and use in the United States. The report, ‘‘Effects of Climate Change on Energy Production and Use in the United

States,’’ focused on three questions:

1. How might climate change affect energy consumption;

2. How might climate change affect energy production and supply; and

3. How might climate change have other effects that indirectly shape energy

production and consumption?

The reports, overall, are designed to address a full range of science questions and

evaluate options for responses that are of the greatest relevance to decision and policymakers and planners. The products are intended to provide the best possible

state of science information, developed by a diverse group of climate experts, for the

decision community.

D. Accelerating Climate Change Technology Development and Deployment

While acting to slow the pace of greenhouse gas emissions intensity in the near

term, the administration is laying a strong technological foundation to develop realistic mitigation options to meet energy security, economic development, and climate

change objectives.

20

52See ‘‘U.S. Climate Change Technology Program Strategic Plan,’’ September 2006, p. 2 at

http://www.climatetechnology.gov/stratplan/final/CCTP-StratPlan-Sep-2006.pdf. 53See http://www.climatetechnology.gov/. 54See http://www.whitehouse.gov/stateoftheunion/2006/energy/energybooklet.pdf. 55See http://www.whitehouse.gov/stateoftheunion/2006/. 56See http://www.eere.energy.gov/.

The Bush administration is moving ahead on advanced technology options that

have the potential to substantially reduce, avoid, or sequester future greenhouse gas

emissions. Over 80 percent of current global anthropogenic greenhouse gas emissions are energy related, and although projections vary considerably, a tripling of

global energy demand by 2100 is not unimaginable.52 Therefore, to provide the energy necessary for continued economic growth while we reduce greenhouse gas emissions, we will have to develop and deploy cost-effective technologies that alter the

way we produce and use energy.

The United States is leading the development of many advanced technology options that have the potential to reduce, avoid, or sequester greenhouse gas emissions. The Climate Change Technology Program (CCTP) 53 was created in 2002, and

subsequently authorized in the Energy Policy Act of 2005, to coordinate and prioritize the Federal Government’s annual investment in climate-related technology—a

proposed $3.9 billion in Fiscal Year 2008—and to further the President’s National

Climate Change Technology Initiative (NCCTI). Ten Federal agencies support a

broad portfolio of activities within this framework.

Basic guidance for the program is provided through CCTP’s Strategic Plan, released in September 2006. CCTP’s strategic vision has six complementary goals: (1)

Reducing emissions from energy use and infrastructure; (2) reducing emissions from

energy supply; (3) capturing and sequestering carbon dioxide; (4) reducing emissions

of other greenhouse gases; (5) measuring and monitoring emissions; and (6) bolstering the contributions of basic science.

CCTP’s principal aim is to accelerate the development and reduce the cost of new

and advanced technologies. It provides strategic direction for the climate-related elements of the overall Federal technology portfolio. CCTP also is assessing different

technology options and their potential contributions to reducing greenhouse gas

emissions over the short, mid, and long term. CCTP’s boasts a diverse R&D portfolio

that covers a wide range of technology options in energy efficiency, renewable energy, nuclear power, and clean coal, and non-CO2 gases.

Many CCTP activities build on existing work, but the Bush administration also

has expanded and realigned some activities and launched new initiatives in key

technology areas to support the CCTP’s goals. The President’s NCCTI, for example,

includes 12 discrete R&D activities that, if successful, could advance technologies

to reduce greenhouse gas emissions on a large scale.

Advanced Energy Initiative (AEI) 54: In his 2006 State of the Union Address,55

President Bush announced plans for the Advanced Energy Initiative (AEI), which

will help reduce America’s greenhouse gas emissions, pollution, and dependence on

foreign sources of energy by accelerating advanced energy technologies. Examples

of AEI investment include: The Solar America Initiative, which aims to make solar

energy cost-competitive with conventional forms of electricity by 2015; the Biofuels

Initiative, which aims to make cellulosic ethanol cost competitive with gasoline by

2012; the Hydrogen Fuel Initiative, which aims to develop the technology needed

for commercially viable hydrogen-powered fuel cells; the Plug-in Hybrid Electric Vehicle (PHEV) research, which aims to develop advanced battery technologies that

allow PHEVs to have a 40-mile range operating solely on battery charge; the

FutureGen near-zero-emissions coal-fired power plant; and the Nuclear Power 2010

program. By investing in these and other advanced energy technologies, AEI will

allow us to alter the way we power our buildings and automobiles within 20 years.

The President’s budget for fiscal year 2008 includes $2.7 billion in the Department

of Energy for the AEI, an increase of 22 percent above the 2007 enacted level.

Energy Efficiency and Renewable Energy 56: Energy efficiency is the single largest

investment area under CCTP and it provides tremendous short-term potential to reduce energy use and greenhouse gas emissions. Raising the efficiency level of home

appliances and commercial equipment is a high priority. Efficiency standards for

products that are subject to regulation are being developed at a pace substantially

greater than at any time in the history of regulating these products. In addition,

Zero Energy Homes and Buildings have been proven technically achievable, but at

significant added cost. The Department of Energy believes that the required technical advances to enable most of the Nation’s new homes to be constructed as net

zero homes can be achieved in less than a decade via an aggressive private/public

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57 57See www.hydrogen.gov. 58See http://www.whitehouse.gov/news/releases/2003/01/20030128-19.html. 59See http://www.eere.energy.gov/vehiclesandfuels/. 60See http://www.fe.doe.gov/programs/sequestration/index.html. 61See http://www.fe.doe.gov/programs/sequestration/partnerships/. 62See http://www.fe.doe.gov/programs/powersystems/cleancoal/index.html. 63See http://www.fe.doe.gov/programs/powersystems/futuregen/index.html.

partnership. For commercial buildings, adequate technical capability can be available by 2020.

Renewable energy includes a range of different technologies that can play an important role in reducing greenhouse gas emissions. The United States invests significant resources in wind, solar, geothermal, and biomass, industrial and buildings

efficiency and alternative transportation technologies. Many of these technologies

have made considerable progress in price competitiveness, but there remain opportunities to reduce manufacturing, operating, and maintenance costs of many of

these technologies as well as to reduce barriers to market penetration.

Hydrogen 57: President Bush announced his Hydrogen Fuel Initiative in his 2003

State of the Union Address.58 The goal is to work closely with the private sector

to accelerate our transition to a hydrogen economy, on both the technology of hydrogen fuel cells and a fueling infrastructure. The President’s Hydrogen Fuel Initiative

and the FreedomCAR Partnership 59 which was launched in 2002 will provide $1.7

billion through 2008 to develop hydrogen-powered fuel cells, hydrogen production

and infrastructure technologies, and advanced automotive technologies, with the

goal of commercializing fuel-cell vehicles by 2020.

Carbon Sequestration: Carbon capture and sequestration is a central element of

CCTP’s strategy because for the foreseeable future, fossil fuels will continue to be

the world’s most reliable and lowest cost form of energy. A realistic approach is to

find ways to capture and store the CO2 produced when these fuels are used at centralized power generation and industrial applications. DOE’s core Carbon Sequestration Program 60 emphasizes technologies that capture CO2 from large point sources

and store it in geologic formations. In 2003, DOE launched a nationwide network

of seven Regional Carbon Sequestration Partnerships,61 involving State agencies,

universities, and the private sector, to determine the best approaches for sequestration in each geographic region represented and to examine regulatory and infrastructure needs. Today the partnerships include more than 400 organizations in 41

U.S. states, three Indian nations, and four Canadian provinces. The Regional Partnerships have progressed to a validation phase in which they are conducting 25 field

tests involving the injection of carbon dioxide into underground formations where

it will be stored and monitored. The Regional Partnerships are also planning several

large-scale field tests throughout the United States to validate the efficacy of longterm storage of CO2 in a variety of geologic storage sites.

Additionally, EPA leads U.S. Government efforts to evaluate any risks to human

health and the environment associated with underground injection and storage.

EPA is responsible for developing regulatory guidance and a risk-management

framework under Safe Drinking Water Act. The Agency also designs inventory and

accounting methodologies for carbon capture and sequestration.

Coal-Fired, Near-Zero-Emissions Power Generation: The United States has vast

reserves of coal, and about half of its electricity is generated from this fuel. Advanced coal-based power and fuels, therefore, is an area of special interest from both

an energy security and climate change perspective. The Coal Research Initiative

(CRI) consists of research, development, and demonstration of coal-related technologies that will improve coal’s competitiveness in future energy supply markets.

The Clean Coal Power Initiative (CCPI),62 within the CRI, is a cost-shared program

between the government and industry to demonstrate emerging technologies in coalbased power generation and to accelerate their commercialization. A major priority

under the CRI is the FutureGen project,63 a 10-year, $1 billion international government-industry cost-shared effort to design, build, and operate the world’s first nearzero atmospheric emissions coal-fired power plant. This project, which now includes

India and the Republic of Korea as partners (with other countries expected to join

shortly), will incorporate advanced coal gasification technology integrated with combined cycle electricity generation and the capture and long-term storage of carbon

dioxide. Through the CRI, clean coal can remain part of a diverse, secure energy

portfolio well into the future.

Nuclear Fission: Concerns over resource availability, energy security, and air

quality as well as climate change suggest a larger role for nuclear power as an energy supply choice. While current generations of nuclear energy systems are adequate in many markets today, new construction of advanced light-water reactors in

22

64See http://www.ne.doe.gov/np2010/neNP2010a.html. 65See http://www.ne.doe.gov/genIV/neGenlV1.html. 66See http://www.ne.doe.gov/NHI/neNHI.html. 67See http://www.ne.doe.gov/AFCI/neAFCI.html. 68See http://www.energy.gov/sciencetech/fusion.htm.

the near term and of even more advanced systems in the longer term can broaden

opportunities for nuclear energy, both in industrialized and developing countries.

The Nuclear Power 2010 program 64 is working with industry to demonstrate the

Nuclear Regulatory Commission’s new licensing process, and earlier this year the

Nuclear Regulatory Commission approved the Early Site Permits for two new nuclear power plants.

The Generation IV Nuclear Energy Systems Initiative 65 is investigating the more

advanced reactor and fuel cycle systems that represent a significant leap in economic performance, safety, and proliferation-resistance. One promising system being

developed under the Nuclear Hydrogen Initiative 66 would pair very-high-temperature reactor technology with advanced hydrogen production capabilities that could

produce both electricity and hydrogen on a scale to meet transportation needs. Complementing these programs is the Advanced Fuel Cycle Initiative,67 which is developing advanced, proliferation resistant nuclear fuel technologies that can improve

the fuel cycle, reduce costs, and increase the safety of handling nuclear wastes.

Fusion 68: Fusion energy is a potential major new source of energy that, if successfully developed, could be used to produce electricity and possibly hydrogen. Fusion

has features that make it is an attractive option from both an environmental and

safety perspective. However, the technical hurdles of fusion energy are very high,

and with a commercialization objective of 2050, its impact would not be felt until

the second half of the century, if at all. Nevertheless, the promise of fusion energy

is simply too great to ignore.

Advances in these and other technology areas in the CCTP portfolio could put us

on a path to ensuring access to clean, affordable energy supplies while dramatically

reducing the greenhouse gas profile of our economy over the long term. Moreover,

the deployment of cleaner energy technologies in developing economies like China

and India can make a huge difference in altering the future global energy picture.

23

24

25

26

Senator KERRY. Thank you very much, Madam Secretary. We

really appreciate it.

And what we’ll do is have 7-minute rounds, and we’ll try to get

through as much as we can.

First of all, let me just quickly put on the record that we have

heard, through sources, that, in Valencia, the administration is sort

of working behind the scenes to tone down, a little bit, the urgency

that the IPCC folks want to give to this summary agreement. Can

you tell us whether there’s any reality to that? Are we somehow—

I mean, as you know, there’s been an unfortunate record here of

EPA and other reports in science being somewhat stomped on over

the course of the last few years. So, are you expressing, today, a

State Department view or an administration view? And are there

any efforts you know of to sort of reduce the impact of what comes

out of Valencia?

Ms. DOBRIANSKY. I’m part of the State Department, but I’m part

of this administration. With regard to any toning down, I’m not

aware of any toning down. We have a delegation that is there; a

delegation that also participated in the three working groups that

were held previously as part of the IPCC process. The United

States welcomed the reports of each working group. Dr. Susan Solomon of NOAA has been cochair of one of the working groups. We

certainly have not only welcomed, but strongly supported, her work

27

and the work of many of the American scientists who have been

part of this.

I might just add that the United States has been one of the largest contributors to the work that is done under the IPCC. We welcome the work that has been done. It informs us, and will continue

to inform us.

Senator KERRY. To the degree that it informs you, have you accepted—or, do you accept the now-revised scientific consensus that

no longer believes we can tolerate a 3-degree increase, Centigrade,

in the Earth’s temperature, but only a 2-degree, and that we can

no longer tolerate a 550-parts-per-million increase, or level, of

greenhouse gases, but, rather, we have to stabilize at around 450?

Is that the starting working premise of the administration with respect to what we need to do?

Ms. DOBRIANSKY. Senator, we welcome the findings of the IPCC;

and specifically, the language that is used in the report is, it

doesn’t precisely give one figure, one degree, or another degree. It

provides a range. And, as you know, as part of the U.N. Framework Convention on Climate Change, we’re very committed to this

goal. In fact, that’s one of the reasons why we have put forth the—

and joined other countries in the importance of establishing a longterm global goal that needs to be identified.

Senator KERRY. Well, here’s the conundrum, and this is what I’m

trying to get at. You—I mean, this is not an issue where you can

be half pregnant. You can’t accept the science and say, ‘‘Yes, it’s

happening; yes, it’s having these consequences; yes, it’s moving

more rapidly than we had anticipated, with greater consequences

than were originally predicted’’—you can’t accept all of that and

then discard, at whim, the accompanying targets that those same

scientists give us as to what is tolerable or not, particularly when

measured against what is happening at the rate of pulverized coalfired plant construction in China and India and here. If we proceed

as we are in the next few years with those coal-fired power plants

being built without capture and sequestration, we’re looking at

somewhere between 600 and 900 parts per million of a greenhouse

concentration, way outside of what the scientists tell us is the tipping point, the catastrophe point for Earth.

So, the question is not a theoretical one. I mean, it’s a really

practical one. Are we going to Bali accepting these targets? And

will that guide what we think have to be the policies? Or are we

going to be sort of rhetorically pregnant and kind of play around,

here?

Ms. DOBRIANSKY. I would say we’re going to Bali accepting, as

you’ve indicated, the findings of the IPCC, and the outcomes and

the products of the different working groups. And, toward that end,

on the specific question, there was a range that was provided

and——

Senator KERRY. And what do you understand the range——

Ms. DOBRIANSKY [continuing]. That the——

Senator KERRY [continuing]. To be?

Ms. DOBRIANSKY [continuing]. Scientists, in fact, put forth. They

did not precisely pin down one degree over another.

Senator KERRY. What do you understand the range to be?

Ms. DOBRIANSKY. The range is as was stated in——

28

Senator KERRY. What is the——

Ms. DOBRIANSKY [continuing]. The report——

Senator KERRY [continuing]. Range?

Ms. DOBRIANSKY [continuing]. Which was—it was a general

range. I will let my colleague comment—would you like to—because you were there.

Mr. REIFSNYDER. Well, I don’t know, Senator—sorry—I don’t

know, Senator, what the actual range that the IPCC has projected

this go-round has been, but I know that it has been—it’s not that

dissimilar from that which has been projected for a long time by

the IPCC, since the first assessment report in——

Senator KERRY. Well, the range is what I’ve just laid out, folks.

I mean, the range is—in terms of allowable degrees of Centigrade

warming and allowable measure of greenhouse gas. It’s what I just

said.

Ms. DOBRIANSKY. And I think I indicated, Senator, we do embrace that range. That was——

Senator KERRY. OK. Now, if you——

Ms. DOBRIANSKY [continuing]. The range.

Senator KERRY [continuing]. Embrace it——

Ms. DOBRIANSKY. That’s a bit different from citing one particular

degree. And I know that the report did not, in fact, do that.

Senator KERRY. No; it doesn’t do that, but what it does is, it sets

out parameters that any reasonable person who accepts science has

to look at it and say, ‘‘Whoa, we’ve got a big task here.’’ Now, you

know, you had a key word in your testimony, the word ‘‘voluntary.’’

We’ve had voluntary for the last 20 years. It hasn’t worked. How

do you heed the warning of a Jim Hansen, who said, ‘‘Look, you’ve

got 10 years to get this right’’? How do you respond to the notion

that one coal-fired pulverized plant per week is going to be built

in China, and, if we go ahead with what’s happening today without

U.S. leadership to sort of put the brakes on and offer alternatives,

that we’re ever going to meet this challenge? How do you do that

in a voluntary scheme?

Ms. DOBRIANSKY. Well, first, in terms of our own domestic policy

mix, we’ve had a mix of mandatory, voluntary, as well as those programs which are supported by tax incentives. There are a variety

of mandatory programs. The President put forth the ‘‘20-in-10’’ reduction on gas consumption. There has also been a building and

appliance efficiency——

Senator KERRY. Those are goals.

Ms. DOBRIANSKY [continuing]. Goals that have been put forth.

But, on the second, when you look at it globally, one of our goals

and objectives, Senator, is—as we go into Bali, is to look at, first

and foremost, how we can get a global agreement, a global agreement where all are at the table, ourselves included, as well as big

emitters. And a challenge here is: How do you achieve that? A

number of countries have put forward long-term goals that are aspirational—Japan, Canada, the European Union. When we met together in the Major Economies Meeting, we had a discussion about

this. One of the things that we then talked about was, all right,

how can you then look at, on a national basis, the variety and differences among the countries around the table, that we could go

forward with medium-term goals, and—in which countries would

29

put together their portfolios, and in which there would be accountability, of which part of that would be on a country-by-country

basis, mandatory approaches, and maybe a mix of mandatory/voluntary. But, basically, all would be at the table, so that we would

have an effective approach and that there would be results derived

from it.

Senator KERRY. Well, I appreciate what you’re saying. My time

is up. I just want to—I’ll close by saying this, and I want to continue this dialogue. And it’s a very important one. Most of the foreign environment ministers and others that we’ve been meeting

with from Europe and elsewhere, have indicated to us that they believe it ought to be mandatory, and they believe the United States

has to lead on this. We’re a quarter of the world’s greenhouse gas

emissions, the most industrial country. And when I talk to the Chinese or the Indians or others, it’s very clear that, unless we do

something with some sort of real goals, they’re not going to believe,

No. 1, that we’re serious, and, No. 2, they know that there’s nothing compelling them, therefore, to, sort of, come to the table in any

mandatory way. And most people don’t believe it can happen without mandatory.

Second, we have done mandatory. We have a great, great example that we all adopted, right here in the Congress. And I was part

of those negotiations, as I think Senator Wirth was, and others,

back in 1990s, when we did the Clean Air Act. We heard the same

kinds of arguments. The industry all came in and said, ‘‘Don’t do

this to us. If you do this to us, we’re going to be noncompetitive,

we’re going to lose jobs, we’re going to fall behind, it’s going to cost

$8 billion, take 10 years.’’ The environment community came in

and said, ‘‘No; that’s all industry, you know, self-interest talk. It’s

really only going to cost $5 billion, and it’s going to take about, you

know, 5 years.’’ Well, guess what? George Herbert Walker Bush,

Bill Reilly, John Sununu sat at that table with George Mitchell, we

put it in place—acid rain, sulfur dioxide emissions in the Clean Air

Act—mandatory. And, lo and behold, it took about $2 billion and

took about 21⁄2 years. Why? In fact, the pricing in the auction place on the permits went from about $1,000 down to about $60, then

bounced back up to 100. The reason it worked is that no one is capable of predicting what happens when the entrepreneurial, innovative spirit of our country is applied economywide to the task of

meeting one of those goals, and no one can predict how the technology then takes over in the creation of jobs, cheaper ways of

doing it, which is precisely what everybody believes will happen

here if we take the lead in doing it.

So, I’d like to pursue that with you a little bit later. I’m sure colleagues will pursue some of that in the dialogue here. But I think

we shouldn’t ignore our own history of what happens in voluntary

versus mandatory.

Senator Lugar.

Senator LUGAR. Thank you very much, Mr. Chairman.

Secretary, as we prepare for the Bali Conference, I’m hopeful

that our delegation and the administration are trying to focus on

a parallel course of discussions we need on energy requirements for

our country, as well as for the world. They have to run at the same

time, and they are often divisive, contradictory, and competitive.

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To be specific, many talk about gaining a greater degree of energy independence for our country, and they usually phrase it that

way, as opposed to saying ‘‘energy independence,’’ because it’s an

awesome goal, given the dependence we have on imported oil and

other energy sources. We’ve been attempting, as a government, to

think of ways of replacing imported oil. You’ve cited some of the

President’s programs, that over the course of several years, we

would substitute imported oil with energy sources that we produce

here.

My fear is that, even with our resolve and our programs, this is

all moving tediously slowly. It is not without note that even our debate in the Congress this year on energy legislation is bogged down

in all sorts of ways that I’ll not try to describe. It may be that the

market works and that somehow—through idealism—people will do

the research that’s required; forward the money, loans from government or private industry to develop experimental things, such as

cellulosic ethanol. But this is not happening very fast.

What is occurring very fast—and you’ve cited this, as Senator

Kerry has—is the need for greater electric power throughout the

country, whether it be our computers or the rest of our electronic

society, the impelling problem is how to use coal. The problem then

is how to clean up the coal, how to sequester the carbon from the

coal. We’re taking this seriously, although these are still very, very

experimental situations. We are beginning to put a toe in the water

again with regard to nuclear power. Even this is bogged down in

all sorts of difficult situations, even as we advise India or China

or other countries that that probably should be the course for them.

As we note, they’re opening up coal-fired electric plants, if not one

a week in China, as sometimes suggested, maybe one a month at

least. And, as Senator Kerry has said, this is occurring even while

the debate in Bali proceeds. In real life, people are not going to let

the lights go out. They are—in fact, going to demand that their

government produce light. Or, worse still, demand that their government produce gasoline at very subsidized prices. Even in Iraq

and Iran, we’ve found gasoline selling for a pittance, because politically it’s impossible for the leadership to let the market work, even

in a society of that sort, quite apart from our own.

I mentioned all of this because it seems to me that it is not easy

to float off into the climate change argument oblivious of real life,

but there’s a tendency to do this, and this is why it doesn’t work.

Ultimately, people come back down to earth in a democracy and

say, ‘‘That’s all very interesting, that the elite of the country have

these ideas.’’ And clearly there is a problem. The ice floes are melting, and the polar bears are in trouble. And we understand things

are coming along poorly. We feel that. But we also, as a matter of

fact, in day-by-day living, want jobs. We want the lights to go on.

We want heat in the winter. We want electricity to run our computers. As a matter of fact, we want to live during this particular

period and not in 2080 or at some other time, granted, that our

grandchildren may have a hard time.

Now, I go through all of this rhetoric simply because it appears

to me that an approach to Bali or any other conference has to have

both of these streams of thought moving along if they’re going to

be successful. Clearly, we need to recognize that with climate

31

change there will be very great reticence to take the steps that are

important in energy conservation in this country. Why would anybody buy a hybrid car and try to get 50 miles to the gallon unless

there is, in fact, a desire, first of all, to conserve energy, and, second, to do something about CO2? But some people do buy such cars,

and we hope that some more will be produced. Why does anybody

distribute ethanol, E85? Well, not many do. Despite all the rhetoric

in my State, barely 110 stations out of several thousands, despite

corn and all the rhetoric on ethanol. In other words, our whole national emphasis here has got to move together.

Now, can you make some comment of reassurance that, as the

planning is proceeding, in your shop at least, there are recognition

of these factors, and you’re prepared to address them in practical

ways for our country, as well as other countries that we are talking

to?

Ms. DOBRIANSKY. Senator, I think you make a very important

point, and let me, in response, make three comments.

First, I think that there has been a shift in the orientation of

these global discussions on the environment, where there’s an integration of issues that I don’t think had really occurred before. The

fact that you have countries, not only ourselves, but others, like

India, China, Brazil, looking at issues of economic reform and advancement, how you apply your economic growth to these issues,

and the critical issue of energy security matters. I think you’re

quite right in saying, in every discussion we have with countries

that are emerging economies, they’re very focused on not only

growing their economies, but how they get energy sources to, particularly, their rural areas, and what are the most clean and efficient ways of doing that, and which will have consequences and

benefits, environmentally? So, the first point I would make is, is

that I have noticed that the discourse has shifted, and I think

there is an acceptance of the integration of these issues.

Second, I would make the point that, during the Major Economies Meeting, which is geared toward advancing the negotiation

process in the U.N. Framework Convention—we brought together

not only representatives that represent environmental ministries,

but also those in attendance were from Ministries of Energy, my

counterparts in Foreign Ministries, and also those dealing with finance. That kind of integrated discussion was absolutely essential—essential as we go forward, not only to Bali, but also it’s critical as we come out of Bali.

Also, toward that end, if I may say, the areas that we addressed

during this exchange involved not only power generation, but we

had a session with also participants from the private sector, focusing on the question of how you deal with transportation, vehicles,

and many of the innovative ways that we should be rapidly moving

forward on; land use, as well as financing.

Finally, as I referenced in my earlier comments about the Asia

Pacific Partnership on Clean Development and Climate, that

through the Asia Pacific Partnership, one of the things that we’ve

been striving to do is, particularly in working with China and

India, is to try to draw them in and work effectively with them on

near-term steps that can be undertaken and that, by the way, don’t

cost a lot, but adds up.

32

Do we need to do more? Yes; we do need to do more. These are

only a few examples of some of the things that we are doing, but

this is an area that absolutely is essential. Our own Major Economies Meeting was entitled ‘‘Energy Security and Climate Change’’

because of that key integration.

Senator LUGAR. Thank you.

Thank you, Mr. Chairman.

Senator KERRY. Thank you, Senator Lugar. Appreciate it.

Senator Nelson.

Senator Bill NELSON. Madam Secretary, you’ve got a pretty good

idea of what we think should be the role that the United States

would play in the Bali meeting. What do you think are the international expectations of the United States in these U.N. talks in

Bali?

Ms. DOBRIANSKY. Well, I attended, as I’ve indicated, the

preministerial meeting, which was in Bogor, Indonesia, which comprised some 35 nations. And, first, I would say that one expectation

was to see how we would embrace the various recommendations

that were put on the table, including the importance of having a

Bali roadmap. We support that, we want to see that. Two, in terms

of having the four areas that I mentioned in my comments—adaptation, mitigation, financing, and technology—be elements comprising our discussion of a framework—a post-2012 framework.

Third, we were very vocal, during those discussions, about the importance of forestry and how critical it is to address the issue of

deforestation and land misuse, which comprises 20 percent of

greenhouse gas emissions. We came forward and supported having

a beginning, a middle, and an end. In other words, that we would

have an outcome concluded by 2009. I might add that there were

others around that table who did not necessarily support what I

am sharing with you.

I think we have already indicated, going into this meeting, that

we are open-minded. We want to have a constructive approach. We

want to see movement. Senator Kerry referenced, before, the importance of the IPCC. That will be a critical component of the discussions in Bali. And we also think that that is going to inform our

discussions, as well.

Senator BILL NELSON. Do you think that the rest of the world

thinks that the United States should lead in the development of

this post-2012 agreement in Bali?

Ms. DOBRIANSKY. In fact, during the preministerial meeting in

Bogor, a suggestion was made by the chair in the Indonesian’s

chairman’s summary, that the United States effort—the launch of

the Major Economies Meeting—would be helpful to moving the

process of negotiations along, and that that effort should report

back to the U.N. Framework Convention on Climate Change. Why

am I sharing this? This is an important initiative that we have put

forward, which seeks to bridge differences. We want to see a global

agreement. We want to see a global framework, of which we are

part and of which we do our part. At the same time, we want others, who have not also joined, to come to the table, as well. And

how do we go about——

Senator BILL NELSON. I’m going to have to cut you off, here, because we’re running——

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Ms. DOBRIANSKY. I’m sorry.

Senator BILL NELSON [continuing]. Out of time. So, the answer

to that question was yes?

Ms. DOBRIANSKY. Yes.

Senator BILL NELSON. The rest of the world expects us to lead

in the post-2012——

Ms. DOBRIANSKY. I think——

Senator BILL NELSON [continuing]. Agreement.

Ms. DOBRIANSKY [continuing]. I—first, we plan to lead, and also,

I think others would welcome our leadership.

Senator BILL NELSON. So, the answer is yes.

Now, on mandatory reductions, doesn’t the rest of the world expect us to lead on mandatory reductions?

Ms. DOBRIANSKY. I would say we have a dilemma here, Senator,

and that dilemma is: How do you get a global agreement that’s

going to be environmentally effective and economically sound? Let

me give you an example. We have canvassed a variety of developing countries, and have asked them the question: If the United

States goes forward and supports mandatory commitments, would

you join us in this effort? The answer has been, ‘‘No.’’ Why?

Through the Major Economies Meeting, we are striving to bring

parties together, we are looking at a way forward that will be robust and that will make a difference. We have put forth, along with

others, the need for having a long-term global goal. Second, we

have put forth the notion of having national plans, and, in those

national plans, the establishment of medium goals, which could be

mandatory——

Senator BILL NELSON. So, they——

Ms. DOBRIANSKY [continuing]. And they could be——

Senator BILL NELSON. So——

Ms. DOBRIANSKY [continuing]. Complied——

Senator BILL NELSON. So, the answer is yes—and the question

is, the rest of the world expects us to lead in mandatory reductions.

Ms. DOBRIANSKY. In this regard, I would say that they’re looking

to us for our leadership, and leadership that could bring us all to

the table and bridge consensus.

Senator BILL NELSON. All right, let’s try to——

Ms. DOBRIANSKY. And toward that end——

Senator BILL NELSON [continuing]. Bridge some of that consensus with China and India as greenhouse gas emitters. Now, you

mention that we had taken steps to do that. What specific steps

have we taken? You just mentioned we had taken steps. Specifically, what?

Ms. DOBRIANSKY. Meaning, in terms of the Major Economies

Meeting——

Senator BILL NELSON. China and India.

Ms. DOBRIANSKY. China and India have been part of our discussions in the Major Economies Meeting. This affords an opportunity

for looking at a way forward, a way forward in bringing them into

a global agreement and also our having a part in a global agreement. And here, as I’ve indicated, one of the approaches under discussion—and there are a variety of approaches under discussion—

is to have the differences of our national characteristics put on the

table, and then to look at, how does one come forward with apVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6602 CLIMATE sforel1 PsN: sforel1
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proaches that are going to be accountable and that will be, in fact,

complied with? If you have midterm goals established, you have national plans, you will have domestic laws, which you can ensure enforcement. This is one of the dilemmas and one of the challenges

that we are confronting. And, as I’ve indicated, this is one approach

that we’ve put on the table, but there are other approaches. In

order to be really effective here, and to make a difference, it has

to be global, and it has to be environmentally effective.

Senator BILL NELSON. Final question. Are you personally committed to hand off to the next administration, and to work with the

next administration, in order to achieve the strongest possible 2012

post agreement?

Ms. DOBRIANSKY. Senator, I’m personally committed. And, may I

just add, I have taken the personal time and effort to hear the

views of a wide variety of interlocutors from the business community, from civil society, from some of the representatives who are

even here today who will be speaking later; our panelists. Having

a discussion and trying to come forward with a way that will bring

us all around the table and for a global agreement that’s effective,

we are committed to.

Senator KERRY. Senator Hagel.

Senator HAGEL. Mr. Chairman, thank you.

Madam Secretary, welcome.

Ms. DOBRIANSKY. Thank you.

Senator HAGEL. Secretary Dobriansky, you and I have, on many

occasions, had many of these same conversations. And I wanted to

refer back to the general theme of Senator Lugar’s comments, because I think what he has focused on—and, as you know, through

our previous conversations and some of what you talked about in

the Asia Pacific Framework and the technology sharing public-private partnerships—came as a direct result of my legislation that

was the environmental title of the Energy Act of 2005. I have always believed that we cannot realistically talk about, look at, environmental policy without integrating energy and economic policy.

And I think much of the discussion today reflects that point. And

so, as Senator Lugar took you through a number of those issues,

I want to reflect on, generally, the integration of those three components; specifically, on what you can tell us might be the form

that we will see begin to shape in Bali with the integration of those

three dynamics. The President of China, for example, I think, in

September at the APEC meeting, said—and I think it was rather—

this direct—that China would not be held hostage to any mandatory requirements on the issue of emissions—carbon emissions.

Now, I assume that the President of China speaks for China and

reflects China’s position, as was the case in Indonesia, as will be

the case in Bali. So, how and what form are you going to integrate

all of this so that, at some point, we are going to hopefully come

out of Bali with something tangible, productive, and positive?

Ms. DOBRIANSKY. Well, two comments.

First, in terms of Bali, I think that, as I’ve indicated, our fundamental goal and objective is to identify what are the core elements

that we need to address in a post-2012 framework. We need to

have a process forward, and we need to identify ways of advancing

and pushing that process forward, because, clearly, going to Bali,

35

there are differing viewpoints about how one is committed. The one

fundamental goal and objective that we have going into this is to

have a global agreement that is environmentally effective, as I’ve

mentioned, and economically sustainable. And, by putting forward

the Major Economies Meeting, we’re striving to bring these countries, that are 80 percent the biggest energy users, 80 percent in

terms of their economic output, and also 80 percent emitters, to

forge the most robust and effective way of reducing emissions.

You’re quite right in stating—and as I have mentioned previously

to Senator Nelson’s question to me—we have posed the question to

a number of developing countries, ‘‘Well, what if we took on certain

measures? What would you do?’’ Here, technology matters greatly.

Economic growth matters greatly to the developing world. We think

that there’s a dire need to look at the most innovative and practical

ways of bringing these countries in.

Why I cited the Asia Pacific Partnership earlier and as you’ve indicated, we’ve had conversations about this, and given your legislation, we have tried to have practical ways of bringing other countries into this fold to see that there are benefits to be accrued from

taking very concrete and tangible steps that have economic consequences. These steps also have consequences in terms of energy

security, and at the same time, by the way, will also reduce greenhouse gas emissions, which is part of our goal and objective.

What I can say to you is, is that our effort is to try to get a successful roadmap and to try to work vigorously with all of these

partners, particularly the emerging countries, to address the kinds

of concerns that they have.

If I may give one more example, we put forth the—President

Bush announced the formation of an International Clean Energy

Fund. Why? Because there’s a need to have others come forward,

including developing countries to provide investments in this area.

It’s not only in their interest, in our interest, it’s in the world’s interest, it’s in the planet’s interest, specifically. Those are the kinds

of initiatives that we are trying to come forward with.

I would say that there is a dire need for innovation here. We welcome this opportunity to come forward and have this discussion,

and to continue it, because innovation is really needed as we go

forward.

Senator HAGEL. Thank you, Madam Secretary, Mr. Chairman.

Senator KERRY. Thank you very much, Senator Hagel.

Senator Menendez.

Senator MENENDEZ. Thank you, Mr. Chairman.

Madam Secretary, in the Asia Pacific Partnership Meeting that

you’ve talked about often, this past February, you said, ‘‘The U.S.

policy is a mix of mandatory/voluntary/tax-incentive measures to

address climate change. We believe climate policy should be

science-based.’’ And, in that regard, we welcome the recent release

of the Intergovernmental Panel on Climate Change’s fourth assessment report.

Now, before, in response to Senator Kerry’s question, what mandatory aspect of this were you referring to? Because, as far as I

know, the administration has never supported any form of mandatory provisions. And certainly not what you were referring to before; those are goals.

36

Ms. DOBRIANSKY. The administration has supported mandatory

measures, domestically. That’s what we are referring to in this——

Senator MENENDEZ. Which——

Ms. DOBRIANSKY [continuing]. Case.

Senator MENENDEZ [continuing]. One, specifically.

Ms. DOBRIANSKY. Specifically, President Bush has put forward,

here, to the Hill, the ‘‘20-in-10’’ proposal, about having a 20-percent

reduction in 10 years on gas consumption. We have building code

standards——

Senator MENENDEZ. Those are goals. They’re aspirations. The

question is: What mandates does the administration support that

actually puts the bite to ensure that, in fact, any aspirational goal

is achieved? None that I know of. Correct me if I’m wrong.

Ms. DOBRIANSKY. As I said, Senator, even Senator Kerry referred

to, before, the Clean Air Act. We just came back from

negotiating——

Senator MENENDEZ. Well, the Clean Air——

Ms. DOBRIANSKY [continuing]. The Montreal Protocol——

Senator MENENDEZ [continuing]. The Clean Air Act is the law of

the land. I’m asking you——

Ms. DOBRIANSKY. The Montreal Protocol—my colleague just came

back from negotiating that, which has binding commitments. There

are a number of areas that have been——

Senator MENENDEZ. Well, I——

Ms. DOBRIANSKY [continuing]. Part of our mandate.

Senator MENENDEZ. With all due respect, I think that——

Ms. DOBRIANSKY. We have Federal standards, in terms of building codes——

Senator MENENDEZ. With all due respect, I think that those are

aspirations—you know, the——

Ms. DOBRIANSKY. I’m not aware that——

Senator MENENDEZ [continuing]. The bottom line is——

Ms. DOBRIANSKY [continuing]. Those are aspirations. I’ve seen a

significant change, in terms of our building codes——

Senator MENENDEZ. Bottom line, I think it’s fast and loose to

suggest that mandatory, as you described, is, in fact, mandatory in

any consequential way to the ultimate challenge we have.

Let me ask you this. How is it that you talk about science-based,

when scientists are telling us that we need to cut emissions 80 percent by 2050, and there’s nothing that the administration has put

forth that would meet that challenge?

Ms. DOBRIANSKY. Senator, science informs our policy, but we look

at a broad range of issues in determining what are the most effective policies. We look at what are economic components of our policy, what might make a difference, where jobs may not be cut or

other——

Senator MENENDEZ. So, it’s science-conditioned.

Ms. DOBRIANSKY. No; I wouldn’t say that. I think that one of the

appeals made by science is indicating that the Earth is warming

and that also humans are contributing to it.

Senator MENENDEZ. Well, let me ask you this.

Ms. DOBRIANSKY. We’re looking at approaches that address

those——

Senator MENENDEZ. You consistently——

37

Ms. DOBRIANSKY [continuing]. Kinds of concerns.

Senator MENENDEZ [continuing]. Refer to costs, but you only talk

about the costs of action. Why is it that you fail to talk about the

costs of inaction and quantify that as part of the equation?

Ms. DOBRIANSKY. By the way, when the Stern report came out,

one of its main appeals was, we need to act now, and that there

are costs of inaction. And, by the way, we think that there should

be near-term steps taken now, there shouldn’t be costs of inaction.

We should take near-term steps, medium-term steps, and longterm steps. We commented on the issuance of the Stern report,

which made that appeal.

Senator MENENDEZ. Well, if I were to listen to just about every—

every time I’ve heard the administration speak, you would hear the

manner of exorbitant costs that would be imposed on business and

consumers. There’s very little discussion about the costs of failure

to act, yet we know rising sea levels will be an enormous expense

for all of the coastal States of this country, including my home

State of New Jersey. And, we know that Sir Nicholas Stern has estimated that failure to act could actually shrink the global economy

by 20 percent. And we know that every dollar spent now would

save us five or more later on. That never seems to be something

that I hear about in the balance of the equation of costs.

Let me ask you this.

Ms. DOBRIANSKY. Senator, may I——

Senator MENENDEZ. Do you think——

Ms. DOBRIANSKY [continuing]. May I just respond to that,

though?

Senator MENENDEZ. I——

Ms. DOBRIANSKY. Because my mandate——

Senator MENENDEZ [continuing]. I heard your——

Ms. DOBRIANSKY [continuing]. Is not——

Senator MENENDEZ [continuing]. Response.

Ms. DOBRIANSKY. My mandate is——

Senator MENENDEZ. Basically, it’s not——

Ms. DOBRIANSKY [continuing]. International——

Senator MENENDEZ [continuing]. Part of it.

Ms. DOBRIANSKY. No; but it’s important. My mandate is inter- national. And we have put some $37 billion into efforts that support a wide range of initiatives—carbon sequestration, methane,

hydrogen, renewables, nuclear—that are international. We are acting now, we are engaging others. My mandate——

Senator MENENDEZ. Let me——

Ms. DOBRIANSKY [continuing]. Is not domestic.

Senator MENENDEZ. Let me ask you this. You keep referring to

the developing countries. And you know, carbon dioxide stays in

the atmosphere for an average of 100 years or more. Industrialized

nations clearly are, by far, more responsible for current greenhouse

gas emissions concentrations than developing nations. So, then,

why should we expect developing nations to agree to mandatory

cuts, when, historically, they are much less responsible for the

problem that was created by industrialized countries? In other

words, why are we constantly hearing from the administration that

we look to developing nations for leadership on an issue that developed nations created?

38

Ms. DOBRIANSKY. Senator, there are two key points here. One is,

in order to really have an impact on the reduction of greenhouse

gas emissions, an effort forward must be global; No. 1. No. 2, in

terms of obligations—by the way, I’ve indicated that we should be

sensitive to the diverse characteristics of individual countries. And

let me just add that, in terms of the character of commitments, all

countries have responsibility, but, in terms of the content, I would

say to you that that content must be differentiated. There are countries that should take on and shoulder greater responsibility. That

will be part of our discussion as we go forward from here.

Senator MENENDEZ. Well, let me just close by saying, we can’t,

in a sense, lead in so far as the concern that other countries will

not act accordingly. You know, it seems to me, if you look at Senator Lieberman and Warner’s bill, and any possible cap-and-trade

bill, that they will allow for tariffs to be placed on imported goods

from major emitters who do not have adequate measures to cut

their own emissions. In this way, our own domestic cuts will provide international leadership and incentives for developing countries to act.

What I largely hear, to be very honest with you, is that, as the

world heats up, we meander down a cool path in which I hear a

lot of wordspeak, but I don’t hear a lot of leadership that creates

any real action. And, at the end of the day, that leads us to a consequential path in which we will have a fatal result. And that’s not

something we should be bequeathing to the next generation of

Americans. I listened to your answers, but I’m not sure where

we’re headed under real leadership.

Thank you, Mr. Chairman.

Senator KERRY. Thank you, Senator Menendez.

And, as I turn to Senator Corker, let me just comment on the

Montreal Protocol we passed in 1992, I think, if I recall correctly,

and DuPont and others were screaming for us to pass it, because

they had an alternative, and the companies basically wanted to

move there. So, it’s reassuring to know you didn’t want to move

back on it. But it’s hardly this administration’s mandatory request

or requirement.

Senator Corker.

Senator CORKER. Thank you, Mr. Chairman.

And, Madam Secretary, thanks for your testimony.

It is interesting to continually sort of feel this conundrum that

we’re in, where, you know, we don’t want to take a leadership role,

because other countries might not play a role. And setting all of

that aside, if you could be the czar, if you will, and lay out what

an agreement in 2009 should look like, what would be the basic

components of that agreement, setting aside this conundrum, if you

will, that we continue to talk about?

Ms. DOBRIANSKY. Well, in terms of taking a leadership role, our

goal and objective here is to have, as I’ve indicated——

Senator CORKER. No, no, no; I’m not talking about goal, I’m talking, like, specific——

Ms. DOBRIANSKY. Specific——

Senator CORKER [continuing]. Attributes. Yeah, I mean, I understand about the goals and all that. But what would be the specific

39

attributes that countries around the world would agree to as it relates to lowering carbon emissions?

Ms. DOBRIANSKY. Well, I was going to say—I wasn’t using the

term ‘‘goal’’—goal out of Bali, that’s what I was going to say.

Senator CORKER. OK, yeah.

Ms. DOBRIANSKY. Not literally a goal, in the sense that you’re referring to.

Look what other countries have focused on. They want to discuss

mitigation, adaptation—adaptation is critical in this upcoming

meeting. Adaption has not—in previous COP meetings—has not

really taken on the significance or the prominence, that is requested by many developing countries. Why does that matter? Because adaptation measures are measures that will especially build

capacity and help developing countries in dealing with climatic

change. We have embraced that. We have indicated that we would

like to see stronger measures taken in the area of adaptation. That

is one of the areas that they have——

Senator CORKER. Let me——

Ms. DOBRIANSKY [continuing]. Identified.

Senator CORKER. Let me focus. And I apologize. We just have

limited time.

Let’s just focus on mitigation only, and let’s talk about the attributes there, that if you were the czar and could set all the rules

in play that the United States and Europe and Asia and other

players would be a part of, what would those attributes be, of mitigation?

Ms. DOBRIANSKY. Well, in terms of attributes of mitigation, we

would like to see all countries have responsibility for the character

of a framework and its outcome. In terms of the content, we would

see it as being differentiated, and that would be contingent upon

countries’ different circumstances. We would like to see domestic

laws. One of the challenges here has been in terms of compliance

and accountability. Even if you have a global framework, if a particular country is not meeting its requirements, then how do you

enforce particular measures in that country? So, that’s the kind of

discussion that we are having. How do you get compliance? how do

you get accountability? and how do you get countries at the table?

One of my colleagues gave a——

Senator CORKER. Let me just ask you the—so, you would not,

then, be talking about some global exchange with carbon, some

cap-and-trade system that emerges, where the world is involved in

that. That would not be——

Ms. DOBRIANSKY. Some have put forward that suggestion, but let

me say that there are those who have spoken to this issue. I

know——

Senator CORKER. But I’m asking you——

Ms. DOBRIANSKY. I’m going to——

Senator CORKER [continuing]. Not——

Ms. DOBRIANSKY. I’m going to respond.

Senator CORKER. OK.

Ms. DOBRIANSKY. That some have spoken to this issue, like Jeffrey Sachs who recently has looked at the developmental consequences of such an approach. How can you verify it? How can

you ensure that there is accountability? We are looking at a variety

40

of approaches, which come back to the basic concept of getting results and effectiveness.

Senator CORKER. If we had troubles getting other countries involved, and we decided, as a country ourself, to be involved in a

cap-and-trade program, would tariffs on their goods coming into

our country be something that you would find that interesting, if

they were not a part of a regime like that themselves?

Ms. DOBRIANSKY. I—would you——

Mr. REIFSNYDER. Well, no, if I just could mention, Senator, because it may be illustrative, in the—at the Montreal Protocol meeting in India last year, which India hosted, they were quite critical

of those aspects of the Montreal Protocol that provide for trade

sanctions. And this kind of—the notion that we could unilaterally

take on a cap on our emissions and then threaten people with trade

sanctions who didn’t comply has not been a very popular approach

over the years in the U.N. Framework Convention on Climate

Change. I think it’s one of the things that makes people quite nervous about meetings like Bali, when they feel that they’re being

threatened with sanctions if they don’t agree to the approach someone else has laid out for them. I think we have to build a cooperative approach to this.

Senator CORKER. Does anybody—do you all work with the Energy Department very closely? I’ve found a—but on this particular

issue as it relates to——

Ms. DOBRIANSKY. Very closely, as I—as I indicated, when we—

when we go to COP meetings, we have a Department of Energy

representative. When we launched the Major Economies Meeting,

the Department of Energy has been a key player. In fact, Senator

Menendez mentioned mandates, were many of the mandates

here—building codes, Federal appliance efficiency, Federal renewable fuels, Federal fuel economy, CAFE, all of these are mandated—have mandatory standards. The majority of them have

mandates that have been brokered through the Department of

Energy.

Senator CORKER. Do any of the folks at Energy look at a potential cap-and-trade program? And I only focus on this because I

know that’s more immediate, if you will, as it relates to our focus,

because of some bills that are emerging. Do any of those people

look at cap-and-trade as an opportunity for our country as it relates to energy security?

Ms. DOBRIANSKY. There’s a discussion and a debate that’s going

on, as you know, about this, on the issue of cap-and-trade, and

there have been reservations and serious concerns expressed by the

administration because of the ramifications of cap-and-trade domestically—the ramifications on our economy, and the ramifications for companies putting investments into technologies. There

have been a number of issues that have been of concern, that have

been expressed by those on the domestic side.

Senator CORKER. Thank you. And I apologize for trying to focus

just during this 7 minutes, but thank you very much for your testimony.

Ms. DOBRIANSKY. Thank you.

Senator KERRY. Thank you, Senator Corker. I think it’s been

good to try to get that focus.

41

Senator Casey.

Senator CASEY. Mr. Chairman, thank you very much. And thank

you for putting this hearing together for us. It’s very valuable.

Madam Secretary, I just want to make a brief statement, in summary fashion, but then also get to some questions.

And this is, of course, my opinion, but I think it’s widely shared

opinion, and I think it—it’s the point of departure, when you begin

a discussion about climate change internationally or our responsibilities here in the United States.

I think this discussion, with all the details in between, they’re all

important, and the players are all important. But this discussion

begins and ends with the President of the United States, and this

President. And, unfortunately, no matter how you—no matter how

I look at this issue, when you consider what President Bush has

said or not said, actions he has taken or not taken, just look at his

calendar for the last couple of years, there’s a palpable sense—or,

I’d say, a palpable reluctance or a sense that you have of his own

reluctance. I don’t really get a sense that he believes this at all,

that he really believes this is a threat to human life. We can talk

about the environment in a very abstract way, but a threat to

human life, and that this is a major priority, maybe in the top two,

maybe three, of any President of any administration of any Congress. I don’t get that sense at all from this President. I don’t know

what he believes, really. I’m not sure he really believes that it is

the threat that I believe it is. There’s no sense of urgency. I mean,

this is a President who, on many issues where people don’t—people

disagree with him, there’s a clarity when he speaks about some

things. You know exactly where he stands.

And on this issue, there’s no sense of clarity, there’s no sense of

commitment or urgency or intensity. Pick your word, it’s not there

with this President. So, you’ve got a tough job on your hands, because I don’t get the sense at all that this administration is committed to anything you’re talking about, unfortunately. And I know

that there are administrations of both parties that have that problem, where the people in the trenches, whether you’re an Under

Secretary of State or whether you’re much further down in the

pecking order, that you’re doing things that are about trying to

manage that imbalance or that inconsistency between what should

be done and what maybe the Department of State would want to

do and what the President doesn’t want to do. That’s my own opinion. But I think it has a direct connection to what we’re talking

about here.

I mean, we’re talking about an administration—let me just ask

you, just a parenthetical management question. Who’s the top person in the State Department on this issue? You’re that person?

Ms. DOBRIANSKY. Right.

Senator CASEY. Now——

Ms. DOBRIANSKY. Correct.

Senator CASEY [continuing]. Other than you and Secretary

Rice—I’ll leave the President out of this for a brief moment—other

than you and Secretary Rice, who else would you identify as the

top people in this administration on climate change internationally.

Let’s set aside the domestic considerations.

42

Ms. DOBRIANSKY. On international issues, we also have Deputy

Secretary John Negroponte. He was previously the Assistant Secretary for Oceans Environment and Science—he cares a great deal

about these issues. There is the Chairman of the Council on Environmental Quality, Jim Connaughton; the Deputy National Security Advisor for International Economic Affairs, Dan Price; and

Steve Johnson, the Administrator of the Environmental Protection

Agency. We also have worked very closely with the Department of

Energy, and its Secretary, Sam Bodman, and his——

Senator CASEY. OK.

Ms. DOBRIANSKY [continuing]. Team; and the President of the

United States.

Senator CASEY. OK. How long have you been in this job?

Ms. DOBRIANSKY. I have been in this job since the beginning of

this administration. I came in——

Senator CASEY. OK.

Ms. DOBRIANSKY [continuing]. On May 1 of 2001.

Senator CASEY. In all the time that you’ve had this job, how

many times were those individuals listed—how many times were

those people in the same room with the President of the United

States for a—not just a briefing, but a substantial meeting about

these issues?

Ms. DOBRIANSKY. A very significant number of times. In my first

year, prior to——

Senator CASEY. How many since you’ve been there?

Ms. DOBRIANSKY. Oh, I can’t quantify, because we’ve had so

many meetings on——

Senator CASEY. With the President of the United States.

Ms. DOBRIANSKY. Some which have included the President of the

United States. My first year, the issue of climate change was nonstop, in terms of meetings at the White House, and that was, I was

just about to say, before September 11.

Senator CASEY. Well, if you can provide to the committee, as part

of our record, the dates on which all those individuals had a meeting with the President of the United States on this issue, I think

that’s important for the record.

[The written response of Under Secretary Dobriansky to the

above question follows;]

Climate change comes up frequently as part of the President’s regular business.

While I cannot speak to the wide range of officials that you have listed, I can say

that I have attended a number of meetings convened by the President on climaterelated matters. Most recently, before this hearing, I joined Secretary Rice for a policy discussion with the President on September 20. And, as you know, the President

hosted the Major Economies Meeting on Energy Security and Climate Change on

September 27–28, 2007. In addition, climate has been discussed in various bilateral

and multilateral meetings, for many of which I joined the President. Two of the

most significant meetings were the U.S.–EU summits and the G–8 meetings.

Senator CASEY. And I was looking at a—this is a list of principles

that our office put together when we talk about this issue, just

basic foundational principles on climate change that guide me, because there’s a lot of legislation out there and a lot of ideas. But,

let me just give you the top three, in this order. No. 1, make mandatory—mandatory greenhouse gas emissions. No. 2, reduce greenhouse gases at rates and levels identified by the international

43

sciences of 80 percent by 2050. And, No. 3, take immediate action—

immediate action to reduce emissions in the short term.

Here’s the problem I have. They are three basic goals that I

think are widely shared around the country, widely shared in the

Senate and the House in both parties. I come from a big, big State,

a big, diverse State. And I think those principles are generally

agreed to. I don’t have any polling to show that, but I can’t imagine

there isn’t broad support for those. And here’s the problem. You’re

asserting here before this committee that the President of the

United States, who a lot of people don’t believe has a real commitment to this—he doesn’t agree, and your administration doesn’t

agree, with any of those three, or maybe one of those three, I’m not

sure which. So, how can the President be an effective international

leader on climate change when he isn’t leading a consensus on climate change in the United States of America? I don’t know how

that works. If you can tell me, I’d—I’m—I’ve got 20 seconds left,

I want to ask another question.

Ms. DOBRIANSKY. In 20 seconds, Senator, my mandate is international. I work very closely with my colleagues on the domestic

side. And I’d like to respond to your question, actually, for the

record with that, and involve my domestic colleagues because

there’s a very strong effort, domestically, in charting a course for

the United States. I’ve tried to indicate what we’re doing internationally, which—a substantial amount has been put into it over

these years, and the breadth and the scope is really significant, in

terms of carbon sequestration, methane among other areas. My colleague just came back from a meeting in Norway, and he told me

that, actually, many of the interlocutors there were even amazed

at the kinds of steps being undertaken in dealing with one of the

most potent sources of greenhouse gas emissions—methane.

Simply put, I would say to you that, in my longer testimony, if

you look through that, you will see the scale and the scope of the

kinds of initiatives that we are taking, and that we have been engaging other countries on, and in which we are very committed to

this issue.

Senator CASEY. Well, we need Presidential leadership, but we’ll—

my time is up.

Senator KERRY. Thank you, Senator Casey.

Are we ready to go?

Senator MURKOWSKI. Ready to go? Thank you.

Thank you, Madam Secretary, for your appearance here this

afternoon. You know, we’ve had a fair amount of discussion about

the mitigation aspect, a little bit about the technology, certainly

Senator Hagel has been involved with that initiative through

EPAct 2005. But I want to ask a couple of questions about the adaptation component that you have addressed. And you mentioned,

specifically, the forestry adaptation.

Certainly in my State, climate change is happening. We are seeing it, whether it is change in vegetation as it advances northward,

whether it is the change in our fisheries—we’re seeing different

species of fish further north. Certainly, you see all of the articles

about the thinning of the ice and the receding of the ice pack and

the consequences, the impact, not only to the land, to the animals,

to the water fowl that is out there, but the people that rely on

44

them. So, for us, adaptation is very, very key. It’s not some theoretical exercise. Senator Menendez mentioned that, in his State of

New Jersey, with the coastline, potentially his constituents could

be impacted. Well, my constituents are being impacted. I’ve got

communities that are literally being washed out to sea as we

speak. And yet, we—we’re trying to advance legislation here within

the Congress that addresses things from the domestic perspective,

and we really are not focused on the adaptation component.

So, I’m pleased to see that there is a—I guess, a greater focus

as we move forward. I’m curious, though, how much has the discussion really centered on adaptation, and how will we be able to provide for this, financially? Take just one coastal village. We’re looking at $120 to $140 million to move a little village. This is one

small village in Alaska. What is the proposal, as we move forward?

I noticed in the Framework for a Post-2012 Agreement on Climate

Change, there is reference to—in the adaptation section, ‘‘a substantial package of financial support, including public and private

funds, should be established.’’ Certainly necessary. We’re also going

to need considerable capital as we develop the technologies, not

only for this country, but the technologies that we will be required

to help other countries with, perhaps the less developed nations.

They’re going to be looking to us for that assistance. To what extent—whether it’s the adaptation or the technology, to what extent

does the financing piece of this come into play? And what are the

proposals out there for how we realistically can deal with these

very, very difficult situations?

Ms. DOBRIANSKY. Senator, thank you. I’d like to make several

points. First, as I indicated earlier, it is very significant that adaptation is put into the framework, and, at the same level of mitigation. Far too often, we have looked at mitigation, and mitigation

alone. And what has been striking, in terms of the discourse in the

recent meetings leading up to Bali is that there has been agreement that there is a need to address adaptation. So, first, this is

where countries basically are.

Second, in terms of the issue of funding, we have put in, ourselves, a significant amount of resources for practical approaches,

starting with the basic approach of being able to determine and

help those developing countries forecast and deal with climatic

change. And how do you prepare for that? That’s through the

Global Earth Observation System of Systems, in which you have

some 70 countries, and even over that, developing countries, in particular. We’ve put moneys into this initiative to try to help them

in building capacity. That’s not enough.

Senator MURKOWSKI. Who else is helping us with that

financing——

Ms. DOBRIANSKY. I could provide you the list. It’s significant——

Senator MURKOWSKI. Well, I know that——

Ms. DOBRIANSKY [continuing]. Of both——

Senator MURKOWSKI [continuing]. with the——

Ms. DOBRIANSKY [continuing]. Developed and developing of——

Senator MURKOWSKI [continuing]. With the Asia Pacific——

Ms. DOBRIANSKY [continuing]. A wide range——

Senator MURKOWSKI [continuing]. Partnership, the United States

had kicked in their share, but there was some issue as to whether

45

or not every—the other participants had made equal financial contribution.

Ms. DOBRIANSKY. There have been different contributions put in.

There’s a meeting coming up of the Global Earth Observation System of Systems in South Africa, in 2 weeks’ time. Other countries

have come forward and have put in resources.

Mr. REIFSNYDER. The European Commission, in particular, has

been very supportive of this effort and has put a lot of money into

the—GEO, the Group on Earth Observations, I should say.

Ms. DOBRIANSKY. But, third, that’s not enough. What is also critical is looking for those most effective development strategies. We

have worked very closely with the U.S. Agency for International

Development in looking at how we deal, not only with issues of climate change, but how we also deal with development approaches

to countries and in a way that’s sustainable. One of the most

graphic examples is dealing with forestry, because forestry has

been looked—at mostly in a mitigation context. But, by the way,

there are also these issues you hear from small island states—How

can you help us in terms of our livelihood and ensure that we can

use forests as part of our livelihood, and, at the same time, also

preserve our forests? How do you balance the two? We look at these

issues through a broader prism of development strategies in which

we’ve put in significant resources.

I’d like to mention—which I know you have an interest in, Senator—my colleague was in Norway, and they were discussing, in

particular, adaptation measures in the Arctic and looking——

Senator MURKOWSKI. Is that going to be part of the Arctic policy

that we advance, then?

Mr. REIFSNYDER. Yes; this meeting on Oslo last week was really

concerned about not only carbon dioxide emissions as a factor, in

terms of warming in the Arctic, but also on emissions of other

gases; in particular, methane, volatile organic compounds, and

black soot was another key focus. I know that they’re concerned

about melting of the Greenland ice sheet, about the melting of sea

ice, and about release of methane from Arctic tundra.

This was a very interesting opportunity, Senator, because we had

countries there—in particular, Sweden and Norway—that knew

very little, I found at the meeting, about our Methane-to-Markets

Partnership, and I detected a great deal of interest in that, in trying—in terms of addressing methane emissions as a way of trying

to slow warming in the Arctic, in particular. So, it was a very positive outcome from the session.

Could I mention, if I could, one other aspect? I’ve been—I was

the person that was in Montreal in September that negotiated, on

behalf of the United States, the accelerated phaseout of HCFCs

under the Montreal Protocol, which has an enormous impact, 25

percent of Kyoto is what we anticipate is the CO2 equivalent, 3

gigatons. And it’s been kind of disappointing to me to—that people

have not really focused on the fact that this was a major step forward on the climate front. It has the potential, if we can find substances that have no global warming potential, or a much lower

global warming potential, to be even bigger than the impact of

Kyoto.

46

So, I think it’s important to keep in mind—I understand that

Montreal Protocol is not the focus of our climate efforts, but the

links between actions under Montreal Protocol and the climate that

have a great impact on emissions of greenhouse gases.

Senator MURKOWSKI. Thank you.

Senator KERRY. Senator Murkowski, thank you very much.

We could easily have another round, but we don’t have time to

have another round. We have an excellent second panel that’s been

waiting patiently.

Senator BILL NELSON. Mr. Chairman, I just want to enter in the

record, if I may, a statement made by the Executive Secretary of

the U.N. Framework on Climate Change, in response to the question that I had asked the witness on the United States committing

to leading the development of the post-2012 agreement in Bali. And

this is what the Executive Secretary says. Senator Wirth is going

to quote this in his statement, ‘‘Bali needs to launch a negotiating

agenda, decide that negotiations need to begin on post-2012 climate-change policy, launch that process formally, decide what the

main elements that need to be negotiated are, set a timetable for

negotiations, and, like every good timetable, set an end date. That

end date should be 2009.’’

Senator KERRY. Well said, Senator. And let me just, as I thank

you, Secretary Dobriansky—and I do thank you, we’re very appreciative of you being here; it’s a very important dialogue, and, you

know, this is not a ‘‘gotcha’’ process, it’s really a sort of ‘‘how do

we get there’’ process, and share our thoughts—but let me just underscore one thing, if I can, to you. You know, it is sometimes forgotten in some ways, because of the power of the Presidency, but

we are a separate and coequal branch of government, and I know

that the democratic majority of this Congress wants to proceed forward and show leadership on this. And it is my hope that we don’t

have two separate policies in Bali. We’re certainly prepared to sit

with you and talk about it, but we are also equally prepared to go

there, to make sure that the rest of the world understands how serious America is about this, and how there is leadership in the

waiting, if you will.

You will not complete this task; 2009 will have a new administration of one party or the other, and a new President. But many

of the people up here will still be here and trying to move forward

on it. So, I think that’s an important component of how we go at

this, No. 1.

No. 2, there really is a kind of disconnect on the leadership issue.

I know those countries look to us when we have a discussion with

them, and I’ve heard the Indians, and I’ve heard the Chinese—for

20 years, I’ve heard the Chinese tell us it’s a conspiracy against

their ability to grow, and it’s a Western ability to hold them down.

And that’s now transitioned. They’ve got a new line on it. In fact,

they’re changing, quite significantly, on the issue, because they’re

seeing the consequences of their own sacred glaciers melting and

rivers and other agricultural problems that are ensuing. In fact,

China just announced some very significant mandatory steps with

respect to their businesses. Now, whether they’re enforced or not,

that’s the next measure. But they announced them, and they’ve set

a goal of 36 miles per gallon for their vehicles, which is way ahead

47

of where the Senate bill is. So, other countries are doing things

that, if we were smart, we could just take and measure. Those are

the measurements. They can be given credit for those things. This

can be worked out in a way that doesn’t diminish their ability to

grow, and speaks to that fear and sense of conspiracy, all of which

can become part of the mosaic of a global agreement that we’re

moving in the same direction. But if the United States isn’t saying

to them, ‘‘Yes; we know your reservations, but this is what we have

to do, this is the direction we’ve got to move in,’’ it’ll be like Senator Lugar said, it’s just going to kind of drag on and to go anywhere. They’re waiting for us to show that leadership.

And the—I’d just close by saying this to you. You know, if we’re

all wrong, if every one of those scientists—everybody’s wrong, and

the figures aren’t going to be what they are, and you’ve made the

decisions to go down this road, what’s the worst that’s going to

happen? Well, the worst that’s going to happen is, you’re going to

have a whole bunch of new technologies, you’re going to have

cleaner air, you’re going to have new jobs, the health of your nation

will be better, you’ll have reduced hospital visits for kids with asthma, you’ll have unbelievably better agricultural practices, kids will

be able to fish again in some places in America where they can’t

today—19 States, you can’t fish, you’re not allowed to eat the fish;

44 States, they have warnings against it. You can run down the list

of these things. All those things improve, not to mention the national security of the United States, because, to deal with climate

change, you have to deal with energy; and to deal with energy, it

makes us more secure, less dependent on foreign sources.

So, in every respect—that’s the downside; if we’re wrong, we’ve

done all those good things. But if you’re wrong, or those who resist

this are wrong and don’t show leadership, the downside is catastrophe, by everybody’s measure.

So, I think, as public people, we’ve got a big responsibility here,

and I hope we’re going to see the leadership in Bali—in ensuing

days. And we’re ready and prepared to meet with you any day,

anytime, anywhere, to work through how we do this. But I think—

you know, Nicholas Stern made it clear, every economist makes it

clear, you’ve got to measure the downsides of the mitigation. Lisa

Murkowski just talked about it: $140 million in Alaska for one village. What happens if that 20 inches to 55 inches of sea rise, at

the current rate, that’s without the Arctic glacier and without the

Antarctic, and so forth, melting—you know, that’s 40 million-plus—

50 million people displaced on the planet. Just that. Current expectation.

So, I really think the urgency of leadership has got to be felt, and

it would be so wonderful to have a sense of how the President

feels—everybody knows how the President feels about Iraq, but

they sure don’t know how he feels about this. In fact, they think

it’s to the contrary. That’s the distinction Senator Casey was talking about.

So, we hope this can change in the next weeks. Maybe it won’t,

but we sure hope it can.

Ms. DOBRIANSKY. Senator, may I just make two closing comments?

Senator KERRY. Absolutely.

48

Ms. DOBRIANSKY. I wanted to read—you know, I was previously

with the Council on Foreign Relations before coming into this job.

You gave a speech at the Council, and you had, ‘‘Our primary

goal’’—at least from your prepared text—‘‘Our primary goal in Bali

must be to arrive at a mandate for future negotiations to finally

reach a truly global agreement on a truly global effort, not one that

leaves the world’s largest emitter of the past and the largest

emitters of the future outside the system.’’

I want to say, in the spirit of what you’re saying, we completely

agree with that goal, that objective, going into Bali. I will look forward to continuing this discussion and thinking about, you know,

in trying to reach that objective, how we can go forward in the

most effective way. And there are multiple ways of doing that.

The second point I just would like to make is the comment, you

know, made before, about the President. The President has, I

think, shown leadership in ways that I think need to be underscored; the fact that, at a time when we didn’t have a global agreement and all parties at the table, that we did not go forward with

that.

In terms of the scale and the scope of the range—full range of

what we’re doing, my mandate is international. I may not know

everything that we’re doing domestically. I have colleagues that do

that. But we are doing a significant amount that President Bush

has blessed, has launched, has encouraged. And we want to continue along that path.

As I said in my longer version of my testimony, it fully documents the scale and the scope of how we’re using, and how we’ve

used, some $37 billion toward that end.

Senator KERRY. Well, let me give you an example of the kind of

thing you might grab onto. And I appreciate those comments, and

I stick by them. I think that’s the goal. But I still think we have

to lead to get there.

Senator Stevens and I have introduced, on the Commerce Committee, a bill to immediately deploy three to five carbon capture

and carbon storage plants. So, we have storage and sequestration,

three to five of each—we ought to do this, immediately, commercial

scale, as rapidly as possible. Now, I think if you went to Bali and

embraced that, and said, ‘‘The United States is going to immediately do this, and we’re prepared to share the technology and assist China and other countries in order to implement it as rapidly

as we know what’s best,’’ that would go a long way, in my judgment, to bring people to the table in a serious way. So, we hope

you’d consider that and some other steps. We’re about to spend $25

billion in the farm bill for a program put in place in the 1980s,

called, you know, Freedom to Farm, which allows people who don’t

even farm to get huge payouts. How much are we going to put on

the table in Bali to help with this technology development and

these other practices? I think those are the issues of leadership

here that we need to see. And so, we hope.

I don’t know if—Senator Lugar, I’ve monopolized. Thank you.

We really thank you. This record will remain open in the event

any Senators want to submit some questions.

49

And we do look forward to testimony of the next panel. We’re

very grateful to you for coming. I look forward to following up with

you before we go there.

Ms. DOBRIANSKY. Likewise. Thank you.

Senator KERRY. Thanks so much.

Thank you.

Ms. DOBRIANSKY. Thank you.

Senator KERRY. Could we ask the second panel to come up? And

we’re very, very appreciative for your patience. It’s a worthwhile

engagement, and we look forward to your testimonies: Tim Wirth,

who is a good former colleague of all of ours, and friend, and current president of the United Nations Foundation, who, I might add,

has been unbelievably diligent and involved, and has traveled near

and far in an effort to further these issues and others, and we’re

very grateful for his work and leadership; Richard Sandor, chairman and CEO of the Chicago Climate Exchange; and Jonathan

Pershing, director of the Climate, Energy, Pollution Program at the

World Resources Institute.

Thank you all very much for being here.

Senator Wirth, would you—Secretary Wirth.

STATEMENT OF HON. TIMOTHY WIRTH, PRESIDENT, UNITED

NATIONS FOUNDATION, WASHINGTON, DC

Senator WIRTH. Thank you very much, Mr. Chairman. And I’m

delighted to be here and to see so many old friends.

I must say, having been the climate negotiator for the United

States from 1993 to 1997, the idea that there would be eight U.S.

Senators showing up for a climate hearing is absolutely wonderful.

At that point, we could get no attention, you’ll remember, or very,

very little attention, to the issue, with the exception of a few of

you, and this is great.

I thought, if I might put my statement in full——

Senator KERRY. The full statement will be——

Senator WIRTH [continuing]. In the record, Mr. Chairman——

Senator KERRY [continuing]. Put in the record for everybody. If

you want to summarize, then we——

Senator WIRTH. I just would make three points that might be

helpful to the committee. The first relates to Bali. Let me go back

to the quote that Senator Nelson read from my testimony, which

was a quote from Yvo de Boer, who is the executive secretary of

the Framework Convention. Bali is a meeting not of substance, but

of process. Where you all can be really helpful is in lowering expectations for Bali; this is not a meeting that’s going to decide on targets, it’s not going to decide on finance, it’s not going to decide on

the substance of the climate issue—it’s a process meeting. And lots

of people, including lots of political people, lots of press people, lots

of NGOs, are steaming into Bali with enormous expectations about

what’s going to happen. This is a process meeting, and you all can

be very helpful, it seems to me, at reflecting that and helping to

lower expectations about what Bali does.

We don’t want the success of Bali to be termed, ‘‘Oh, nothing

happened, it was just another talkfest, they just talked process.’’

Well, that’s what it’s designed to do, to set up a process. And I

would say, while I’ve been critical of what the administration’s

50

done related to climate, what Paula Dobriansky laid out today has

got it right. If they do what they say they’re going to do in the administration and support that agenda, that’ll be great, and we’ll get

in and out of Bali with a successful venture.

The second item that might be helpful, Mr. Chairman, would be

to reflect upon the Senate Observer Group, of which you were a

part in 1992, and which is going to be extremely important for the

long-term success of the climate negotiations. These negotiations—

and Jonathan Pershing, at the end of the table here, was deeply

engaged in them—are going to be extremely difficult, very, very

hard, and very, very complex. Kyoto was tough enough. This is

going to be even harder. And what happens in 2008–2009, with an

enormous amount of material, very complicated material, how to

order that material and how to explain that material, the Senate

Observer Group can be extremely helpful in coming together to understand what has to be done, and then helping to explain it.

Now, I cite that particularly out of personal experience in the

fact that we failed dramatically, going into Kyoto, to have the kind

of communication that was necessary between the administration

and the negotiation process and the Senate. There was a total gap.

There was almost no communication at all. And that occurred for

a lot of very complicated reasons. Someday somebody will tell that

story. It’s not a very pretty story. But that’s what did happen. And

the result was the 95-to-nothing vote, or whatever it was, which

you point out was not a pro-or-con climate vote, it was really a vote

on the process and a misunderstanding—nobody really knew what

had happened, and there had been no groundwork laid leading up

to Kyoto. That was a very, very big mistake. We would be very

happy to work with you and others in establishing what could be

done, how the Senate Observer Group can be helpful, and working

that along—I think it’s got to be an inside-outside job. I know there

are a lot of people on the private side who would be very pleased

to work with the Senate on that; it’s a very big job that you have

in helping this to happen and helping the negotiations in 2008–

2009, when we really get to the substance—in helping those negotiations.

The third point that I would make relates to the substance of the

negotiation. The framework, which is now broadly agreed, is that

the substance will have four pathways, or four pots, and they’ve

been referred to today. Senator Corker was talking about mitigation, which is the first, and probably the most difficult. The second

is adaptation—that is: How are we going to respond and adapt to

what we’ve already built into the system, and anticipate what’s

coming down the line? The third is technology, which is just a piece

of low-hanging fruit, waiting, it seems to me, for very aggressive

congressional action. And the fourth is the issue of finance, which

loops back around to mitigation. You know, you have to, Senator

Corker, put a price on carbon. And when you put a price on carbon,

the way those funds get distributed gives you the opportunity then

to finance a number of the things that have to be done. And Richard Sandor, who knows an enormous amount about this, will be

next on the agenda.

But these four pathways, these four packages, each deserve attention and understanding in this international context. And the

51

single most important part running all the way through that is a

phrase that was referred to by Secretary Dobriansky, but which

demands a lot of attention, and that’s the idea that we all have

responsibilities, but they are differentiated responsibilities. Common, but differentiated. Explaining to people that we all have responsibilities in working on the climate issue, but those are differentiated. Some can do more right now than others; some have

a responsibility to do more right now than others.

During Kyoto—and this is the final point that I would make—

we were successful in two out of the three procedural pieces that

we wanted to get done. The first was trading. Europeans were adamantly opposed to trading, and we got them over the ‘‘want to’’

line, and they agreed to do trading, and they’re now, the world’s

strongest advocates for trading.

The second one was sinks—that we should be talking about

sinks. And there was great resistance to that. That is now well understood to be terribly important, particularly in the context of

deforestation.

The third, which we were unsuccessful on, was the point that

you were raising, Mr. Chairman, and that’s: How do we give others

credit for what they’re already doing and get them onboard as a

partner? China is the perfect example, and I cite, in my testimony

at some length, how we ought to be working with China as a partner in this negotiation, not viewing them as the enemy, not viewing

them as somebody that we are going to be fighting with; but,

rather, working to figure out how, with what they’ve already done

on mileage standards, what they’ve already done on efficiency and

so on, they get credit for what they’re already doing, and slowly but

surely, just as we’re going to lead in some ways, they are going to

have to lead in other ways as a model for the rapidly developing

world, in particular. That should be a positive relationship, and not

a negative relationship. And, again, what you all say, from your

perspective on this committee with this responsibility and who you

are as members of the U.S. Senate, the way in which you talk

about ‘‘common, but differentiated,’’ and bring them onboard, is

going to be extremely important. And that will set a tone, as well,

for what the United States does in 2008 and 2009, and, I think,

will be extremely important for the outcome of these negotiations.

Those are three summary points that I would make, Mr. Chairman. I hope that’s helpful. And we look forward——

Senator KERRY. Very helpful.

Senator WIRTH [continuing]. To working with you.

Thank you.

[The prepared statement of Senator Wirth follows:]

PREPARED STATEMENT OF HON. TIMOTHY E. WIRTH, PRESIDENT, UNITED NATIONS

FOUNDATION, WASHINGTON, DC

Thank you, Mr. Chairman, for inviting me to testify and for the outstanding leadership you have shown on this issue for many years.

Climate change and the proliferation of nuclear weapons are the most dangerous

challenges confronting humanity; at the United Nations Foundation we are deeply

engaged with working toward solutions of the climate crisis, both in the U.S. and

globally. The other major institution funded by Ted Turner, the Nuclear Threat Initiative, chaired by former Senator Sam Nunn, is dedicated to finding solutions to

the nuclear issue.

52

We particularly welcome the remarkable leadership that is being shown by United

Nations Secretary General Ban Ki-moon, who has made climate change one of his

top three priorities, and is relentlessly emphasizing the importance and urgency of

action around the world. This week the Secretary General is traveling to Valencia,

Spain, for the release of the synthesis report of the Intergovernmental Panel on

Climate Change (IPCC). This report will sum up the findings of the three IPCC

working groups, whose work has been released over the course of this last year. The

clarity and forcefulness of this Fourth Assessment Report and its three important

predecessors have clearly described the state of the science, and the consensus on

the need for urgent action. The IPCC represents the U.N. system at its best and

well deserves the Nobel Peace Prize that it is sharing with former Vice President

Al Gore.

The United Nations Framework Convention on Climate Change (UNFCCC),

signed in Rio in 1992 by President George H.W. Bush and immediately ratified by

the U.S. Senate, defined the treaty’s objective as ‘‘stabilization of greenhouse gas

concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.’’ The Kyoto Protocol and the negotiations

next month in Bali represent the world’s continuing efforts to implement the Framework Convention and make it effective. The first commitment period under the

Kyoto Protocol comes to an end in 2012, and the world’s urgent task is to negotiate

what comes next—preferably a new and comprehensive global agreement that puts

us on a path to achieve the Framework Convention’s objective.

The negotiations leading to the 1997 Kyoto agreement were prolonged and extremely difficult, and our ambitions then were relatively modest compared to the

challenge we face today. It will therefore be even more difficult and complex to

reach agreement this time—but world opinion has shifted since 1997 with regard

to the urgency of action and the scale of the threat, and we are optimistic that common ground can be found. To have an updated treaty implementation agreement in

place by 2012, however, we need to complete negotiations by the end of 2009, and

allow time for ratification and implementation. To reach a new agreement by the

end of 2009, we have to start immediately, and that is the objective of Bali: Not

to conclude any deals, but to agree on a process and timetable that can be completed

by the 2009 and 2012 deadlines. Bali is a ‘‘process’’ meeting; its success will be

measured by the consensus reached on process and timetable.

Together with the Club of Madrid—a group of 66 democratic former heads of state

and government—the United Nations Foundation this year convened a distinguished task force that we called ‘‘Global Leadership for Climate Action,’’ comprising

former heads of government and other leading figures from 20 countries. The objective of this diverse group (facilitated by the extremely effective former CEO of the

Global Environment Facility, Mohamed El-Ashry) was to develop and propose the

outlines of a broadly acceptable global climate agreement. The resulting report,

‘‘Framework for a Post-2012 Agreement on Climate Change,’’ has been warmly received in international circles, starting with the G–8 Gleneagles Dialogue in Berlin

in September. This very useful document, which we commend to your attention (and

which I wish to include in the record), breaks the complex subject of climate change

down into four key areas or ‘‘pathways’’ to agreement: Mitigation, adaptation, technology, and finance. We recommend that parallel negotiations proceed along each

of these pathways during 2008 and 2009, in order to bring the world together on

a new agreement and to make further progress in implementing the 1992 climate

treaty. We are encouraged that our suggested framework—the four pathways—have

become the almost universally agreed method of organizing the many complex

issues that contribute to the substance and politics of the climate issue. We were

further encouraged that this general framework helped to organize the Secretary

General’s high-level session on climate at the U.N. in September, and appears to

enjoy broad support as we prepare for Bali.

The substance of the debate over climate will not be resolved in Bali next month.

Bali will be a success if all the engaged countries devise, agree upon and embark

on a process that leads to a comprehensive new agreement for next steps in implementing the climate treaty. Yvo de Boer, the Executive Secretary of the UNFCCC,

put it succinctly last week when he said: ‘‘Bali needs to launch a negotiating agenda, decide that negotiations need to begin on a post-2012 climate change policy,

launch that process formally, decide what the main elements that need to be negotiated are, set a timetable for negotiations, and like every good timetable, set an

end date . . . The end date should be 2009.’’

Ultimately, the agreement which must be negotiated in 2008 and 2009 must be

comprehensive. It should include all countries, all sectors, all sources and sinks,

mitigation as well as adaptation, technology development and sharing, and adequate

and innovative finance mechanisms. However, ‘‘comprehensive’’ does not mean ‘‘one

53

size fits all.’’ Targeted agreements—for example, on industrial energy use, energy

efficiency, renewable energy, and technology cooperation—should be encouraged and

incorporated within a new comprehensive agreement, and these agreements could

encompass a much broader array of countries than those who immediately commit

to an emissions cap. Sectoral agreements—also developed within the global U.N.

agreement—should also be encouraged: Autos, cement, steel, and utilities should be

on everyone’s early lists.

The Framework Convention established the principle that countries should address the climate challenge ‘‘on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities.’’ Developed countries should take the lead because over many years they have contributed the most

to the buildup of greenhouse gases in the atmosphere. Meaningful engagement of

developing countries, especially the rapidly industrializing economies, is needed

also. But requiring all countries to achieve the same percentage reduction in the

same time period would be unfair, and frankly impossible. The developed countries

put the carbon into the atmosphere to start with—we were the first to use the atmosphere as our carbon garbage dump. The effects of our dumping are now being

felt, and our task is to change our habits and help the world to adapt to the problems we largely have created, while encouraging others—like China and India—to

avoid our bad habits and embark over time on the same low-carbon path that we

should be pursuing now.

This key issue—who has what responsibility, and when do obligations kick in—

is the central issue in the climate negotiations—in Bali and beyond—and it will also

be critical to the future Senate ratification of any new climate protocol. We must

be flexible enough to recognize and accept the value of diverse approaches to the

climate challenge.

For example, China may not accept an immediate cap on its emissions, but should

be encouraged and credited with the important actions it has already taken: Setting

a target of improving its energy efficiency by 4 percent per year, imposing fuel economy standards that are stricter than those of the U.S., and moving to double its

renewable energy capacity (to 15 percent) by the year 2020. Those steps will significantly reduce Chinese emissions in real terms, while putting China on a path toward a lower carbon economy. Like the U.S., China is learning how to cope with

the looming climate crisis, but unlike the U.S., China has made relatively little historic contribution to the level of carbon in the atmosphere. Like the U.S., China is

a global leader, and in dealing with the climate crisis, should become our partner,

not our adversary. The U.S. can help to lead in many areas: Technology, economic

transformation, sectoral modernization. China can help to lead in others, serve as

a model and challenge, especially to others in the rapidly developing world, and together we can demonstrate that the climate crisis can be an opportunity, and reflect

everyone’s self-interest.

Mr. Chairman, this committee (and the Senate Observer Group, which I hope will

continue to work together well after the climate negotiations in Bali) can make a

number of very significant contributions:

• You can help your colleagues, the administration, the press and the country to

understand the issue of equity and responsibility that I have just discussed.

How we implement the key treaty commitment ‘‘Common but Differentiated’’

will be central to the success of our efforts. This will require patience, understanding, diplomacy, and time, as well as a lot of negotiation, and you can help.

• You can also help to clarify the context of the climate negotiations. Of special

note are two elements:

1. The state of science and the fact that the debate is over about man’s effect

on the climate. The questions now are how much, where, how fast, and of

course, what do we do next?

2. Pricing carbon: The sooner we get agreement on pricing carbon—the atmosphere should no longer be treated as a free garbage dump—the more rapidly

we can make progress on the complex negotiation that lies ahead.

Finally, let me briefly outline some of the key, immediate issues along the pathways for the negotiation, and again commend to you the framework which we have

developed in cooperation with the Club of Madrid:

• Mitigation: In the area of mitigation, of special concern and opportunity is the

treatment of forests, an issue of the greatest importance for the developing

world. Will countries be rewarded for protecting the great carbon sinks in their

natural forests, for replacing forests and planting new ones? How can we use

carbon credits without destabilizing the carbon markets?

• Adaptation: Since there is enormous inertia in the climate system, significant

effects of our climate-forcing pollution are inevitable and largely irreversible.

54

The world will have to adapt to a changed climate, and the poorest countries

will be hardest hit, with the least resources to cope. New drought-resistant

crops will be needed; so will new methods of storing and using water efficiently.

How will rich countries step in to help? • Technology: Technology development and deployment is essential to reducing

carbon emissions at an acceptable cost. Yet U.S. and global spending on energy

research and development is a small fraction of what it was more than 25 years

ago. The United States Government should make a major commitment to restoring RD&D investment—an immediate doubling or quadrupling, especially to

accelerate the deployment of high-priority technologies in such areas as carbon

capture and sequestration, second-generation biofuels, and a modernized electric power system. How can the U.S. and others collaborate effectively with developing countries on the development and deployment of new sustainable energy technologies? • Finance: The world will not transition to a new system of energy technologies

without massive investment, in the trillions of dollars over the next 30 years,

and how we price carbon is fundamental. Further, with the right public policy

signals, the private sector will be central, and the public-private partnerships

will be indispensable. Private investors are unlikely to finance protection of the

shoreline and other critical infrastructure against rising sea levels, and will be

cautious about investing in sustainable energy development in the poorest countries. But private expertise, innovation, and technique will be absolutely essential. What combination of innovative finance, carbon credits, and direct assistance will catalyze the most rapid progress?

Leadership by the United States remains central, and the most important step

we can take is at home—by putting a price on carbon, either through a cap-andtrade system or through a carbon tax. The progress on the Lieberman-Warner bill

is extremely heartening in that regard. It is important to note that the purpose of

a price on carbon is not to bring about higher energy costs to consumers. Rather

it is to set the rules of the game in such a way that clean technologies can compete

with dirty ones, and indeed, over time, out-compete them. This will lead to a great

wave of innovation, investment, economic development and job creation—which the

U.S. has historically done better than anyone in the world.

For many years this committee has promoted U.S. reengagement in the global climate negotiations. Constructive reengagement will change the dynamics of the discussion and create the basis for success. Now the committee, and the Senate more

broadly, needs to prepare for that success by setting out clear and realistic expectations (on a bipartisan basis) for next steps on implementing the climate treaty, so

that a new agreement can be quickly ratified and implemented by the United

States. These negotiations will certainly continue at least until the end of 2009, and

your guidance and political judgments will be extremely important and valuable.

Our negotiators must have a clear understanding of what can be delivered, and

early cooperation is very important.

Mr. Chairman, hearings like these, and your leadership and engagement on this

subject in Bali and beyond, are essential steps in that process, and we thank you

for it.

Senator KERRY. Well, we look forward to discussing it, but that’s

very, very helpful. Thank you.

Mr. Sandor.

STATEMENT OF RICHARD SANDOR, CHAIRMAN AND CEO,

CHICAGO CLIMATE EXCHANGE, CHICAGO, IL

Dr. SANDOR. Yes; thank you, Mr. Chairman, it’s a pleasure to be

here.

And I’d like to share with you, if I can, some of the experiences

that we’ve had at the Chicago Climate Exchange. Many of you may

not know what the organization is, so let me share a few things

about it.

The Chicago Climate Exchange (CCX) is a financial institution

that administers a cap-and-trade, allowance-and-offset system that

is legally binding, but voluntary. Ten percent of Fortune’s top 100

companies belong—Ford, Motorola, Bank of America, Safeway, et

cetera. Seventeen percent of the Dow Jones Industrial Average beVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6602 CLIMATE sforel1 PsN: sforel1
55

longs to the exchange—IBM, DuPont, Intel, United Technologies.

Twenty percent of the power companies belong including AEP and

Allegheny Energy. In your State, Senator Nelson, TECO is a member. There are CCX members located in every state represented by

the members of this committee. Together, these emitters constitute

a bigger allocation of emissions than the country of Germany. CCX

members make up 16 percent of the United States large stationary

sources of greenhouse gas emissions.

In addition to those corporate members, we have others. In your

State, Senator Kerry, we have the first university in America to

join CCX—Tufts. We’re proud to have the Lugar Stock Farm as a

member. Other members include Tennessee Timber Consultants, a

forestry project aggregators. Miami Dade County and cities from

Chicago all the way to Melbourne, Australia, and States like New

Mexico and Illinois have all joined. All in all, CCX membership

numbers close to 400. The CCX market is more than 25 percent the

size of the entire carbon emissions market in the EU. We are independently audited by the NASD—National Association of Securities

Dealers—now called FINRA—Financial Industry Regulatory

Authority)—which originated from the Maloney Act of 1938, to be

the self-regulatory organization for the securities world.

I might mention to you that we are an international organization. We have reforestation projects from Costa Rica. We have

seven Brazilian members, all of which, like Aracruz, is a $7 billion

New York Stock Exchange company, have taken on the CCX membership commitment to reduce their greenhouse gas remissions by

6 percent by 2010 even though Brazil is not required by international treaty to mandate emissions cuts.

From 2003 through 2006, our members were committed to make

a 4-percent cut in their emissions. They’ve actually achieved a 12-

percent reduction, so we’re way ahead of schedule.

The CCX program includes everything from German coal mine

methane, to AGL, the largest utility in Australia, to five Chinese,

five Indian, and one Chilean member. All of this adds up to what

we think is a substantial group of members.

Most recently, the House of Representatives of the United States

joined CCX, and it offset a portion of the emissions from the operation of the House. We conducted a reverse auction for the House

that yielded a basket of offsets from U.S.-based coal mine methane,

soils, and forestry projects.

Also, our progress has not gone unnoticed in the developing

world. We were surprised, most recently, when we were approached by Tata Motors of India to conduct a dollar-based auction

of certified emission reductions that it had tried, unsuccessfully to

sell in Europe. Tata, if you don’t know, is the Indian equivalent of

General Motors. It’s that country’s largest automaker. We did conduct the auction, with a week’s notice, and were 13 times oversubscribed.

The market is here today; the capital is here. And we are exporting our expertise. We also run—just for your information, Senators

Kerry and Tim Wirth, who inspired many things from what you did

back in the eighties—we run the only transparent regulated market for sulfur dioxide emissions under the U.S. Acid Rain Program.

Trading volume has been $3 billion year to date, up from $10 milVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00059 Fmt 6633 Sfmt 6602 CLIMATE sforel1 PsN: sforel1
56

lion 2 years ago. We also run a mandated NOx futures market. And

I think what may surprise some of you, that the United States, the

Chicago Climate Exchange, actually began the European Climate

Exchange, which, of nine exchanges in Europe, is the largest. We’ll

trade about 30 billion dollars’ worth of carbon this year in Europe.

So, we’ve exported our trading technology and our capital market

expertise. We also have a joint venture in Canada with the Montreal Bourse to operate the Montreal Climate Exchange, and we’re

looking at a similar effort in India. Our India advisory committee

there is headed by Rajendra Pachauri, of the IPCC. And we’re

making a very strong effort in China, as well.

In conclusion, from the experience that we’ve had, both with the

sulfur market and the carbon market, this is all not very difficult,

it’s not von Heisenberg’s Uncertainty Principle. You put them up

on a screen, and you buy them and sell them. You monitor and

verify them, as we do with the million acres of Nebraska, farmland

enrolled in our Ag solids program. You take an NASD and you

audit the emissions from all 39 of Ford’s North American plants.

It’s doable. And, not only that, as Senator Wirth just said, we put

out a price signal. We’re seeing inventors out of MIT and other universities who, for a price signal of $2 to $3 a ton, are being motivated to develop new mitigation technologies.

The U.S. can take the leadership role here. We have the financial

technology, and the price discovery mechanism that will spawn the

most cost-effective ways to reduce greenhouse gas emissions.

Thank you.

[The prepared statement of Dr. Sandor follows:]

PREPARED STATEMENT OF DR. RICHARD L. SANDOR, CHAIRMAN AND CEO, CHICAGO

CLIMATE EXCHANGE, CHICAGO, IL

Senator Kerry, Senator Lugar, and members of the committee, I want to thank

you for your invitation to be with you today. I congratulate your leadership on the

complex problem of climate change, which presents both deep challenges and wide

possibilities.

Today the committee is taking up the topic of the United States role in the international negotiations on climate change and how this country can resume its leadership on this critical issue. First, it is incumbent upon the committee to know that

a functioning and successful cap-and-trade system already exists in the U.S. The

Chicago Climate Exchange (CCX) along with leading U.S. economic enterprises, cities, states, counties, farm organizations and others are using a voluntary but legally

binding cap to structure their energy use, enhance their strategic economic planning, and most importantly reduce their greenhouse gas emissions.

To date, CCX members have reduced their emissions, on average, by 12 percent

beyond their annual commitments, representing more than 180 million tons of

greenhouse gas reductions in the first four compliance years of our program. On the

eve of the Bali negotiations, the CCX experience is extremely relevant.

To flesh this out, I will report to you on the work of the Chicago Climate

Exchange (CCX) family, the world’s only global emissions reduction and trading system handling all six greenhouse gases. CCX had its birth in the U.N. process in

1992 and operates worldwide in both voluntary and mandatory regulatory frameworks. CCX and its members are securing actual greenhouse gas reductions now,

using emissions trading, a critical financial mechanism, in a system that is designed

to meet the needs of all emerging policies, including the post-Kyoto framework that

will be discussed at the forthcoming Bali negotiations

Membership in CCX now numbers in excess of 370 and represents the leading

edge of industry, municipal and state government, universities, and nonprofit organizations. Our members include:

• Twenty percent of the largest CO2 emitting power utilities in the U.S. including

American Electric Power, Reliant, Allegheny Energy and DTE.

57

• Seventeen percent of the companies making up the Dow Industrial Index, including DuPont, Intel, IBM, and United Technologies.

• Ten percent of the Fortune 100, including Ford Motor Company, Bank of America, Motorola, Safeway, and International Paper.

• Six U.S. cities including Chicago and Portland, Oregon.

• Three counties, including King County in Washington, Sacramento in California, and Miami-Dade in Florida.

• The States of New Mexico and Illinois.

• Universities like Tufts, Michigan State, Minnesota, Iowa, Oklahoma, and Idaho.

• Associate members including architectural firms like Mithun, law firms like

Sullivan and Cromwell and Foley and Lardner and NGOs like the Rocky Mountain Institute.

• Hedge funds, banks, and professional commodities traders that provide liquidity

in our markets.

And, the United States House of Representatives is a CCX Exchange Participant.

The House is using the CCX offsets portfolio as a source of verified U.S.-based

greenhouse gas mitigation project credits to help it achieve ‘‘carbon neutrality,’’ as

part of its Greening the Capitol initiative launched in the spring of 2007.

Members join CCX for disparate reasons, but they all share one motive which is

to better master their emissions data and gain early mover benefits with price discovery for carbon, and all aspects of risk mitigation, includng financial, operational,

and reputational.

The baseline of emissions under the CCX cap is currently 540 million metric tons,

which is greater than the National Allocation of Germany, the largest economy participating in the European Union’s emissions trading scheme. The current CCX

baseline represents more than 16 percent of the total large stationary sources of

greenhouse gas emissions in the United States. This means that the U.S. has more

emissions under management through CCX than any other country with an active

cap-and-trade system.

The CCX Offsets Program is successfully rewarding emissions mitigation through

sustainable farming and forestry, while also providing a new income source for U.S.

agriculture. Entities such as the Iowa Farm Bureau and the National Farmers

Union are leading the way in building the infrastructure for our agricultural offsets

program. To date, more than 2 million acres of conservation tillage and grassland

in more than 20 States and the Canadian Province of Saskatchewan have been registered, verified, and sold through the Exchange. From 2005 to 2006, farmers earned

more than $3 million from the sale of CCX Carbon Financial Instruments. Tonnage

enrolled under the CCX agricultural methane program went from 24,100 tons to

207,200 tons during the same period.

These offsets provide a least cost avenue for society to reduce greenhouse gas

emissions in addition to enhancing farm profitability and income diversification.

American agricultural producers are taking a leadership role in promoting long-term

sustainability of U.S. agricultural soils through the CCX program. Earlier this year,

the CCX Offsets Committee approved protocols for rangeland management soil carbon offsets, which are now being registered on the Exchange. A member of this

committee, Senator Richard Lugar, has registered reforestation credits from trees

planted on his family farm in Indiana, and is setting an example to many other

farmers for turning otherwise unproductive land into acreage that provides the important environmental service of carbon sequestration.

It is also important to note that the potential for offsets coming from coal mine

and coal bed methane is substantial. More than 7 million tons of captured methane

from coal mines has been registered on CCX to date. Coal mine methane capture

not only reduces greenhouse gases but can contribute to the safety of miners.

CCX is also pleased to inform the committee that it is supported by the U.S.

Department of Agriculture to help expand the CCX agricultural offset program. Further research and expansion on agriculturally based greenhouse gas mitigation

strategies can provide new sources of revenue for America’s farmers, who are providing bona fide environmental services. These revenues can help minimize the need

for additional subsidies and lower the tax burden required to finance agricultural

security while encouraging innovative practices to address climate change.

CCX Member operations and Offset Projects can be found in every member of this

committee’s home state as well as in every other state in the U.S., and they span

the globe as well. In the Annex I countries of Canada and Australia, CCX members

include Abitibi-Consolidated, Manitoba Hydro, Tembec, AGL (the largest power producer in Australia), and the city of Melbourne. In addition there are CCX registered

Offset Projects in Canada and New Zealand as well as projects outside of the Kyoto

mechanisms in the country of Germany.

58

1 A member’s baseline is calculated as: (i) Its average emissions over the period 1998–2001;

or (ii) its total emissions in 2000. 2FINRA was formerly known as NASD the leading financial regulator in America and created

by an Act of Congress in 1938.

In the Non-Annex I countries of Brazil and Chile, the New York Stock Exchange

listed, Aracruz ($7.21 billion market cap) and seven other corporations have joined

as members, taking on the same reduction commitments as our U.S., Canadian, and

Australian members. CCX member Ford Motor Company has included all of its

Mexican operations, along with its U.S. and Canadian operations in its reduction

commitment. And Motorola recently announced that it will be including all of its

global facilities in its reduction commitment beginning this year. CCX’s portfolio of

offsets include projects in the Non-Annex I countries of China, Costa Rica, India,

and Mexico.

CCX members execute legally binding commitments to meet, at a minimum, an

emissions reduction goal of 6 percent below baseline by 2010.1 Members who exceed

their reduction commitments may sell allowances; those who do not make the required cuts must buy allowances to come into compliance. CCX rules require that

all emission baselines, annual reduction commitments and Offset Projects undergo

a standardized third party audit by the Financial Industry Regulatory Authority

(FINRA) 2 and authorized experts. This is the only third party standardized audit

system for greenhouse gas emissions reductions operating in the United States at

this time.

CCX members report that the baselines, audits, and annual commitments represent concrete goals that help them focus on internal efficiencies and attendant financial opportunities. They have reduced their emissions through increased energy

efficiency, expanded use of renewable fuels, and realization of low-cost reductions

in non-CO2 greenhouse gases through use of direct abatement equipment. Many

members have exceeded their reduction targets. As an important aside, another benefit of the price discovery mechanism provided by an organized market is the ability

to spur inventive activity. Developers of various renewable energy technologies including biodiesel production and anaerobic manure digesters have been able to raise

capital from the investor community after factoring in CCX prices in their business

plans.

CCX has built emissions trading markets under every possible regulatory framework. In the European Union’s Kyoto-driven emissions trading program, our sister

exchange, the European Climate Exchange (ECX) trades more than $130 million in

CO2 emissions contracts daily. More than 795 million metric tons of CO2 reductions

have been traded on ECX this year to date with more than 1.3 billion tons traded

since ECX launched in 2005. Transactions on ECX represents between 80 and 90

percent or all exchange-based trading in the EU trading scheme.

It is important to note that linkages already exist between the European and U.S.

carbon trading systems. In 2006, CCX member Baxter International transferred

emissions reduction allowances earned by its EU-regulated Irish facility into its

CCX account in order to meet its compliance requirements under the CCX program,

thus demonstrating the ability to create a compliance market that crosses international borders.

In Canada, CCX is in a joint venture with the Montreal Bourse, that country’s

leading derivatives exchange to operate the Montreal Climate Exchange (MCeX)

which will trade emissions reduction contracts under that country’s Kyoto program.

MCeX will launch its first contract in early 2008.

It is significant, and ironic to note that American ingenuity and financial knowhow are being exported abroad. Despite the absence of a mandated carbon constraint here at home, U.S. financial services provide the infrastructure for emissions

trading in the Kyoto-driven cap and trade market.

Through its CFTC regulated subsidiary, the Chicago Climate Futures Exchange

(CCFE), CCX has also created a market for SO2 and NOx emission allowances regulated under the Clean Air Act Amendments of 1990. That market is now the central

point for SO2 price discovery in the U.S. Acid Rain Program.

Through CCX and its affiliated exchanges, the financial, capital, and regulatory

structures needed for an internationally linked carbon trading system are well advanced. The effectiveness of cap and trade is being demonstrated every day by CCX

members, now across the globe. The environmental and economic benefits being generated are of national and global significance. There are extensive opportunities for

the U.S. to leverage global linkages, and we believe we have pioneered pathways

of engagement for all nations to become involved in meaningful greenhouse gas reduction using flexible market mechanisms.

59

CCX plans to forge ahead with its expansion and development and is ready to

operationalize and facilitate any legislation passed in the United States.

We are at the disposal of the Congress to provide advice or answer any further

questions.

Senator KERRY. Thank you very much, Mr. Sandor, it was very

helpful.

Mr. Pershing.

STATEMENT OF DR. JONATHAN PERSHING, DIRECTOR, CLIMATE, ENERGY, AND POLLUTION PROGRAM, WORLD RESOURCES INSTITUTE, WASHINGTON, DC

Dr. PERSHING. Thanks very much.

I’m Jonathan Pershing. I’m the director of the Climate, Energy,

and Pollution Program at the World Resources Institute, which is

a nonpartisan think tank here in Washington, but we have partnerships in over 70-odd countries around the world, did a lot of

work on the climate-change issue, among others.

I wanted to just make a few points to try to summarize my written testimony, which I’ve submitted.

The first one, I think, is one that was made by almost everyone

who spoke, which is about the urgency of the problem. And I think

we can’t understate that. And, in fact, that adds to a sense of the

importance, not only of this meeting, but of the next couple of

years. Unless we move forward really aggressively, the problem is

really beyond our control.

The second point I want to make is the need for U.S. leadership.

And I think that, at the moment, the United States has got about

5 percent of the world’s population, give or take; some 28 percent

of the emissions that have entered the atmosphere. So, it’s even

more than a quarter. That’s an historical total, but we also have

technology, we have economic capacity. Richard Sandor spoke

about the market expertise that we bring. So, we can do an enormous number of things if we put our mind to it. And the point is

that we’re, so far, not, apparently, doing that, the level we’d like

to see.

I would think that, therefore, one of the most important things

that you could do would be to think about legislation. And, to a certain extent, what you bring to Bali and the methods that you carry

about the willingness to enact legislation will perhaps be the most

powerful message that you carry.

I note that we are still operating in a multipolar world. It’s not

what it was when I first began working in this negotiation, and I,

speaking on behalf of the United States, sat next to the Union of

Social Soviet Republics. They were right next to us at that point.

Now they’ve moved well down the ranks, and you sit next to Russia; it’s a very different dynamic, and we speak to China much

more than we speak to our immediate neighbors, who are the

United Kingdom. That dynamic has fundamentally shifted how we

need to interact in this global set of activities.

China, in particular, which is, I think, a considerable focus, as

it should be—they’ve now assumed the position atop the pyramid

as the world’s largest emitter—China should be a focus, but China

will not act just because we say so. China might act because we

do things on our own. China will certainly act because of its own

60

interests. And those interests clearly, in my mind, reflect the

things that you, Senator Kerry, mentioned. It’s the questions of energy security. China is expected to import huge shares of its oil by

the end of this decade. It will affect local pollution. You can hardly

breathe the air in some of the cities. It will reflect water and water

damages. It will also reflect climate change. Those things will drive

China, and we can bring to them our information and our data and

our expertise.

Of course, developed countries have indicated they are prepared

to move forward—but developing countries have indicated they are

not—through a binding commitment. And so, we need to find other

approaches. We need to recognize the fact that the population of

China, four times our own, has only one-fifth the per capita income,

one-fifth the total emissions. It’s not a quid pro quo and an even

exchange between one and the next, but there are lessons to learn

and lessons to exchange.

I’d like to make the point that Richard Sandor made, that the

markets will be enormously powerful. It will raise huge sums of

money that we can distribute for things like adaptation, for things

like technologies, for the mitigation obligations and the development needs of the least advantaged. But they don’t work for everyone. We need strong institutions. We need strong compliance mechanisms. It is not a one-size-fits-all equation. A trade with all

countries is not the equivalent of a trade with the United States,

and those countries that do not have these institutions have to be

treated in a somewhat different way.

Finally, I want to say something about adaptation. I think that

was the comment that Senator Murkowski made, and others here

on your committee have certainly reflected on. At the moment, according to the World Bank, there are about 2 billion people in countries affected by climate disasters in the 1990s alone. That’s a staggering number. It’s likely to go up by perhaps as many as doubling,

just in this decade. We have the best projections of the IPCC that

include things like sea-level rise, but they also include consequences like heat and drought, include consequences like forest

fires, and they include consequences like pests. We have to move

forward on those kinds of tasks.

So, finally, Senator, what might you bring to Bali, and how do

you think about all of these in the context of a Bali agreement? I

would say just a few things. The first one, we need a mandate. And

I would agree with Senator Wirth, the mandate that was laid out

is really not a bad one. The question really is: How will we carry

it forward? But it is a process meeting, and a mandate is critical.

The second thing is, it does have to incorporate both developed

and developing countries. And, from that perspective, I would

strongly urge that we not insist on exact equality, but we insist on

equity. And that means a balance.

The third thing is, we must address deforestation. Close to 20

percent of the total emissions, collectively, are from forests. If we

don’t address that, not only will we not have any forests or biodiversity in Indonesia or Brazil, we have a huge problem.

And, finally, we need to have systems for adaptation to help

those vulnerable populations to move forward.

61

It’s a pretty daunting task. The first step, though, is very manageable. And if we take this one step at a time, I certainly believe

we can get there in a cooperative spirit, which I think you’re trying

to lay out. And I think that you and the Senate delegation that

comes to Bali could be enormously effective at making that case.

Thank you.

[The prepared statement of Dr. Pershing follows:]

PREPARED STATEMENT OF DR. JONATHAN PERSHING, DIRECTOR, CLIMATE, ENERGY, AND POLLUTION PROGRAM, WORLD RESOURCES INSTITUTE, WASHINGTON, DC

My name is Jonathan Pershing, and I am the Director of the Climate, Energy and

Pollution Program at the World Resources Institute. The World Resources Institute

is a nonprofit, nonpartisan environmental think tank that goes beyond research to

provide practical solutions to the world’s most urgent environment and development

challenges. We work in partnership with scientists, businesses, governments, and

nongovernmental organizations in more than 70 countries to provide information,

tools, and analysis to address problems like climate change, the degradation of ecosystems and their capacity to provide for human well-being.

I am very pleased to be here to speak to what I consider the most pressing environmental issues faced by the world—and to what I consider a major opportunity

for the United States to assume a role of international leadership.

In this testimony, I would like to make a number of key points, each of which

I will expand on below:

1. Emissions are rising much faster than we thought, the ice is melting decades sooner than we expected.

2. The world urgently needs the leading emitters—particularly the U.S. and

China—to find a basis for agreement and action. To do so, the U.S. itself must

take real and immediate steps to reduce emissions.

3. The U.S. must recognize we are operating in a multi-polar world. We can

lead, we can help, but we can’t dictate to other great powers. China will act for

its own interests.

4. China, India, and Brazil are changing their views, and we must negotiate

agreements that help all achieve national goals, even if the means to reach

these differ from ours.

5. There will be a huge global market for low carbon goods and services, and

we must compete for it. Countries that do not adopt policies to reduce emissions

will not compete effectively.

6. Markets will promote the development and support the penetration of new

technologies. A robust governmental framework is needed to ensure technology

development is focused on priority needs.

7. We are unfortunately starting late and we are not likely to avoid all climate damages. The world must agree to address the problem of the neediest

and most vulnerable.

If we start in on an agreement on these issues at the forthcoming U.N. Climate

Convention meeting in Bali next month, we will indeed be setting out on a path to

success. If we do not, and instead continue to argue for caution and inaction until

we have ‘‘more information,’’ the world will be a much different, and much less hospitable place.

THE CHALLENGE IS LARGE AND URGENT

The Earth is warming, primarily due to human activities. Fossil fuels (in spite

of their contribution to huge increases in human productivity and great improvements in human well-being), together with significant deforestation, have been the

most important causes of global warming. The buildup of carbon dioxide and other

greenhouse gases (GHGs) is accelerating, and unless we act very soon to control

emissions warming, will rise to very dangerous levels. This is no longer a problem

only for our children, but increasingly for the present generation.

In February 2007, the Intergovernmental Panel on Climate Change (IPCC—the

official science process endorsed and supported by the world’s governments and in

which the United States was an active participant) released its most recent scientific report. The report states that it is ‘‘unequivocal’’ that Earth’s climate is

warming, and confirms that the current atmospheric concentration of carbon dioxide

and methane, two important GHGs, ‘‘exceeds by far the natural range over the last

650,000 years.’’ Further, the IPCC concludes that it is now ‘‘very likely’’ (greater

than 90 percent probability) that GHG emissions from human activities have caused

62

‘‘most of the observed increase in globally averaged temperatures since the mid-20th

century.’’

Indeed, the impacts of warming have become increasingly evident. Sea ice in the

Arctic was at a record low this summer, and Greenland’s massive ice sheet is receding—far faster even than predicted in the IPCC report released prior to this summer’s unprecedented melting. Glaciers are rapidly shrinking from the Rockies to the

Alps. There have been fatal heat waves in Northern Europe and extensive droughts

in the Western U.S., Australia, and in the Amazon. Farmers and hunters across the

United States report changing growing seasons and changing bird migration. If we

already see these kinds of impacts with only about 0.6 °C (1 °F) of warming, the

nature of future damages, with temperatures ranging to 2 °C and higher, are likely

to be catastrophic.

The IPCC also gave us a clear sense of the emissions reductions required to limit

the damages—and a timeframe in which to achieve them. The IPCC suggests that

world emissions must peak within the next 10–15 years and then decline globally

by as much as 50–85 percent below 2,000 levels by 2050 if we wish to see global

average temperatures remain below two degrees of warming. Furthermore, global

emissions must be stabilized by 2035.

THE U.S. MUST LEAD WITH A DOMESTIC POLICY

The warming occurring today is the result of greenhouse gases emitted over the

past half century. The United States, with 4.6 percent of the world’s population, has

contributed 28 percent of the emissions currently in the atmosphere. Our strong economic growth in the 20th century was fueled by fossil fuel technologies we invented.

And it is clear that today the U.S., with the most advanced economic and technological resources and capacity, must take the lead in transforming the global economy to a new, low-carbon future. We cannot expect the rest of the world to act if

we do not—or expect countries with per capita incomes one-tenth our own to lead

if we will not.

The emissions limits we set for the U.S. matter. Action by the U.S. will be seen

as the benchmark against which other countries will measure their commitments.

The U.S., with its historical responsibility for the current buildup of greenhouse

gases in the atmosphere, will continue to be a key contributor to temperature rise—

even as other countries may pass us in annual emissions. With our European allies

committing to align with the science in their proposal for a 20-to-30-percent reduction in greenhouse gas emissions by 2020 (and a European Parliament recommendation of a 50-percent cut in global emissions by 2050, identical to the reduction proposed by both Japan and Canada during last year’s G–8 discussions), the U.S. role

will be pivotal if we are to have concerted OECD action and leadership to advance

the efforts of all countries to take action.

U.S. legislation must put a clear and specific limit on aggregate emissions and

achieve the emissions-reduction target at the least possible cost. The cap establishes

certainty as to the total amount of emissions that will occur under the program. The

cap must be broad, including as much of the economy as possible, so as to achieve

the greatest efficiency. It must have stringent emissions reductions targets, and include a range of complementary policies to reduce emissions from sectors outside of

the cap. In parallel, the U.S. must adopt complementary measures to promote new

technology, to assure that we have a complete monitoring and reporting system, and

to begin to develop national adaptation programs to protect vulnerable people and

ecosystems.

STRUCTURING A GLOBAL CLIMATE CHANGE SOLUTION

U.S. action alone will not be enough to reduce global emissions to the extent required, although it is widely understood that without timely and aggressive U.S. action, a successful international agreement on climate change will be impossible. A

number of key elements are required to adequately address the problem of global

climate change, and will be critical ongoing aspects of international negotiation: (1)

International GHG markets; (2) developing country actions; (3) mechanisms to promote technology development and penetration; (4) minimizing deforestation; and (5)

addressing vulnerability to climate change, and taking necessary steps for adaptation. Each is discussed below.

1. GHG markets.—For countries that have the technical and institutional sophistication to embrace them, greenhouse gas markets are a powerful driver for change.

The United States is discussing (at least in Congress and at the State level) adopting a cap-and-trade mechanism. Europe has already implemented one. Other key

partners such as Canada, Australia, and New Zealand are poised to do so.

63

1For European emissions trading system prices, see http://www.europeanclimate

exchange.com; 23.84÷/ton of CO2 is the price for a December 2102 settlement as of November

8, 2007. 2D. Ellerman and B. Buchner, ‘‘Over-Allocation or Abatement? A Preliminary Analysis of the

Eu Ets Based on the 2005 Emissions Data,’’ Fondazione Eni Enrico Mattei, November 2006.

Markets are demonstrating success. Their key features—capping emissions and

creating a price that stimulates investment—are both observed in the European

case. Emissions in that market have risen at rates significantly below those of the

U.S. (see figure 1), while investment decisions, particularly in the power sector, appear to be shifting to technologies with a lower carbon footprint in reaction to a

price signal that is currently approximately 23÷/ton of CO2

1. Contrary to the mythology sometimes heard in Washington, the EU’s emission

trading system (EU ETS) has been a striking success. The period 2005–07 has been

a trial first phase, and has certainly had its teething troubles, but even during this

period MIT researcher Denny Ellerman estimates that it will lead to between 50

and 200 million tons of CO2 emission reductions.2 Given the speed and complexity

of the system’s implementation, this is an extraordinary success by any measure.

It is true that some design errors were made—and certain operating constraints

existed that lead to unavoidable, negative outcomes. For example the pilot phase of

the system did not allow carrying forward emissions allowances to subsequent

periods—rendering the value of each allowance worthless instead of acting as an incentive to early action. The erratic release of information about the regime led to

considerable price spikes—mistakes that could have been avoided with a more

transparent system (and one that was in place and fully functioning prior to the

start of trading). Finally, the initial allocation of allowances (distributed at the national level, and largely a function of the legal autonomy of Member States within

the union) provided companies in some countries with excess tons—leading to both

windfall profits and to a devaluation of the currency. Each of these problems can

be (and is being) addressed in the subsequent phases of the program. The EU is

increasing transparency, providing for banking allowances to future periods, auctioning an increasing share of the allowances and tightening the caps; this will address most of the regimes shortcomings. We in the U.S.—and others around the

world—are in a position to learn from the EU’s mistakes and avoid them ourselves

as we adopt our own programs.

There is not a ‘‘one-size-fits-all’’ policy for climate change; while markets are critical components of a successful regime, not all countries are prepared to adopt or

implement a cap-and-trade market mechanism. Among the prerequisites are a robust legal system that respects property rights and can ensure the integrity of any

emissions transactions, a comprehensive and rigorous emissions reporting and monitoring regime, and a strong commitment to ensuring the environmental integrity of

64

3See the UNFCCC CDM Web site at: http://cdm.unfccc.int/Statistics/index.html.

4See the World Bank/International Emissions Trading Association’s ‘‘State and Trends of

the Carbon Market’’ 2007, http://carbonfinance.org/docs/CarbonTrends2007-FINAL-

May2.pdf. 5 Ibid.

the trading system. Such criteria are not yet met by too many countries. In particular, countries such as Russia, as well as others in Central Europe and Asia are

not yet able to demonstrate with confidence that their emissions records or legal

compliance systems are adequate to allow them to trade in a global GHG market.

Without confidence in such globally traded allowances, we run the risk of undermining the environmental integrity of the entire global regime. For these countries,

as well as other large developing countries, a full emissions trading program may

not be the best solution—although participation in global markets, including

through ‘‘offset programs’’ like the Kyoto Protocol’s Clean Development Mechanism

(CDM) or ‘‘Joint Implementation’’ may be possible. Understanding this potential

shortcoming, it is clear that one of the long-term goals of the international effort

should be to help develop the proper underpinnings for a global market.

The CDM itself is also facing difficulties, although it has generated significant reductions. To date, there have been more than 2,600 CDM projects proposed, of

which only 844 are registered 3 (a consequence of both poor methodological development as well as the nature of the overburdened approval process). These 844

projects over their lifetimes should save 1,080,000,000 tons—a level that already

outstrips demand under the commitments for developed country parties in under

the Kyoto Protocol. Approximately 80 percent of the annual project credits come

from only 4 countries (China, India, Brazil, and South Korea); see figure 2. Along

with some uncertainty in the integrity of offset credits, this supply/demand ratio as

well as limits on the amount of international offset credits Europe will accept for

internal compliance has led to a lower price for Certified Emission Reductions

(CERs). While European emissions allowances sold for an average of about $23/ton

through 2007, offsets sold for less than $11/ton.4 The relatively low price and lower

volumes has also led to only modest funds being available for the kinds of major

energy infrastructure projects that might significantly reduce emissions. According

to a 2007 World Bank/IETA study,5 to date, the total of all CDM projects has only

been $5 billion. Such prices and volumes are substantially below the costs of supporting potentially critical new technologies, such as carbon capture and storage,

which would be required to neutralize emissions from the rapidly growing GHG

footprint in the developing world.

Resolving conflicts over the CDM (or its successor) will be a key feature in the

ongoing post-Kyoto discussion, and a central topic at the Bali negotiations. Concerns

remain high that projects may not yield ‘‘real, measurable, and verifiable’’ reductions that would be ‘‘additional’’ to those that would have occurred in the absence

of the project. At the same time, the burden of proof regarding project eligibility for

inclusion into the CDM process is onerous, and may turn many good (albeit someVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00068 Fmt 6633 Sfmt 6621 CLIMATE sforel1 PsN: sforel1
65

6 Unfortunately, adequate, up-to-date information on GHG emissions from all countries is

missing; while CO2 data is available for 2005, six gas data is only available for 3 years: 1990,

1995, and 2000. It remains difficult to properly assess recent development in non-CO2 gas emissions or to assess policy effectiveness in the absence of such data.

times small) project proposals away, further widening the gap between projects undertaken in the poor smaller countries and those in the more capable larger countries.

2. Developing country actions.—To address the global climate change problem,

major emitters from the developing world will have to bring serious actions to the

table. Countries such as China, India, Brazil, and Indonesia are among the world’s

largest emitters, although both cumulatively and on a per capita basis, they remain

much lower than the U.S. (see table 1 and 2).6 Climate policy cannot ultimately succeed without these countries, any more than it can without America or the rest of

the developed world. However, there is room for optimism: in many cases these

countries are already taking serious action—more so, in some ways, than the U.S.

TABLE 1.—GREENHOUSE GAS EMISSIONS OF THE 20 LARGEST EMITTING COUNTRIES, 2000

Country MtC Rank Percent of

world total

Tons C per

person Rank

United States of America ...................................................................... 1,765.5 (1) 15.65 6.3 (14)

China ..................................................................................................... 1,341.7 (2) 11.89 1.1 (122)

European Union (25) ............................................................................. 1,288.5 (3) 11.42 2.8 (53)

Indonesia ............................................................................................... 837.3 (4) 7.42 4.1 (24)

Brazil ..................................................................................................... 606.3 (5) 5.37 3.5 (38)

Russian Federation ............................................................................... 537.6 (6) 4.77 3.7 (33)

India ...................................................................................................... 504.6 (7) 4.47 0.5 (163)

Japan ..................................................................................................... 370.1 (8) 3.28 2.9 (50)

German .................................................................................................. 276.6 (9) 2.45 3.4 (40)

Malaysia ................................................................................................ 233.5 (10) 2.07 10.2 (4)

Canada .................................................................................................. 204.3 (11) 1.81 6.6 (12)

United Kingdom ..................................................................................... 179.3 (12) 1.59 3.0 (47)

Mexico .................................................................................................... 169.9 (13) 1.51 1.7 (93)

Italy ....................................................................................................... 144.4 (14) 1.28 2.5 (67)

Korea (South) ........................................................................................ 142.0 (15) 1.26 3.0 (45)

France .................................................................................................... 139.8 (16) 1.24 2.4 (69)

Myanmar ................................................................................................ 138.8 (17) 1.23 2.9 (51)

Australia ................................................................................................ 135.2 (18) 1.20 7.1 (9)

Iran ........................................................................................................ 132.1 (19) 1.17 2.1 (75)

Ukraine (1) ............................................................................................ 131.6 (20) 1.17 2.7 (61)

Source: WRI, Climate Analysis Indicators Tool, http://cait.wri.org.

TABLE 2.—2005 DATA, CO2 EMISSIONS ONLY

Country

National total

(millions tons

C)

Percent Total

Per capita

emissions

(million tons

C)

United States .......................................................................................................... 5,956.98 24.3 20.14

China ....................................................................................................................... 5,322.69 21.7 4.07

Russia ..................................................................................................................... 1,696.00 6.9 11.88

Japan ....................................................................................................................... 1,230.36 5.0 9.65

India ........................................................................................................................ 1,165.72 4.7 1.07

Germany .................................................................................................................. 844.17 3.4 10.24

Canada .................................................................................................................... 631.26 2.6 19.24

United Kingdom ...................................................................................................... 577.17 2.4 9.55

Korea, South ............................................................................................................ 499.63 2.0 10.27

Italy ......................................................................................................................... 466.64 1.9 8.03

Iran .......................................................................................................................... 450.68 1.8 6.96

South Africa ............................................................................................................ 423.81 1.7 9.56

France ..................................................................................................................... 415.27 1.7 6.59

Saudi Arabia ........................................................................................................... 412.35 1.7 15.61

Australia .................................................................................................................. 406.64 1.7 20.24

Mexico ..................................................................................................................... 398.25 1.6 3.75

Spain ....................................................................................................................... 387.11 1.6 9.60

66

7The WRI database, which includes policies from Argentina, Brazil, China, Costa Rica, India,

Indonesia, Iran, Malaysia, Mexico, Nigeria, Pakistan, Philippines, Sauda Arabia, Singapore,

South Africa, South Korea, Thailand, and Turkey can be found at: http://cait.wri.org/sdpams/

search.php. The IEA database, with information focused on IEA member countries as well as

limited information on policies adopted by several developing countries, can be found at:

http://www.iea.org/textbase/pm/.

TABLE 2.—2005 DATA, CO2 EMISSIONS ONLY—Continued

Country

National total

(millions tons

C)

Percent Total

Per capita

emissions

(million tons

C)

Brazil ....................................................................................................................... 360.57 1.5 1.94

Indonesia ................................................................................................................. 359.47 1.5 1.57

Ukraine .................................................................................................................... 342.57 1.4 7.30

Source: DOE EIA, http://www.eia.doe.gov/environment.html.

WRI maintains a database of national climate change policies in key developing

countries to supplement a compendium of energy related policies in OECD countries

maintained by the International Energy Agency.7 Policies range widely, from those

designed to promote alternative fuels or transport (e.g., the Brazilian ethanol program) to those that promote energy efficiency and conservation in the top 1,000

companies in China. The effectiveness of national policies can be seen in the fact

that the CO2 intensity of major developing country economies is declining—in some

cases (e.g., China), even faster than in the U.S. (see figure 3). National circumstances continue to be hugely influential: In Brazil, for example, new energy demand has largely been met by natural gas, which, while the least CO2 intensive of

any fossil fuel, generates enormously more CO2 than does the zero-emitting hydropower that it has supplemented.

The international framework must include a structure to allow these actions to

be recognized and reviewed. This was missing from the Kyoto Protocol, and will

need to be added. A number of options exist to promote such developing country

efforts. One of the most prominent focuses on the concept of ‘‘Sustainable Development Policies and Measures’’ or SD–PAMS.

Sustainable Development Policies and Measures (SDPAMS)

For many developing countries, the highest priorities are major domestic problems: Health, access to electricity, clean air and water, and a growing economy. The

SDPAMs approach starts from the premise that these policies can be implemented

in a way that simultaneously reduces GHG emissions.

Two examples help illustrate the point:

(1) Energy security and climate: Meeting energy needs is a growing concern not

only for the U.S., but also for China, India, and others. China is expected to import

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8See Yvo de Boer, ‘‘Investment and Financial Flows to Address Climate Change,’’ 2007

http://unfccc.int/files/cooperationandsupport/financialmechanism/application/pdf/presentationyvo.pdf.

75 percent of the oil it consumes by 2030. Any policy that reduces its demand may

have enormous benefits. Thus, fuel efficiency standards, or efforts to switch from oil/

diesel electric generation to renewable energy or nuclear power would be valuable.

Each of these would also lead to a reduction in associated GHG emissions. China,

acting on the basis of an energy security constraint, could also mitigate its climate

footprint. Of course, not all security measures would necessarily be beneficial: If

China increases its coal liquefaction program without CO2 sequestration, its emissions would rise precipitously, even though its energy security problems might be

diminished.

(2) Clean air and climate: Another serious problem facing many cities in the developing world is increasing air pollution. As vehicle traffic increases and dirty industry and power generation grow, air quality declines, with related consequences

for human health and welfare. Solutions to promote clean air—switching from coal

to gas, increased automobile efficiency, improved mass transit, and process standards for industry can all improve the local pollution problem while simultaneously

reducing the GHG footprint.

A successful SDPAMS approach will need to be country specific, and issue specific. It will need to build on the domestic priorities, and find synergies between

development agendas and climate. This will require technical inputs on the U.S.

Government side from agencies like DOE, EPA, DOC, and AID, and on the private

sector side from both multinationals and from small- and medium-sized enterprises.

Congress will need to create systems to encourage such engagement—and push the

State Department, DOC, and USTR to open opportunities for trade relationships so

that markets in such new technologies and systems can be easily developed and

exported.

Developing countries, too, will support such an approach—but it must meet both

their local development needs and business interests. The U.S. (and OECD) role in

promoting SDPAMS is central. It will mean working to create fair trade agreements

in new technologies, and will likely lead to increased competition for the manufacturers of such low-cost technological solutions. Historically, U.S. companies have

done well in such markets; we need to develop the skills to do well in this new world

of environmental technology, too. However, this market will develop whether or not

we participate. The issue for the U.S. is whether we will play ‘‘catch-up’’ as we have

done for many of the telecoms and automotive applications that were invented in

the U.S. but built elsewhere, or whether we will be market leaders, with the concomitant economic wealth creation that such leadership brings.

None of this global developing country engagement effort will come cheaply.

According to information presented by UNFCCC Executive Secretary Yvo de Boer

at the ‘‘Dialogue on Long-Term Cooperative Action’’ held in Vienna—August 28,

2007, the additional estimated investment and financial flows needed in 2030 is

large compared with the funding currently available under the Convention and the

Kyoto Protocol, but small in relation to estimated GDP (0.3 to 0.5 percent) and global investment (1.1 to 1.7 percent) in 2030. De Boer suggested that mitigation measures needed to return global GHG emissions to current levels in 2030 would require

additional flows between $200–$210 billion in 2030, while additional flows needed

for adaptation in 2030 amount to several tens of billions of dollars.8

The UNFCCC, in a paper analyzing the technologies and the need for investment

to implement those technologies, suggests the potential for emissions reductions is

very large—and that only a small fraction is being undertaken through the existing

offset projects (see figure 4).

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9For a full report, see the Clean Energy Trends report at http://www.cleanedge.com/reports

trends2007.php.

It is clear that this funding will be incremental to what is already expected to

be spent on energy and infrastructure over the next several decades. Both national

governments and the private sector will play a key role in raising and directing

these financial flows. Thus, there is a critical role or the U.S. in ‘‘greening’’ the financial sector—including not only private equity incentives, but also more direct

prodding of the multilateral development banks—and the creation and funding of

new international mechanisms. This is further discussed below, in the section on

technology development and penetration.

One additional point might be made with respect to developing country engagement: Trade measures to compel action may backfire on the U.S. It is generally assumed that major developing countries are much less efficient in their use of energy

than the United States and other developed nations, and that production in those

countries generates greater emissions. Thus, it has been proposed that the U.S. impose border tax adjustments or other trade measures to assure U.S. industry is not

competitively disadvantaged. For the economy as a whole, the U.S. may well be

more efficient. However, in some important sectors in which U.S. industry competes

with developing country producers it is not the case. For instance, in aluminum production the most efficient plants are in Africa, with U.S. and EU producers the least

efficient, largely because their capital stock is the oldest. Conversely, U.S. steel production is low in emissions because it uses scrap metal rather than iron ore as a

feedstock. If foreign competitors started bidding up scrap prices in response to carbon constraints the competitive advantage of U.S. producers could disappear. This

is worth bearing in mind as we consider trade measures aimed at less efficient producers in global markets. Such measures do not always favor U.S. producers, and

in some cases more cooperative action may be possible in specific sectors.

3. Technology development and penetration.—There is a widespread consensus

that solving the climate change problem will require the development and rapid

penetration of new technology. Innovation will be needed in all sectors—and appropriate policies will be required to ensure rapid diffusion.

While there will be some costs to this technology development and diffusion pathway, there will also be enormous opportunities: The new technologies in a lowcarbon world represent a major new set of markets. The Clean Energy Trends report 9 estimates that the markets for renewable and hydrogen technologies will have

69

10See U.S. Climate Action Partnership: ‘‘A Call for Action.’’ http://www.us-cap.org. 11TEA ‘‘Energy R&D Database’’ http://wiww.iea.org/RDD/ReportFolders/ReportFolders.aspx.

quadrupled from $55.4 billion today to more than $226 billion in 2016. These include:

• Global biofuels market: $20.5 billion (2006)—$81 billion (projected 2016);

• Wind power market: $18 billion (2006)—$60.8 billion (projected 2016);

• Solar PV market: $15.6 billion (2006)—$69 billion (projected 2016);

• Fuel-cell and hydrogen market: $1.4 billion (2006—$15.6 billion (projected

2016).

Fundamental to the development of any new technology is the confidence that

there is a market for it; and this principle applies equally to the low-carbon energy

technologies needed to fight climate change. Those that present ‘‘technology approaches’’ as an alternative to a market-building mechanism such as cap and trade

present a false dichotomy: A cap-and-trade system, if adopted, will be by far the

most important driver of new low-carbon technologies. Without it, other technologybased efforts are likely to have minimal effect. It is recognition of this reality that

a group of America’s most prominent corporations united with leading NGOs in January 2007 to call for mandatory carbon limits in the United States.10 Leadership

in climate policy is not just about moral responsibility: It also places innovative U.S.

companies at the heart of these new markets.

Targeting specific technologies is made more challenging by the large range of options. Figure 5 shows one analysis of the technologies that can contribute to reducing emissions. As is apparent, in some cases these can entail costs of more than ÷40/

ton, while in others there is the potential to both reduce emissions and save money

through implementation (often through removing a range of nontechnical barriers).

There are a number of complementary measures that can help bring new technologies to the market. Three deserve highlighting: Research and development;

precommercial demonstration; and funds and related mechanisms to transfer technology to poorer countries.

Boosting R&D

Energy technology development is, according to the U.S. Administration, a ‘‘highpriority national need.’’ Certainly the concerns raised by climate and energy security

concerns would support this assessment. But despite this, federal funding for energy

research has been steadily falling since 1980. Federal funding for energy R&D has

hovered between $2.31 billion and $3.45 billion for the past 20 years,11 compared

to recent expenditures exceeding $20 billion for medical science, for instance (see

figure 6).

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12 U.S., Japan, Canada, Denmark, France, Germany, Italy, the Netherlands, Spain, Sweden,

and the U.K. 13 Runci, Paul. 5005. ‘‘Energy R&D Investment Patters in IEA Countries: An Update.’’ Pacific

Northwest National Laboratory/Joint Global Change Research Institute Technical Paper

PNWD–3581. 14 American Association for the Advancement of Science (AAAS). 2006. ‘‘A Guide to R&D

Funding Data.’’ http://www.aaas.org/spp/rd/guide.htm.

Nor is this a uniquely American phenomenon. A recent survey of 11 of the biggest

energy R&D funders 12 demonstrated that energy R&D spending worldwide has indeed stagnated (See Figure 7). In every country surveyed, the ratio of energy R&D

to GDP declined significantly between 1975 and 2003.13

One argument for reducing government R&D is that it allows the private sector

to step into its place. However, private sector spending on energy has actually

fallen: It is now around a quarter of the 1985 level in absolute terms.14

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Precommercial demonstrations: Bridging the ‘‘valley of death’’

Between the research and development phase and the full commercialization of

a technology there is a need for commercial scale demonstrations. Particularly for

large, capital-intensive technologies private investors tend to shy away from being

the first in class. On the other hand, such commercial-scale demonstrations can be

expensive, and require judgment from governments as to when to withdraw from

the market and let the private sector take over. This gap is sometimes referred to

as the ‘‘valley of death’’ in technology development.

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15FutureGen Alliance, http:/www.futuregenalliance.org/. 16 International Energy Agency (2006). Energy Technology Perspectives: Scenarios and Strategies to 2050. International Energy Agency, Paris. p. 199.

In the case of many technologies there remains a significant role for government

to partner with private sector players to build demonstration projects. In some cases

technologies suffer from high perceived risks, and demonstration projects can

reassure investors that might otherwise shy away from large, capital-intensive

technologies that lack a proven track record. In addition, some technologies will be

needed under significant carbon constraint but will not be developed until that constraint is clearly impending.

For instance, Integrated Combined Cycle Gasification (IGCC) is a relatively novel

technology for power generation from coal and other feedstocks. Since it produces

a flue gas that is high pressure and CO2-rich, it is expected to play a major role

in the implementation of carbon capture and storage (CCS). However, in the absence of adequate incentives for CCS it is less attractive than alternatives. Although

it emits very low levels of criteria pollutants, without CCS it is no more efficient

than other modern technologies such as ultra-supercritical pulverized coal (USCPC),

costs roughly 20 percent more to build, and suffers from a limited track record and

perceived reliability problems. Establishing a track record for this technology has

the potential to accelerate the eventual implementation of CCS. The FutureGen

project 15 is one example of government and private sector partnership in producing

demonstration projects, but the IEA argues 16 that at least 10 such demonstrations

will be necessary, costing from $500 million to $1 billion each.

Fund technology deployment and transfer

As in other areas, the U.S. to date has been longer on rhetoric than performance

in establishing funds for technology, and we still lag behind some of our international partners. However, some technology funds do have active U.S. involvement,

and in some cases leadership. The following are some examples of existing funds:

• U.S. Methane to Markets Partnership aims to advance cost-effective, near-term

methane recovery and to promote the ‘‘clean’’ energy sources. The total leveraged funding from the private sector, partner countries, and international financial institutions exceeds $261 million. • The ProRETT (Promotion of Renewable Energy Technology Transfer) project,

developed by the EU, was open to EU member countries or observer countries.

The funding for renewable energy is currently at ÷2.9 billion ($4.25 billion) over

the 7 years of the research framework period.

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17See UNFCCC, http://unfccc.int/files/methodsandscience/lulucf/application/pdf/parti

scientificissues.pdf.

• GEEREF (Global Energy Efficiency and Renewable Energy Fund) is aimed at

accelerating the transfer, development, and deployment of environmentally

sound technologies and helping to bring secure energy supplies to people in

poorer regions of the world and protecting against climate change and air pollution. The basis of the initial funding is set at ÷100 million ($145 million) for

global coverage, with the aim of leveraging much larger amounts.

• The international clean technology fund proposed by the U.S. will aim to help

developing nations harness the power of clean energy technologies. The initial

proposal was made just before the G–8 summit in Germany this year and is

to be structured around government contributions to help finance clean-energy

projects in developing countries. At present the fund has no dedicated resources.

These funds are still small compared to Official Development Assistance (ODA),

which in 2006 amounted to about $103.9 billion. It is interesting to note that the

U.S. is a large donor in absolute terms, spending $22.7 billion in 2006, but small

in proportion to the size of its economy. ODA accounts for just 0.17 percent of Gross

National Income, the second lowest percentage after Greece.

It is clear that the UNFCCC negotiations will provide a forum for only one subset

of the technology discussions. In particular, all countries may be prepared to discuss

options for the transfer of technology to least developed nations on a preferential

basis. However, for the larger discussion on technology development and diffusion,

there will be a need to promote more robust markets, as well as cooperative R&D

programs. These may be facilitated through language in the UNFCCC, but ultimately will be successful more through bilateral efforts by governments, supported

by private sector engagement.

4. Forestry.—Forests, and in particular tropical forests, play an important role in

the global carbon budget because they can be either sources or sinks of atmospheric

carbon. Annual emissions from land-use change (mainly through deforestation and

degradation in tropical developing countries) account for approximately 20–25 percent of the total anthropogenic emissions of greenhouse gases.17 The top 20 countries ranked according to forest emissions are listed in Table 3. It should be noted

that estimates of the magnitude of these emissions are highly uncertain due to several reasons such as a lack of resources, lack of standard methods, lack of capacity

at national levels, and lack of data.

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18 Ibid. While the UNFCCC paper cites an accuracy of 95 percent, this is a theoretical number

that does not include either soil carbon or more importantly, forest degradation, which in Indonesia and the Brazilian Amazon, may reduce carbon by 20–25 percent. 19 Under the current World Bank proposal, approved by the Board but not yet implemented,

$100 million would be used to help countries prepare for participation in a REDD market mechanism, and $200 million would be used to pilot REDD projects. 20While the Bank has noted the importance of the leakage issue, it will not address the problem through its Forest Carbon Partnership Facility.

However, broadly speaking, accurate satellite data and careful ground-truthing

can yield considerable accuracy for forest cover CO2.18

TABLE 3.—TOP 20 COUNTRIES RANKED BY EMISSIONS FROM LAND USE CHANGE AND FORESTRY

Country

Emissions

from LUCF

(MTC)

Non LUCFEmissions

(MTC)

Indonesia ......................................................................................................................................... 699.5 80.8

Brazil ................................................................................................................................................ 374.5 91.9

Malaysia ........................................................................................................................................... 190.7 33.3

Myanmar .......................................................................................................................................... 116.1 2.6

Congo, Dem. Republic ..................................................................................................................... 86.6 0.4

Zambia ............................................................................................................................................. 64.3 0.5

Nigeria ............................................................................................................................................. 53.1 21.6

Peru .................................................................................................................................................. 51.1 7.7

Papua New Guinea .......................................................................................................................... 39.8 0.7

Venezuela ......................................................................................................................................... 39.3 38

Nepal ................................................................................................................................................ 33.7 0.9

Colombia .......................................................................................................................................... 28.9 17.3

Mexico .............................................................................................................................................. 26.5 105

Philippines ....................................................................................................................................... 25.9 20.5

Coˆte d’Ivoire ..................................................................................................................................... 24.9 1.9

Bolivia .............................................................................................................................................. 22.9 3.3

Cameroon ......................................................................................................................................... 21.1 1.9

Canada ............................................................................................................................................ 17.6 144.4

Madagascar ..................................................................................................................................... 16.5 0.6

Ecuador ............................................................................................................................................ 16 6.3

Source: WRI, CAIT.

Given the scale of the total forest-related emissions, as well as their importance

to a number of key developing country parties, there is an increasingly strong momentum in favor of including reductions of emissions from deforestation and degradation (REDD) in a post-2012 climate agreement. Although there remain considerable uncertainty as to what form the REDD inclusion will take, the most prominent

proposals depend on large-scale financial transfers through the international carbon

markets in which forest commitments are taken at the national level (referred to

as a national level crediting approach for REDD).

However, a number of other approaches also exist, and are likely to be considered,

including relying exclusively on national forest regulation—perhaps with additional

support from international financial aid mechanisms and bilateral donor assistance;

or relying on expansion of the project-based carbon offset programs to include forestry (a reversal of current decisions under the UNFCCC that exclude REDD

projects from the CDM).

The World Bank is currently strongly pushing the national crediting approach.

The Bank is planning to launch a Forest Carbon Partnership Facility at the Bali

session, and has dedicated $300 million to that end.19 The Bank has recognized the

potential pitfalls of such an approach, and is in large measure focusing its pilot

effort on addressing the readiness of countries to participate in such a program as

well as the methodological and technical problems in the GHG accounting and

approval.

Among the most central of these for climate change is the problem of leakage: Displacement of activities from one place to another, often outside the jurisdiction of

the project implementer (or even the country itself).20 While some have argued that

leakage is solved by setting a cap at the national level, this may be incorrect. While

displacement of activities within a country are largely captured through national

approaches, where the demand for timber and other forest products is a principle

driver of deforestation, international leakage is very likely to be close to 100 perVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00078 Fmt 6633 Sfmt 6621 CLIMATE sforel1 PsN: sforel1
75

cent. As demand within both developed and emerging economies increases, it is

likely that supply will simply shift to less controlled jurisdictions.

At present, it does not appear likely that any of the UNFCCC mechanisms in isolation could completely halt deforestation. A solution is likely to require a policy

structure that focuses less on aggregated deforestation rates and instead provides

support for projects, programs, and policies in specific areas—as well as projects

that specifically help promote development (the central priority for forested countries and regions). Some of the options available include carbon market driven policies such as an enhanced CDM structure, under which requirements for measures

to prevent leakage could be imposed. The SDPAMS model (discussed above) could

also prove to be an excellent solution, both in terms of building capacity and targeting the actual drivers of deforestation.

It is clear that any effective mechanism to protect and manage tropical forests

will require significant levels of funding. A U.S. policy should thus focus on:

• Recommending to donor and forest countries the testing of a broader range of

policy options than just the national crediting approach between now and 2009.

• Working with the multilateral development banks and bilateral lenders to ensure that only a high-quality national crediting approach that links REDD

projects with demand reduction efforts in order to reduce leakage moves

forward.

• Seeking to build consensus in Bali of the need for a forestry component of the

post-2012 agreement to not only address deforestation from a climate perspective, but also to incorporate the nonclimate benefits of forest protection, including for biodiversity, local environment, and development purposes.

Implementing this policy will require both considerable and sustained political

will and resources.

5. Adaptation to the Effects of Climate Change.—According to the World Bank,

nearly 2 billion people in developing countries were affected by climate-related disasters in the 1990s, and the rate may double this decade (see figure 10). People in

developing countries are more than 20 times as likely to be affected by such disaster

as those in the developed world.

Unfortunately, our best projections suggest we are not likely to be on a path that

will keep our climate unchanged. This will require adapting to the changes we cannot avoid.

A critical question for developing adaptation policy is whether (in any given circumstance) climate change will be slow and incremental or fast and large scale. If

the former, we can and must develop a resilience to change that will enable us, collectively, to cope. Thus, we can work so that we can manage a drought that occurs

every 10 years instead of every 12, or a change in rainfall that leads to 10 percent

less water, or an increase in the disease vectors for malaria, or the need to create

corridors in addition to parks to protect diversity. In these cases, we need to do a

76

bit more of what we are now doing: More careful husbandry of scarce resources,

more medicines, and better planning.

On the other hand, if climate really leads to a step change or significant discontinuity, an incremental adaptive strategy may be counterproductive. A potentially catastrophic example of this may be the city of Lima, Peru: If, as predicted, the glacier

that waters the city is melted in 25 years, the city does not have an incremental

option—small savings in water will be inadequate. Instead, they need to accept a

major change: Leave town, begin massive desalination operations, or commence

large scale shipping of water into the city.

Clearly, to cope, there will also be a need for massively increased efficiency, and

perhaps in the near term, some shifting away from water intensive activities. But

over the longer term, these changes will not suffice. The Lima scenario paints a picture less of resiliency than of paradigm change.

A third set of circumstances may occur, in which science is unable to reliably predict whether we face incremental or step change. In these circumstances, the core

task of adaptation is not to plan for specific new impacts, but to learn to cope with

uncertainty. This calls for investment in robust processes for processing information,

making decisions, and responding to the unexpected. The ‘‘adaptive’’ policies and institutions that make such investments effective have yet to be designed, and need

substantial creative thought and analysis.

Decisions on how to spend adaptation money thus face the question: ‘‘What are

we trying to adapt to?’’ Wasting money on incremental change that could be spent

on relocating populations must be avoided; conversely, if incremental shifts are

adequate, huge societywide programs would be equally foolish. And if science cannot

predict with certainty when we face incremental or step change, measures are

needed that take into account a range of possible climate futures.

One key part of any future international regime will therefore need to consider

who will pay for the adaptation required, particularly in the developing world. The

sums involved are very large: Estimates of climate-related impacts range from $10

billion to more than $100 billion per year, and these are only likely to increase.

Meeting these costs poses both a moral and a political dilemma. Most developing

countries consider historical responsibility in determining who should pay for damages. Under this model (using WRI data) the OECD countries along with the FSU

are responsible for about 73 percent of the contribution to the rise in atmospheric

GHG concentrations between 1850 and 2000. This same group of countries also has

the capacity to pay: In 2003, OECD and FSU countries produced about 60 percent

of the world total GDP.

However, the politics of such payments are much more difficult. Virtually all

OECD countries have seen development assistance decline as a percentage of their

GDP. Even including private charitable donations (usually forthcoming in times of

massive disaster), we have demonstrated a limited willingness to pay for sustained,

long-term development priorities.

On the more positive side, there will be business opportunities in disaster preparedness and relief, in the development of technologies that reduce the consequences of climate change such as new drugs, new water savings technologies,

and new crops. All of these will reduce the burden that governments must meet.

However, Congress has a responsibility too. First and foremost, it must enact a

strong climate change program to help minimize global damages. It should consider

increasing support for USAID and the various development banks that many of the

poorest nations will turn to when disaster strikes. And it should support global

agreements, including agreements that include insurance coverage and liability, and

financial assistance to alleviate the worst of the suffering that will likely be borne

by the world’s most vulnerable communities. The U.S., and all donor countries,

should work to mainstream adaptation into development assistance, and work to remove barriers to trade to facilitate the development of more resilient economies in

developing countries that would be less susceptible to climate impacts. Finally there

should be an increase in the global budget devoted to fundamental research on

adaptation. We will not otherwise be able to cope with what appear to be increasingly certain damages.

PROCESSES

All this will mean frank, sometimes complex conversations with our international

partners. The UNFCCC is, and will continue to be the primary forum for engagement on climate change. Fortunately there is no shortage of additional opportunities

for specific exchanges. To cite a few of the most important:

Group of Eight (G–8): While the meetings of the G–8 Heads of State have long

provided an opportunity for discussions of climate change and energy policy, the

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21For a copy of the Secretary General’s meeting summary, see: http://www.un.org/climate

change/2007highlevel/summary.shtml. 22 APEC countries include: Australia; Brunei Darussalam; Canada; Chile; People’s Republic of

China; Hong Kong, China; Indonesia; Japan; Republic of Korea; Malaysia; Mexico; New Zealand;

Papua New Guinea; Peru; Philippines; Russia; Singapore; Chinese Taipei; Thailand; United

States; Viet Nam.

summit in Gleneagles, Scotland, in 2005 (hosted by then-Prime Minister Tony

Blair), marked the beginning of a more aggressive phase of climate discussions. At

the most recent session, in Heiligendamm, Germany, in June 2007, the group (including the U.S.) agreed that climate change is one of the major challenges for mankind and it has the potential to seriously damage the natural environment and global economy. They further agreed that urgent and concerted action is needed and

accepted their collective responsibility to show leadership in tackling climate

change. To that end, the G–8 agreed to consider setting a global goal for emissions

reductions, and further agreed to consider seriously the decisions made by the European Union, Canada, and Japan which include at least a halving of global emissions

by 2050. Finally, the group agreed that the U.N. climate process would remain the

forum for negotiating future global action on climate change, and committed to moving forward in that forum, with a view to achieving a comprehensive post-2012

agreement (post-Kyoto agreement) that should include all major emitters. Japan,

host of the next G–8 meeting in June 2009, is committed to continuing to use the

sessions as an opportunity to further develop a common policy for limiting climate

change, including not only energy-related emissions, but also those related to landuse change and forestry.

Major Economies Meeting (MEM): The United States convened the first Major

Economies Meeting in late September 2007. Bringing together senior representatives from 17 major economies (a group nearly identical to the top emitters group

as defined in Table 1), the session highlighted the importance of establishing a longterm global goal for greenhouse gas reduction in balance with sustainable development objectives. There was wide agreement that all nations would need to act to

advance the global goal. The discussions emphasized the importance of enhancing

investments in technology, and the need for financing clean energy technologies in

the developing world, with considerable attention also paid to the need to address

adaptation in concert with efforts to mitigate climate change. While the MEM session did bring a critical group of countries to the table, it is too soon to tell whether

the sessions (of which several more are planned) will bear fruit. A considerable

skepticism exists as to whether the sessions are a forum for agreement, or rather,

a venue in which rhetoric outweighs action. Some clarity on how the U.S. intends

to work with the group may emerge at the session in Bali—where the U.S. efforts

to bring the results of the MEM discussion into the UNFCCC process, as agreed in

the G–8 dialogues (at the MEM itself) will be tested.

United Nations High Level Event on Climate Change: On September 24, 2007, the

U.N. Secretary General convened a high-level session (1 day before the opening of

the U.N. General Assembly). The session focused on four themes: Adaptation, mitigation, technology, and financing. While there was no consensus outcome from the

session (nor was one sought), it was clear that the delegates were in overwhelming

agreement: The climate problem was real and increasingly severe; damages were

already being observed and immediate steps were needed to mitigate damages and

reduce future climate change. Technology was widely considered a key element for

any success, and adequate financing—both to alleviate current impacts, and to mitigate emissions, including through the development and integration of new, low GHG

technologies, would be required. Perhaps the strongest conclusion was a general

agreement on the need to come together and work through the UNFCCC, beginning

with the meeting in Bali, Indonesia, in December 2007, to take appropriate steps

toward an agreement that could enter into force no later than 2012.21

Asia Pacific Economic Cooperation (APEC): At their most recent session in early

September 2007 (held in Sydney, Australia), the leaders of the APEC countries 22

agreed on the need for global action to address climate change, while also reaffirming the need to take account of differentiated responsibilities and capabilities. Emphasis was placed on the need to develop new, low and zero emitting energy technologies, as well as on combating deforestation, while promoting open trade and

investment. As with dialogues in the U.N., in the MEM, and in the G–8, there was

agreement that the appropriate forum for international negotiation would be the

U.N. Climate Convention, and the group called on those negotiations to reach an

agreement on a post-2012 arrangement that would reduce global GHG emissions.

In a more concrete vein, the group agreed to work together to increase energy intensity 25 percent by 2030 (and called on each member to set national goals), to inVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00081 Fmt 6633 Sfmt 6621 CLIMATE sforel1 PsN: sforel1
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23For a full copy of the APEC statement on climate change, energy security, and clean development, see: http://203.127.220.67/etc/medialib/apecmedialibrary/downloads/newsuploads/

2007aelm.Par.0001.File.tmp/07aelmClimateChangeEnergySec.pdf. 24 Current APP members include Australia, Canada, China, India, Japan, Republic of Korea,

and the United States. 25 In addition to the fora discussed here, which are either climate specific or which have a

broader political agenda where climate change is only one element, there are several new fora

focused on forests, including the Asian Forest Partnership and the Asia Pacific Forest Law Enforcement and Governance Process. In addition, China has proposed a new Asian forest network

to examine the link between forest and climate in the context of APEC. 26 International Energy Agency, World Energy Outlook, 2007. 27For details of the Chinese climate policy, see ‘‘China’s National Climate Change Programme,’’ relased in June 2007, and available at: http://www.ccchina.gov.cn/WebSite/CCChina/

UpFile/File188.pdf.

crease regional forest cover by 20 million hectares by 2020, and to establish a new

network for the exchange or information on low emitting energy technologies. Follow

through, both on the general agreement to support the UNFCCC, as well as on specific target efforts is to be reviewed at subsequent APEC sessions.23

Asia Pacific Partnership (APP): The APP,24 created by the U.S. in 2006, is focused

on accelerating the development and deployment of clean, low or zero emitting technologies. In particular, the group, composed of representatives of both governmental

and private sector partners for the six major Asia Pacific economies, is examining

opportunities through eight task forces: (1) Aluminum, (2) Buildings and Appliances,

(3) Cement, (4) Cleaner Use of Fossil Energy, (5) Coal Mining, (6) Power Generation

and Transmission, (7) Renewable Energy and Distributed Generation, and (8) Steel.

The U.S. chairs or cochairs the task forces on power, aluminum, coal and buildings.

While the group acknowledged its interest in being consistent with the principles

of the UNFCCC, its emphasis is on technology development—with a specific private

sector focus. As of the 2nd Annual Meeting (held in New Delhi in October 2007),

the group had endorsed 110 specific projects, although details of the extent of implementation of these is difficult to ascertain. In 2006, the U.S. proposed a $50 million

budget for the APP, significantly less even than the Australian contribution of $75

million. The APP provides an excellent tool for public-private partnerships and the

direct business participation in efforts to reduce GHG emissions. However, while the

program promotes business collaboration and technology interchange in a way the

purely government fora do not, to date its impact has been limited by the lack of

a U.S. commitment to clear leadership and clearly expressed GHG limitation goals

and by the differential way the U.S. treats collaboration with the developing country

members—China and India.

All these processes and others 25 have a role to play in helping shape a climate

deal. However, as indicated above, all of them have repeatedly emphasized, with the

agreement of the U.S., that the central process for the development of a post-2012

climate agreement is under the United Nations Framework Convention on Climate

Change (UNFCCC). Thus, actions the U.S. and other countries take through that

forum will dictate the ultimate stringency and effectiveness of the post-Kyoto

regime.

A PATHWAY TO ENGAGING CHINA

As we are all aware, Chinese emissions are rising rapidly. The International

Energy Agency projects that China will surpass U.S. in total energy consumption

within the next few years 26—not surprising given reports that indicate China is

building a new power plant nearly every week.

However, even though it is characterized (legitimately) as a developing country

under the UNFCCC context, China none the less has adopted a significant climate

change policy, albeit one that uses a different mix of policy tools than either the

European or the U.S. model.27 In responding to energy security, air pollution, and

water and soil degradation issues, China’s climate strategy to date has highlighted

three key elements:

• Increasing energy efficiency. China’s target is to reduce energy intensity per unit

GDP by 20 percent between 2006 and 2010 (the 11th Five Year Plan Period).

This target codifies the national commitment to reverse the trend of the previous 5 years, where China, for the first time since the period of economic reform, lost ground in its energy intensity. As part of its efficiency agenda, China

has also adopted strong automobile efficiency standards (stronger even than

those proposed by California), and it is concurrently raising gas prices to market levels. The combination should significantly limit the growth in Chinese

demand (although not enough to offset the large numbers of new vehicles and

vehicle miles traveled).

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28 Between 1997 and 2005, the value of Chinese forest product imports rose from $6.4 billion

to $16.4 billion, and the volume more than tripled See ‘‘China and the Global Market for Forest

Products: Transforming Trade to Benefit Forests and Livelihoods’’ available at http://environment.yale.edu/posts/downloads/a-g/Chinaandglobalmarketsforforestproducts.pdf. 29 Respectively the EU and the U.S. are 187kwh/m 2 and 146 kwh/m 2.

• Increasing the use of renewable energy. China’s goal is to increase renewables

to 15 percent of the overall energy mix by 2020. This goal is coupled with additional measures to reduce the overall amount of coal in the energy mix (where

it still accounts for over two-thirds of total energy use and over three-quarters

of electricity generation). Complementary policies in the energy sector include

increasing the use of nuclear energy, encouraging methane capture for energy,

and increasing the use of natural gas. • Increasing forest cover and implementing land-use policies that reduce soil degradation and increase carbon capture. Reforestation efforts within China have

long been consistent and impressive. Anyone who compares a recent visit to the

tree-surrounded Great Wall to a postcard of a similar vantage from the first

half of the 20th century will be surprised at the previous view of bare hills.

Since 1990 forest cover in China has grown from 14 to 18 percent—although

this has come in no small part as a consequence of rapidly increased imports

of forest products from other parts of the world. 28

Other than reforestation, these goals are very much works in progress. For China

to meet its own energy efficiency and renewable energy goals will be extremely challenging. Success will in part be a function of the extent of the technical support

China receives to meet these goals. Policymaking in China is typically an iterative

process: First a goal is set. Then, if it is not met immediately, implementation is

reviewed, new policies are issued and implementation is progressively strengthened.

China is currently developing the tools it needs to meet its goals, including the

‘‘1000 Enterprises Program’’ for energy efficiency; energy conservation and renewable energy laws; new public transportation initiatives; and improvements in efficiency in the building sector. China’s industrial energy efficiency goal is to reduce

its emissions by 100 million tons coal equivalent between 2006 and 2010 compared

with business as usual. This corresponds to about a 15-percent energy intensity improvement and constitutes the equivalent of 240 million tons of CO2 averted. The

program, while quite new, appears to be on track: In 2006, China averted 20 million

tons of coal equivalents under this program.

China does not yet use energy in buildings at anywhere near the rate that we

or the Europeans do: Residential efficiency efforts are also underway. Chinese use

of energy per square meter of building space is about 30 kwh/m 2 in rural areas,

and 65 kwh/m 2 in urban areas (less than a third of the U.S. average and less than

half of the EU average 29). While these levels will undoubtedly increase, and the

Chinese have put in place a number of measures, including insulation requirements

and other building standards, promotion of compact fluorescent lights, improved appliance standards and improvements in the efficiency of building materials production to try to stem the rate of increase. For example, China, which makes 70 percent

of the world’s light bulbs, has agreed to phase out incandescent bulbs in favor of

more energy-efficient ones, part of a push by the Global Environment Facility (GEF)

to phase out incandescent bulbs globally. China is the first developing country to

agree to join this program, and the facility will invest about $25 million for the Chinese program alone.

China has just begun to implement serious metrics to monitor these programs,

and to develop performance benchmarks for progress. Additional tools will be

needed in this area, as well as in the financing of clean energy projects, and in innovating new approaches to technology adoption. These offer potential areas where the

international community can offer technical assistance. The discussion above, on

technology development and penetration, suggests additional opportunities for both

U.S. and China in this area.

China’s goals are ambitious, and will likely be difficult to meet. A combination of

factors will be key for success. Perhaps foremost among these will be a commitment

by the developed world to collaborate with China and work jointly to develop the

tools it needs to reach these goals. This includes much more active engagement by

USG agencies in joint research and implementation of energy conservation and renewable energy technologies in China. The limited engagement thus far by both the

USEPA and the Department of Energy’s National Laboratories has yielded concrete

results in both areas, but the scale has been far lower than what the Chinese need

to bring the needed technologies to scale.

To resolve the big question that hangs over the heads of our large developing

country counterparts and ourselves—how to use coal without emitting CO2—we will

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need heavy investment. Effective uptake of this technology will be enhanced if major

research institutes and industry in both the U.S. and China are parts of the teams

developing the intellectual property to begin with. Furthermore, U.S. Governmentfunded projects should be linked to counterpart projects around the world. We need

to deploy these technologies everywhere quickly, without complex or expensive premiums.

Ultimately, Chinese climate change policy, like that of the United States, will not

be driven by international priority setting, but by a domestic acknowledgement of

the urgency of the problem, and a clear internal sense of the importance of acting.

China is on the early steps of a road to developing and implementing a strong climate program. While the legitimate question remains as to whether it will be large

enough and soon enough to avert the worst of the global damages, it is already at

least the equal of the U.S. climate policy effort. Moving forward, the United States,

through a strong bilateral engagement with China, through active and constructive

participation in the international climate dialogue, as well as through setting our

own aggressive domestic agenda, can certainly help foster a continued, effective Chinese climate policy.

WHAT WE NEED FROM BALI

Next month, the Conference of Parties to the UNFCCC will hold its 13th session

in Bali, Indonesia. The Bali meeting is perhaps the most critical U.N. climate meeting for many years. Its principal objective is to successfully launch the negotiations

for a post-2012 climate agreement. Swift progress on these negotiations will be necessary to ensure that agreement can be reached by 2009 to set the world on a fair

and effective road to managing the climate challenge.

The key features of the Bali agreement will need to include:

1. A mandate to negotiate a new international agreement by 2009

Given the time that it takes countries to ratify and implement international

agreements, in order to avoid a gap following the first commitment period under the

Kyoto Protocol (which ends in 2012) the post-2012 agreement must be negotiated

and agreed by 2009. The negotiation of such a framework will not be simple, so it

is important to begin immediately. The United States should clearly signal that it

will abandon its strategy of obstruction and support a timely and effective agreement.

2. Processes to frame both developed and developing country commitments

The most efficient and effective process would be comprehensive, seeking to deal

with all outstanding issues under a single umbrella. To date, the U.S. has called

for a two-track process—one for Parties committed to the Kyoto Protocol (with its

emissions trading and market mechanisms) and one for everyone else. This insistence on a two-track approach weakens the prospect of eventually getting key developing countries to take actions.

Until the U.S. has a strong domestic cap-and-trade system in place it may be hard

for us to reenter the discussion of targets with much confidence, or indeed with

much credibility.

However, the world is likely to look favorably on any serious U.S. efforts to rejoin

an emerging agreement as soon as it finds the resolve to do so. In Bali, even if we

cannot bring ourselves yet to contribute to the discussion on new commitments, we

should at least not block them.

In addition a mechanism to pledge and review varied types of actions from developing countries needs to be introduced. This would be a new development compared

to the Kyoto Protocol as it now stands. Such mechanisms, which must be introduced

in Bali, need not be agreed there; instead, they would be developed over the span

of the next 2 years, prior to reaching an agreement in 2009. Provisions should be

made for including a comparison of national efforts, so that negotiating countries

can satisfy each other that each is taking real and substantive measures to control

emissions, commensurate with their capacity and level of development.

3. New mechanisms to reduce the destruction of tropical forests

In some major countries, notably Brazil and Indonesia, the majority of human

emissions come from deforestation rather than fossil fuels. Mechanisms are needed

to protect these forests, not just for the carbon they contain but because of their

inestimable value as havens of biodiversity and home to millions. Again, a final

agreement is not required at the Bali session; rather, the meeting must agree to

launch a process, to conclude by COP 15 in 2009, to agree on how to handle these

critical emissions.

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30 At a meeting held in Lisbon, Portugal on October 29, 2007, leaders of more than 15 governments met to launch the International Carbon Action Partnership (ICAP), a partnership of countries and regions that have implemented or are actively pursuing the implementation of carbon

markets through mandatory cap-and-trade systems. The partnership provides a forum to share

experiences and knowledge. Members include: European Commission; France; Germany; Greece;

Ireland; Italy; Netherlands; New Zealand; Norway; Portugal; Spain; United Kingdom ; Arizona;

California; Maine; Maryland; Massachusetts; New Jersey; New Mexico; New York; Oregon;

Washington; British Columbia; and Manitoba.

4. New commitments to help the most vulnerable adapt

Both the UNFCCC and the Kyoto Protocol include mechanisms to help vulnerable

populations adapt to the impacts of climate change. Only now are these (still very

limited) funds about to become operational. The U.S. can lead by example in pledging greater help, both through multilateral mechanisms and through the recommendation of other, new instruments such as USAID programs and other bilateral assistance. Such efforts will be central to ensuring the success of both a climate

agreement in 2009 and to long-term efforts to cope with the global damages of climate change.

A CHANCE FOR THE UNITED STATES TO SHOW ITS COLORS

Above all, Bali is an opportunity for the U.S. to reengage. After years of seeing

the U.S. standing aloof from, or even obstructing, international progress in the fight

against climate change, our international partners are more optimistic. Most are

aware of the extensive efforts underway at the State and local level within the U.S.

(indeed, many discussions are underway about linking national programs to State

efforts 30). Countries are also paying considerable attention to the active debate over

the adoption of strong federal legislation, though all recognize there is still some

way to go before such proposals become U.S. law.

The U.S. is also on record as supporting the UNFCCC process. The Major Economies Meeting may have been short on substance, but our international partners left

largely upbeat. They heard Secretary Rice repeat President Bush’s pledge that the

United States will work to ensure a negotiating process from Bali to 2009, leading

to a fair and effective post-2012 climate agreement.

Now is the time for the United States to live up to that pledge and to take up

the leadership role it has ignored for so long.

Senator KERRY. Thank you very much, Dr. Pershing.

I appreciate the testimony of everybody, and I just want to try

to follow up a little bit—while, indeed, Bali is a ‘‘process,’’ meeting,

I assume you would all agree that—I mean, knowing how these

meetings work, you wind up, particularly, with the interparliamentarians sitting there and, sort of, talking substance. And

to the degree that they view us as legitimate, genuine, prepared to

take on certain tasks, I assume you would agree that will affect

how they view a timeframe for a mandate, or what kind of and extent of mandate they’re willing to embrace, or the timetables, et

cetera. I mean, clearly you can’t divorce the process from some of

their perception of your attitude about the substance. Is that correct, or not?

Senator WIRTH. Well, I think the reality is that 2008 will be consumed by looking at all the details that have to get filled in, and

there’ll be a lot of blanks there, because everybody’s going to wait

for 2009. So, what 2008 can do is to take the framework—and

Paula Dobriansky laid it out, and that’s the one everybody’s agreed

to—mitigation, adaptation, technology, and finance—and forestation is a major piece of this—and they will decide that that’s going

to be the framework that we work on. But they’re not going to fill

in the blanks until they see a new administration come in.

Senator KERRY. Understood. But, I mean, clearly the brunt of

this negotiation is going to be in 2009——

Senator WIRTH. That’s right.

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Senator KERRY [continuing]. In a very short period of time, as I

said earlier. But I—but would you not think that—for instance, on

technology—do you see some of that discussion taking place? Do

you think it’s important for us to be laying out some constructive,

forward thinking about where we’re at in this? Obviously, I know,

from your testimony, you do, Dr. Pershing, but I’d like to get the

others, too, because I——

Dr. PERSHING. Let me suggest just a few points about that, because I would fully subscribe to the theory that—they usually say

90 percent of the agreement happens in the last 10 percent of the

time, and that’s about right. But it only happens because 90 percent of the work was done at the beginning. And so, in this particular instance, I would suggest two possible courses of action.

The first is, this administration has indicated, while it doesn’t,

obviously, care a lot about the mitigation side, it’s prepared to talk

about forests, it’s prepared to talk about adaptation, and it’s prepared to talk about technology. Take them up on it. Let’s see what

they do with those things. There is enormous scope for very positive action, which the world could agree, at this meeting, at Warsaw, which is the next meeting, and at Copenhagen, which is the

2009 meeting, all during the administration’s tenure and purview.

Move on those, and reserve these hard political decisions to that

last session, when perhaps a more focused and positive viewpoint

is in office.

Senator WIRTH. Let me, if I might, Mr. Chairman, follow up on

that.

Secretary Paulson’s been charged—I think it’s the third time that

this charge has been given to somebody—to put together a technology initiative. Take him up on it and say, ‘‘Let’s move.’’ Now, the

response to that will be, ‘‘Well, we’re putting in X number of billions of dollars more than has ever been done before.’’ Well, get to

the bottom of those numbers. The reality is that we’re spending

about 25 percent today in research, development, and demonstration of what we were spending at the time of the last oil crisis in

the 1980s. Our RD&D expenditures have just plummeted. Now,

every single outside group—every single one—will say, ‘‘This is a

set of expenditures that have to be made.’’ As I say, it’s a low-hanging fruit, and that’s something that could be done with the leadership of the Senate, working with the Department of Energy, and

say, ‘‘OK, let’s go ahead and do this, and let’s, over, say, a 4-or-5-

year period of time, ramp us back up to a four—or five-times

value.’’ That has to be done. The report done by John Holdren in

1997 for the President’s Committee of Advisors on Science and

Technology is the No. 1 blueprint for what ought to be done. All

the material is there. It’s now just a matter of fact of doing it. So,

take them up on it, and let’s do that. We could really demonstrate

that we’re serious.

Dr. SANDOR. I would say one thing, from a market’s point of

view, is to try to create as many linkages as possible. We have a

case in point where Baxter International reduced emissions at their

EU regulated facility in Dublin, Ireland, and delivered them in satisfaction of the requirements of CCX.

I think the goal of any such system has first and foremost, is to

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est possible cost. That, to me, is critical. That says—and Jonathan

and Tim both know—that there are many emission reduction actions which we find acceptable that other people may not. For example, those at this table have found avoided deforestation to be

a very big issue. At CCX, we account for it. There are many, elsewhere, that don’t.

There are issues of equity here, in terms of a market. Should it

be that Chinese coal-mine methane is allowed into the system

when it is additional, but Pennsylvania’s is not? Is that a good policy? Or is the Lugar Stock Farm reforestation project OK in CCX,

but not OK in an international market, even though those walnut

trees soak up a lot of carbon?

So, the only thing I would urge is that, as a student of economics

and somebody who for the better part of 35 years has been working

on new products, we create linkages and homogeneity and do not

bifurcate the market. We managed to homogenize wheat and soybeans, Treasury Bonds, and even the S&P 500. I think the leadership position for us here is to make the market as homogeneous,

drive the cost of reducing the greenhouse gases down, and keep focused on that.

Senator WIRTH. Mr. Chairman.

Senator KERRY. Yes, Senator Wirth.

Senator WIRTH. Just one other very specific item which you could

do that would have a significant impact: In the Warner-Lieberman

legislation—which I applaud, I think it’s really headed in the right

direction—there was initially a set-aside that 10 percent of the

funds yielded by the legislation would go to adaptation purposes.

Now, that was of great interest to a lot of people, for reasons Senator Murkowski was suggesting domestically, but also of very significant interest to a lot in the evangelical community and the

Catholics bishops who are very concerned about poverty around the

world. And this was the item in Warner-Lieberman that really got

them enthused about the climate legislation. Unfortunately, someplace along the road, that 10-percent requirement got dropped. It

then got added back in again in very much of a watered-down way.

It ought to come back in its full robustness. That’s a statement to

the developing world that, ‘‘We are serious about the adaptation

issue. We know that you’re the ones that are going to get the most

impacted by climate change. We caused the climate change. Now

we’re willing to work with you.’’ That’s something that can be done

right away, to restore that back into the Warner-Lieberman legislation—I mean, Lieberman-Warner, whatever. It’s a perfect little

vignette about the kinds of things that you can do and make a

statement around, that’s extremely important on an issue of adaptation and an issue of international negotiation, and an issue of

morality and equity.

Senator KERRY. Senator Lugar.

Senator LUGAR. Let me raise a question, just for information,

about markets, in the sense of the discussion that might occur at

Bali. As I understand—and I think you’ve said a little bit about

this, Dr. Sandor—in Europe, they’ve had an active market, based

on the Kyoto Protocol and obligations that countries feel they undertook to trade. The price of carbon, from what I’ve seen in the

regular press, quite apart from the financial press, has ranged from

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$15 a ton to $40 a ton at various times; a huge range. Why such

a range? And, second, could this market in Europe, plus the one

you’ve established at CCX, or maybe others that are established—

can this become, potentially a worldwide market? For example,

today you can get a price for gold and copper, which is an international market, sold in different prices earlier today in Tokyo, but

now, New York or Chicago, a different price now. In other words,

is one of the things you might achieve at the Bali conference a

sense of how a worldwide market construct could occur, and at

least what the rules of the game might be if everybody decided to

enter into this?

In our own domestic debate, it often goes that the cap-and-trade

business is sort of a softie thing. What you really need is a carbon

tax. This is what real people do to—if you want to get at it. On

the other hand, it’s hard to adopt a carbon tax worldwide, given the

sovereignty of many, many countries. But I’m wondering whether

the market principle that you’ve established doesn’t violate the sovereignty of countries, but is really the international idea of the

trading of commodities, generally. Carbon becomes this type of

commodity—so that when the hard negotiations finally transpire;

do you enter the market, do you subject all of your processes to the

fact that you must buy your way out of a problem, if you have one,

and you must have suppliers that are sufficient to get some balance. What comment do you have on, sort of, blue-skying this kind

of concept for a world market?

Dr. SANDOR. Well, we, for one—it is my business, shamelessly

speaking, Senator—would like to see a worldwide market. We

would like to see linkages of some sort. We don’t understand from

our point of view in administering a market, why a coal mine

methane project in Germany should be treated any differently than

a coal mine related project in Pennsylvania or China. To the extent

that we can forge homogeneous instruments, we will broaden the

liquidity and make it much cheaper to transact, just as we do in

agricultural commodities like corn or wheat or soybeans. There are

lots of different grades, but they are all deliverable. So—and, to the

extent that the negotiators can agree upon very critical issues, like

those that Jonathan mentioned, and like avoided deforestation—

this, to me, is a very, very important issue, and there is a great

debate about it.

How do we address the need for equity and make it as cheap as

possible to comply? Sometimes these goals conflict with each other.

Which leads me to the third part of your question. In the first

or pilot stage of the European trading scheme, there were no domestic offsets allowed. The U.N.’s CDM process was clogged and

did not come into play. There wasn’t any offset opportunity for domestic agriculture in there, for example. There wasn’t a lot of the

low-hanging fruit available. The pilot stage dealt with only one gas,

CO2. It didn’t include other greenhouse gases like methane. You

couldn’t do methane capture projects, for example, from dairy

farms, coal mines or landfills. I think a well-designed program,

with an objective of reducing greenhouse gases at the lowest possible cost can also yield other important co-benefits to society. But

one has to be very careful when designing such a program or you’re

85

liable to get a three-wheeled car that doesn’t go very fast if you

compromise the market instruments. Regarding the $15 to $40 price range, I think it is reasonable.

Depending on how you design the deliverable instruments, you can

price a commodity any way.

Senator LUGAR. Let me just pick up on a thought. Ideally, in a

world agreement, people are going to be more inclined to vote for

that which is the least cost, as opposed to something more rigorous.

Some might take that option, but probably not a majority, simply

because each of these economies wants to exist and survive this

process, and it could be expensive. But what I’m curious about—

you mentioned deforestation in Brazil, or wherever we tried to stop

it—what if you give credits to the country of Brazil for their forests, as they’re sitting there? In other words, in terms of this world

equity, there are a lot of forests there now. One reason why somebody wants to cut them down is that they have more value being

lumbered than they do sitting there. Or, likewise, people who have

farmland and adopt different practices, like the Farmers Union out

of North Dakota, or what have you, no-till planting. Maybe people

might say, ‘‘Well, this is very soft. We’re not really sure of the

measurement of this. This is getting pretty queasy.’’ Well, there is

rigorous measurement—but, if you begin to introduce these worldwide situations, where people have farmland, they have forests,

they have other things to put into this equation, this makes them

more interesting, it seems to me, in terms of the equities, as well

as the cost of it.

Now, what is your judgment about that?

Dr. SANDOR. Well, I think you can do it. I think you can create

equities. We’ve had the measurement challenge, whether it’s for

the trees on the Lugar Stock Farm or it’s for Nebraska soil sequestration, are nowhere near as onerous as one would suspect. And

you can deal with avoided deforestation. You can have what economists would call a counterfactual. If, for example, the rate of deforestation in Amazonas is 10 percent and you stop that rate, you

don’t have to give full credit. You can say 10 percent of it would

have been deforested, and if you’re stopping the deforestation rate,

you’re contributing something to the abatement of global warming

and, therefore, get partial credit. So, there are technical answers

to lots of these questions. And I do think you can get a worldwide

system. WRI does an enormous amount of work in the protocol

area and they do a fantastic job. As a matter of fact, half of protocols we use come from WRI. I think the U.S. can lead in saying

we can measure and we can do the job appropriately. It is not so

daunting. And we can develop an equity-driven system which is

fair.

Senator LUGAR. Yes. I didn’t wish to diminish the whole argument to a business arrangement, but I—in the spirit of——

Dr. SANDOR. Yes.

Senator LUGAR [continuing]. Of what Bali is supposed to do—

that is, set up some parameters in which we may have some discussion. This seems to me to offer a potential model that might

bear fruit as people decide that they can enter their equities. We’re

not demeaning the Chinese, or they’re not claiming, ‘‘You’ve

already dirtied the atmosphere for 50 years, we need a chance.’’ We

86

get over that sort of thing and get on with the economics currently

of the world trading system.

Senator KERRY. Dr. Pershing.

Dr. PERSHING. Just one very brief comment on that exchange, I

think it’s exactly the heart of part of the issue. The whole structure

of the carbon market is little different than the structure of commodities markets. It’s created exclusively because governments

have gotten together and said there’s now a cap, and the cap creates scarcity, and the scarcity creates the price. So, we have to go

back to the question of: Will there be a cap, going forward?

But the second thing which we have to do is examine whether,

if there were a cap in all countries, we’d believe the implementation, and whether, if we had a contract for exchange of those permits, we’d believe the contract. In some cases the answer is, absolutely, we’d be very confident. I think the European exchange is a

perfect example. Your farm is a perfect example. But in the forestry side outside of those areas, we may be more skeptical.

So, for example, I’m decreasing deforestation in Indonesia, but,

turns out Brazil’s not part of the institution, and so, the wood demand that was down in Indonesia is now up in Brazil. The fact

that, in Indonesia, there is a change does not necessarily mean

that, globally, the change has happened, because we’re not managing or mapping or recording globally. So, those are the dynamics

that will be part of the Bali discussion and which we need to facilitate and encourage before we could make a lot of progress.

Senator LUGAR. But we could also pick up some of the business

of the World Trade Organization when—for instance, they now condemn certain agricultural subsidies, or various practices, and allow

countries to exact their due in whatever the trade is.

Dr. PERSHING. Yes.

Senator LUGAR. I know, presently, of $4 billion that may be due

by somebody. The United States, because of our cotton business,

unless cotton reforms. There at least is some experience in the

world trading community of this type of thing.

Thank you, Mr. Chairman.

Senator KERRY. Thank you very much, Senator Lugar.

Dr. Pershing, you mentioned the three things the administration

is willing to talk about, and it didn’t include finances, which is on

the list. Are they not?

Dr. PERSHING. We haven’t seen substantial resources yet attach

those financial proposals. There is, as the Under Secretary mentioned, the proposal for the Energy Fund. There is some financing

proposed for it, but I haven’t seen any authorization, I haven’t seen

a strong commitment to it. Other funds that might be required—

the World Bank estimates anywhere from $10–$100 billion a year

for adaptation, I haven’t seen a fund there. The proposals are out

there on the technology side for things like capture and storage,

the administration talks, in the geological side, about putting in a

billion dollars over a number of years; well, the current estimates

from MIT are about 200 million per plant, so five plants would absorb the entire cost. So, your proposal, Senator, which would ramp

up the notion of immediate programs for capture and storage

plants, well, that would be something to bring to the table. CurVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00090 Fmt 6633 Sfmt 6602 CLIMATE sforel1 PsN: sforel1
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rently, I haven’t seen, from them, concrete numbers that would

allow me to say yes.

Senator KERRY. Right. Nor have I, which is why I raised it with

her. But—

Senator Wirth.

Senator WIRTH. Mr. Chairman——

Senator KERRY. Can you also, as you comment on that, I’d just

like you both—and we’re going to wrap up very, very quickly

here—just—what’s the ideal—I mean, I understand the process

part of it, but what’s the best message that you could say would

come out, that you’d be thrilled if Bali did what?

Senator WIRTH. Well, I’m afraid it’s relatively mundane. If I were

a member of the Senate Observer Group, what I’d be doing is talking about the future and the growing change of commitment, how

the private sector is being involved, and really tell people that the

United States is moving as rapidly as it is. That is a message that

is extremely welcome, and the more it’s said—you know, there’s a

lot of skepticism about it, but, in fact, it’s true. That, it seems to

me, is the most important thing to do. The process is pretty much

going to take care of itself, and it’s pretty hard to make that more

than what it is.

Senator KERRY. But I assume you believe we could help change

the dynamics for what follows as they go through the process.

Senator WIRTH. What follows is terribly important, and understanding what follows. What Jonathan said, I think, is correct—

what happens in 2008 will prepare for 2009. We’ve talked about a

number of things here—one, this whole business of what kind of

long-term financial commitment is made for adaptation, and what

the World Bank’s going to do, and the other financial institutions—

that’s one whole clump of activities. The Clean Development Mechanism that Richard was talking about, and making that work is

another; the trade issue which Senator Lugar talked about, and

how that plays into climate change; and the biofuels issue is one

that’s barely been touched. There are a number of opportunities out

there that are just ripe for working, and the demonstration that

we’re willing to do that, I think, is going to be——

Senator KERRY. It would be good if——

Senator WIRTH [continuing]. The bulk of it.

Senator KERRY [continuing]. We could, sort of, follow up with

you. I’d love to do that in the next days and sort of talk about it

a little more. It would be great.

Yes, Dr. Sandor.

Dr. SANDOR. I would second a lot of what Senator Wirth said,

and I would just add to that by saying that Europe is not as far

ahead as people think and the U.S. isn’t as far behind as people

think. There are a lot of things going on at State level and at the

local levels. And there is a very big private sector effort as demonstrated by the members of CCX.

Senator KERRY. It’s a good point.

Dr. SANDOR. And we will go forth and invent in the capital markets, and take a leadership role there.

Senator KERRY. Well, it’s an excellent point. And—

Yes, last point, Dr. Pershing.

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Dr. PERSHING. Yes; I’d just add two more things, because I would

fully subscribe to both Richard’s and Tim’s comments.

The two things that I would add is that you need to send out a

sense of urgency. And the message that we need to bring is that—

it’s something like the timetable that I think that Tim negotiated

in Geneva, which was the precursor process that set the stage for

the negotiation. What we need to have is a sense of timetable, but

scale. We need to have a sense of magnitude of effect and substantive elements, but we also need to have inclusiveness. That’s

the message from Bali. If we don’t have that, we’re really not on

the right track.

Senator KERRY. Well, I thank all of you for your leadership. It’s

so important to have folks like you, who have been working on this

issue for a long time. And I admire each and every one of you enormously. And you’ll forgive me if I particularly single out Senator

Wirth, who, I think, since he left the Senate, has just been singularly focused on whether it’s been in Davos or at the United Nations itself or in all the other meetings he’s convened—I’ve been to

several of them here and there, Washington and Harvard and elsewhere. And, boy, does that add up to help build energy and ultimately get us a consensus. And I’m of confident we’re going to

somehow get there.

Just to underscore the spirit of sacrifice that this Senator has engaged in, I got a BlackBerry about 15 minutes ago that the World

Series trophy was in my conference room. [Laughter.]

And I got a BlackBerry 5 minutes ago saying it has moved on

to the House and I have missed it. [Laughter.]

So, there you go, ladies and gentlemen. But the Boston Red Sox

are going to win it again, so——

[Laughter.]

Senator KERRY [continuing]. It’s OK.

Thank you all. Thank you for being here.

We stand adjourned.

[Whereupon, at 5:10 p.m., the hearing was adjourned.]

ADDITIONAL STATEMENT SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF HON. EILEEN CLAUSSEN, PRESIDENT, PEW CENTER ON

GLOBAL CLIMATE CHANGE, WASHINGTON, DC

Mr. Chairman and members of the committee, thank you for inviting me to submit written testimony on the need to restore U.S. leadership in the international

climate change negotiations. My name is Eileen Claussen, and I am the President

of the Pew Center on Global Climate Change.

The Pew Center on Global Climate Change is a nonprofit, nonpartisan, and independent organization dedicated to providing credible information, straight answers

and innovative solutions in the effort to address global climate change. Forty-five

major companies in the Pew Center’s Business Environmental Leadership Council

(BELC), most included in the Fortune 500, work with the center to educate the public on the risks, challenges, and solutions to climate change.

Mr. Chairman, I would like to commend you, Senator Lugar, Senator Kerry, and

the other members of this committee for convening this hearing today on the international climate change negotiations. As one who has worked for many years to advance efforts on this and other critical environmental challenges, it is very gratifying to me that the U.S. Congress is at long last engaged in a genuine debate on

how—not if, but how—the United States should address global climate change. So

far, this debate has focused primarily on questions of domestic climate policy, and

we are farther along in that debate than ever. But truly meeting the challenge of

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climate change will also require global solutions, and these will be possible, I believe, only with strong leadership from the United States. By broadening the scope

of debate here in Washington to focus attention on the international dimension of

climate change, this hearing will inform constructive U.S. engagement in the upcoming conference in Bali—a conference that hopefully will set the stage for an

effective multilateral response to global climate change.

The Bali meeting presents an enormous opportunity for the United States to help

move nations toward a fair, effective, comprehensive post-2012 climate agreement,

one that serves U.S. interests by ensuring that all major economies are onboard.

However, producing such an agreement first requires the launch of a new round of

negotiations. That must be the key objective in Bali.

In my testimony today, I would like to set the Bali conference in context by highlighting recent international developments addressing climate change, and by outlining the key objectives a post-2012 climate framework must meet, and the form

it should take. Finally, I would like to elaborate on the type of decision needed in

Bali to start nations on the path toward such an agreement.

Recent international developments addressing climate change

As the United States moves closer to taking comprehensive action on climate

change, it is not alone in its efforts. Last week, British Prime Minister Gordon

Brown presented legislation to mandate a 60-percent in U.K. carbon dioxide emissions by 2050. The European Union—which has established the Emissions Trading

Scheme, the largest emissions trading market in the world—has now committed to

reduce its emissions 20 percent below 1990 levels by 2020. Several EU Member

States also have joined with other countries and 10 U.S. States in the International

Carbon Action Partnership, which will work toward international linkage of greenhouse gas markets. The Australian Government has declared its intention to establish a nationwide cap-and-trade system. Canada is developing a regulatory framework that the government projects will reduce emissions 20 percent by 2020. China,

Mexico, and Brazil all issued national climate change programs within recent

months. China’s policies include an economywide goal of reducing energy intensity

20 percent by 2010, ambitious renewable energy targets, and vehicle fuel economy

standards more stringent than those here in the United States.

Climate change is figuring much more prominently in international fora as well.

The potential security implications of climate change drew the attention of the U.N.

Security Council earlier this year. In June, G–8 leaders called for a global agreement on a post-2012 framework under the United Nations Framework Convention

on Climate Change (UNFCCC) by 2009, and agreed to ‘‘consider seriously . . . at

least a halving of global emissions by 2050.’’ At the APEC summit in September,

leaders agreed on aspirational goals to reduce energy intensity 25 percent by 2030

and increase forest cover by at least 20 million hectares by 2020. Later that month,

more than 150 countries, most represented by heads of state or government, participated in a U.N. High-Level Event on Climate Change to urge a breakthrough at

the Bali conference. This was followed a few days later by the Major Economies

Meeting convened here in Washington by President Bush with the goal of forging

a consensus contributing to a global agreement under the UNFCCC in 2009.

Key objectives of a post-2012 climate framework

So what form should such an agreement take? The Pew Center’s perspective on

the future international framework reflects not only our own detailed analysis but

also the collective views of an impressive group of policymakers and stakeholders

from around the world. As part of our effort to help build consensus on these issues,

we convened the Climate Dialogue at Pocantico, whose report was released in late

2005 at an event here in Congress, hosted by Senators Biden and Lugar. The

Pocantico group included senior policymakers from Britain, Germany, China, India,

Japan, Australia, Canada, Mexico, Brazil, and the United States; as well as senior

executives from companies in several key sectors, including Alcoa, BP, DuPont,

Exelon, Eskom (the largest electric utility in Africa), Rio Tinto, and Toyota. Despite

this diverse range of interests and perspectives, the Pocantico group succeeded in

reaching consensus on a broad vision of a post-2012 climate framework. This vision

begins with a set of key objectives that a post-2012 framework must meet, and I

would like to emphasize the two most critical of these objectives.

First, the post-2012 framework must engage all of the world’s major economies.

Twenty-five countries account for about 85 percent of global greenhouse gas emissions. These same countries also account for about 70 percent of global population

and 85 percent of global GDP. Participation of all the major economies is critical

not only from an environmental perspective, but from a political perspective as well,

as we cannot reasonably expect any of these countries to be willing to undertake

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a sustained and ambitious effort against climate change without confidence that the

others are contributing their fair share. We must agree to proceed together.

At the same time, we must recognize the tremendous diversity among the major

economies. This group includes industrialized countries, developing countries, and

economies in transition. Their per capita emissions range by a factor of 14 and their

per capita incomes by a factor of 18. This leads directly to the second critical objective identified in our Pocantico dialogue: The post-2012 framework must provide

flexibility for different national strategies and circumstances. The kinds of policies

that effectively address climate change in ways consistent with other national priorities will vary from country to country. If it is to achieve broad participation, the

future framework must allow for variation both in the nature of commitments taken

by countries and in the timeframes within which these commitments must be

fulfilled.

With these key objectives in mind, the Pocantico group then asked: What could

be the key elements of a post-2012 framework? The group recommended several policy approaches.

The first of these is targets and trading. This is the approach employed in the

Kyoto Protocol, as well as in the European Union’s Emissions Trading Scheme and

the Regional Greenhouse Gas Initiative being undertaken by 10 States in the northeastern United States. There are very sound reasons why U.S. negotiators insisted

so strongly on a market-based architecture for the Kyoto Protocol—and why many

of the major climate bills now before Congress adopt the same approach. Emission

targets provide a reasonable degree of environmental certainty, while emissions

trading harnesses market forces to deliver those reductions at the lowest possible

cost.

While targets and trading should remain a core element of the international effort, we must recognize that China, India, and other developing countries are highly

unlikely to accept binding economywide emission limits any time in the foreseeable

future. Economywide targets also may be technically impractical for them: To accept

a binding target, a country must be able to reliably quantify its current emissions

and project its future emissions, a capacity that at present few if any developing

countries have.

A future framework, therefore, must allow for other approaches as well. These

could include policy-based commitments, under which countries would commit to undertake national policies that will moderate or reduce their emissions without being

bound to an economywide emissions limit. A country like China, for instance, could

commit to strengthen its existing energy efficiency targets, renewable energy goals,

and auto fuel economy standards. Tropical forest countries could commit to reduce

deforestation. For this to work, the commitments would need to be credible and

binding, with mechanisms to ensure close monitoring and compliance. Developed

countries also may need to provide incentives for developing countries to adopt and

implement stronger policies. One option is policy-based emissions crediting, similar

to the Kyoto Protocol’s Clean Development Mechanism, granting countries tradable

emission credits for meeting or exceeding their policy commitments.

A third potential element is sectoral agreements, in which governments commit

to a set of targets, standards, or other measures to reduce emissions from a given

sector, rather than economywide. In energy-intensive industries whose goods trade

globally, which are the sectors most vulnerable to potential competitiveness impacts

from carbon constraints, sectoral agreements can help resolve such concerns by ensuring a more level playing field. Such approaches are being explored by global industry groups in both the aluminum and cement sectors. We believe it is also worth

exploring sectoral approaches in other sectors such as power and transportation

where competitiveness is less of an issue but where large-scale emission reduction

efforts are most urgent.

A fourth potential element is technology cooperation. This could include two types

of agreements. The first would provide for joint research and development of ‘‘breakthrough’’ technologies with long investment horizons. Such agreements could build

on the Asia Pacific Partnership and other technology initiatives, but commit governments to the higher levels of funding needed to accelerate and better coordinate critical research and development. The second type of agreement could help to provide

equitable access to both existing and new technologies by addressing finance, international property rights, and other issues that presently impede the flow of lowcarbon technologies to developing countries.

In addition to these approaches to mitigate greenhouse gas emissions, a sound

international agreement must address adaptation. The top priority within the

framework should be addressing the urgent needs of those countries most vulnerable to climate change, with a broader goal of spurring comprehensive efforts to reVerDate 11-MAY-2000 15:58 Oct 08, 2008 Jkt 000000 PO 00000 Frm 00094 Fmt 6633 Sfmt 6621 CLIMATE sforel1 PsN: sforel1
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duce climate vulnerability generally by integrating adaptation across the full range

of development activities.

The decision needed in Bali: To begin negotiation

I have described the building blocks of a comprehensive agreement. Precisely how

they fit together can be determined only through negotiation. What is needed in

Bali is a clear decision by governments to begin that negotiation.

Two years ago, parties to the Kyoto Protocol opened negotiations on post-2012

commitments for those countries that have emission targets under the protocol. In

their present form, these negotiations are very unlikely to succeed because those

countries are unlikely to commit internationally to stronger action without commitments from the United States and from the major emerging economies. The negotiations must be broadened with the goal of establishing commitments for all the major

economies. The best way to accomplish that is to establish a new negotiating process

under the Framework Convention, where the United States is party. These new negotiations should either be linked to or encompass those underway under Kyoto,

with the aim of producing a comprehensive agreement with elements under both the

convention and the protocol. A decision to launch such negotiations must set out a

clear process and timeline. Ideally, it also should set clear terms of engagement

specifying the types of commitments to be negotiated and for which countries.

At present, while I expect that parties will agree on some type of process in Bali,

I am not confident that it will be the type needed to produce a comprehensive and

effective set of commitments. Of one thing, however, I am certain—a genuine negotiation will be possible only with the full and committed participation of the United

States.

Whether negotiations are launched in Bali or later, one of the most difficult challenges will of course be engaging developing countries. Meeting this challenge requires a firm but balanced approach. To begin with, we must be absolutely clear

in our expectation that the major developing countries assume binding commitments

in a post-2012 framework. It is true that the United States, the world’s largest economy, is also by far the largest historic contributor to climate change. In establishing

mandatory limits on domestic emissions, the United States will have begun to fulfill

the commitment it made with other industrialized countries to lead the climate

change effort. And having done so, it will then be reasonable to expect that countries like China fulfill their responsibilities as well. China’s emissions have grown

80 percent since 1990 and could rise another 80 percent by 2020. It is essential that

these trends be reversed. Realistically, given the greater capacity and historic responsibility of industrialized countries, China, India, and other developing countries

will require incentives to undertake strong climate efforts. However, in return for

these incentives, China and the other major developing countries must assume appropriate commitments that will slow and ultimately reverse the growth of their

greenhouse gas emissions.

To summarize, I believe it is incumbent upon the United States to lead both by

strong action at home and by actively and constructively reengaging in the international climate effort. Only with strong U.S. participation and leadership can we

achieve a fair and effective global response to the critical challenge of climate

change. I thank the committee for the opportunity to present these views.

Æ