U.S. GOVERNMENT PRINTING OFFICE

61–046 CC WASHINGTON : 1999

S. HRG. 106–242

AGENCY FOR INTERNATIONAL DEVELOPMENT AND

U.S. CLIMATE CHANGE POLICY

HEARING

BEFORE THE

SUBCOMMITTEE ON INTERNATIONAL ECONOMIC

POLICY, EXPORT AND TRADE PROMOTION

OF THE

COMMITTEE ON FOREIGN RELATIONS

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

JULY 28, 1999

Printed for the use of the Committee on Foreign Relations

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/senate

COMMITTEE ON FOREIGN RELATIONS

JESSE HELMS, North Carolina, Chairman

RICHARD G. LUGAR, Indiana

PAUL COVERDELL, Georgia

CHUCK HAGEL, Nebraska

GORDON H. SMITH, Oregon

ROD GRAMS, Minnesota

SAM BROWNBACK, Kansas

CRAIG THOMAS, Wyoming

JOHN ASHCROFT, Missouri

BILL FRIST, Tennessee

JOSEPH R. BIDEN, JR., Delaware

PAUL S. SARBANES, Maryland

CHRISTOPHER J. DODD, Connecticut

JOHN F. KERRY, Massachusetts

RUSSELL D. FEINGOLD, Wisconsin

PAUL D. WELLSTONE, Minnesota

BARBARA BOXER, California

ROBERT G. TORRICELLI, New Jersey

STEPHEN E. BIEGUN, Staff Director

EDWIN K. HALL, Minority Staff Director

SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY,

EXPORT AND TRADE PROMOTION

CHUCK HAGEL, Nebraska, Chairman

CRAIG THOMAS, Wyoming

BILL FRIST, Tennessee

RICHARD G. LUGAR, Indiana

PAUL S. SARBANES, Maryland

JOHN F. KERRY, Massachusetts

BARBARA BOXER, California

(II)

CONTENTS

Page

Babbitt, Hon. Hattie, Deputy Administrator, U.S. Agency for International

Development; accompanied by David Hales, Deputy Assistant Administrator ..................................................................................................................... 4

Prepared statement of ...................................................................................... 5

Responses of Deputy Administrator Hattie Babbitt to additional questions

submitted by Senator Chuck Hagel .................................................................... 27

(III)

(1)

AGENCY FOR INTERNATIONAL DEVELOPMENT AND U.S. CLIMATE CHANGE POLICY

WEDNESDAY, JULY 28, 1999

U.S. SENATE, SUBCOMMITTEE ON INTERNATIONAL ECONOMIC

POLICY, EXPORT AND TRADE PROMOTION, COMMITTEE ON FOREIGN RELATIONS, Washington, DC.

The subcommittee met at 2:02 p.m., in room SD–419, Dirksen Senate Office Building, Hon. Chuck Hagel (chairman of the subcommittee) presiding. Present: Senators Hagel, Sarbanes, and Kerry.

Senator HAGEL. Good afternoon. Welcome.

The subcommittee today considers the climate change programs of the Agency for International Development. I welcome our special

witness, Hattie Babbitt, the acting Administrator for the Agency

for International Development.

Ambassador Babbitt comes with a distinguished public service background. Before joining AID, she served as U.S. Ambassador to

the Organization of American States from 1993 to 1997. From 1988

to 1993, she served on the board of the National Democratic Institute for International Affairs where she chaired the Latin American Committee. Prior to joining the administration, Ambassador

Babbitt was an attorney with Robbins & Green from 1974 to 1993.

Last month, this subcommittee heard from the State Department’s nominee to head climate activities regarding his role in developing pilot emissions trading programs with Russia. The committee had received documentation of meetings by EPA to create

a pilot program for trading in carbon emissions, a mechanism

called for in the Kyoto Protocol on Climate Change.

Previously the administration had assured this committee and

the Congress that there would be no implementation of any aspect

of the Kyoto Protocol unless the Senate gave its advice and consent. I was, therefore, surprised by the administration’s legalistic

view of ‘‘implementation’’ that came to light in that hearing. In

fact, there were two hearings. According to EPA lawyers—and I

quote—‘‘because the possible pilot program would not impose any

legal obligations on the United States or on the United States private sector, the issue of relying on authorities provided under the

Framework Convention on Climate Change does not arise,’’ referencing the Framework Convention on Climate Change which I

think most of you understand is a United Nations organization.

The contorted argument put forward by these lawyers is that the

United States can engage in all activities called for in the Kyoto

2

Protocol so long as the administration justifies its activities as the

legitimate exercise of the President’s foreign affairs powers.

This subcommittee has over the past 3 years sought to address

the issue of climate change directly and, I might say, honestly. This

is the first time that we will hear directly from the Agency for

International Development regarding its programs in this general

area. I know, as Administrator Babbitt does, that we will both look

forward to a direct and honest appraisal and discussion on this

issue regarding the climate programs specifically that AID is undertaking with its current budget.

One of the key issues of this hearing is what constitutes implementation of the Kyoto Protocol. It is rather clear to me that creating an emissions trading system directly tied to implementing or

preparing to implement the Kyoto Protocol is, in fact, implementation of the protocol.

Credits gained through emissions trading can only have value in

the context of a global rationing system that was envisioned by the

Kyoto Protocol, and only if the Kyoto Protocol is ratified and implemented. Development of an emissions trading system within a

country will have no value unless an international mechanism exists to trade the emissions. I will look forward to Administrator

Babbitt’s response to this statement.

Madam Administrator, there is a long and unfortunate history of

broken assurances by this administration on the climate change

issue with the Congress, and I am hopeful that we will be able to

get over some of that in our dialog today.

One 1999 AID notification that I would like to discuss this afternoon in some detail funds a project in the Newly Independent

States. Funds for the project are to be used for ‘‘tracking emission

reductions and developing an institutional infrastructure that will

stipulate emissions trading and joint implementation investments.’’

Now, it strains credible debate to suggest that this program is not

designed to lay the groundwork for an international emissions trading scheme, as called for in the Kyoto Protocol.

Programs such as these not only further erode the trust Congress

has toward this administration regarding the Kyoto Protocol, but

also jeopardize cooperation on other energy efficient projects that

will benefit developing countries while also reducing greenhouse

gas emissions.

Just last week, the President stated that the Kyoto Protocol was

not yet in his terms ‘‘ripe’’ for Senate consideration. Now, it strikes

me that with this administration’s variations in definitions, the

Senate will be asked to consider the Kyoto Protocol only after a

worldwide emissions trading scheme is a done deal and funded by

the United States. Now, that is hardly a means to engage the Congress in an honest, open debate on the wisdom of the emissions

trading schemes and other mechanisms created by the Kyoto Protocol.

And I might ask the question, what about the limited resources

that are redirected away from important AID programs to fund

Kyoto Protocol type programs?

Madam Administrator, I hope we can agree on some boundaries

today that cut directly to the AID climate change initiatives. If AID

is to become one of the funding mechanisms for the Kyoto Protocol

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implementation, the agency is in for some very difficult work

ahead, especially in justifying its expenditures of taxpayers’ dollars

to implement a treaty that has not yet been ratified, as a matter

of fact, a treaty that has not even yet been submitted to the U.S.

Senate. This action, of course, as you would understand, would

have very significant consequences on future funding and current

programs.

This committee looks forward to your testimony and we thank

you very much.

Just in time, we have our distinguished colleague, the senior

Senator from Maryland. Senator Sarbanes, welcome.

Senator SARBANES. Thank you very much, Mr. Chairman.

I am pleased to join you in welcoming Hattie Babbitt, the acting

Administrator of USAID, before the subcommittee this afternoon.

USAID has a number of interesting projects in India and in other

developing countries to help improve energy efficiency and reduce

greenhouse gas emissions. I welcome this opportunity to examine

the work they are doing in this area.

I gather that there are some concerns about the relationship of

these programs to the Kyoto Protocol. I have to confess, it is difficult for me to understand how programs to mitigate the negative

impact that developing countries are having on climate change

could possibly be construed as ‘‘back-door implementation’’ of a

treaty. In fact, it is exactly what we have said must be done before

the Kyoto Protocol is submitted for Senate advice and consent to

ratification. The efforts of developing countries are critical to our

own success in preventing global warming, which is a problem I

think we have a responsibility to address. We take a number of

measures in this country to try to reduce global warming, from

mass transit programs to even more direct proposals. I cannot understand why there is something amiss when we are supportive of

programs to improve energy efficiency and reduce greenhouse gas

emissions in developing countries.

Further, as I discussed at the nomination hearing for David

Sandalow, who unfortunately is being held up on the Senate floor

for unrelated reasons, the debate over the Kyoto Protocol should

not prevent us from undertaking voluntary environmental projects

that are otherwise in the U.S. interest.

Actually, we ratified the Framework Convention on Global Climate Change, under which the United States has a general legal

obligation to adopt policies and take other measures to mitigate climate change. That is something we adopted and have put into

place.

So, I welcome this opportunity to hear from the acting Administrator, who will help to clarify any misunderstandings or

misperceptions that might exist. It seems to me these projects are

desirable and I see no reason why they should not proceed. I look

forward to the opportunity to explore that matter here this afternoon.

Senator HAGEL. Senator Sarbanes, thank you.

Again, welcome, Administrator Babbitt. We appreciate your

being here. Please proceed with your testimony.

4

STATEMENT OF HON. HATTIE BABBITT, DEPUTY ADMINISTRATOR, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT;

ACCOMPANIED BY DAVID HALES, DEPUTY ASSISTANT ADMINISTRATOR

Ms. BABBITT. Thank you very much, Mr. Chairman. I am glad to be here today to discuss an issue of great interest to us all, and

that is global climate change. I know we all agree on the importance of protecting and preserv- ing the environment. We in the United States take pride in our initiatives to limit pollution, improve energy efficiency, and preserve

the world’s resources. We believe that from an environmental and

economic perspective, global climate change is of the utmost importance. It poses profound threats to international economic development and ecological balance. Although the United States remains the world’s leading emitter of greenhouse gases, developing countries make up an increasingly

large share of the global emissions problem. Their emissions are

expected to surpass those of industrialized nations in the next 20

years. As countries like India and China bring dozens of new coalfired plants on line each year, their emissions of carbon dioxide will

grow greater and greater. The predictable impact of global climate change endangers our best efforts to build sustainable economic and social progress in developing nations. And obviously the threats to our own country, in

terms of our people’s health and our national economy, are a most

serious concern.

We believe that climate-related programs are essential to our de- velopment mission, that they promote our national interests and

that they are consistent with our national obligations under the

Framework Convention on Climate Change and with Congress’ approach to international action on climate change. Let me state,

Senator, emphatically that USAID’s climate related activities are

fully consistent with the administration’s pledge not to implement

the Kyoto Protocol before the Senate has given its advice and consent and it has been ratified by the President.

We are carrying out a climate change strategy that was developed and announced before the Kyoto Protocol was negotiated. Our

programs stand on their own merits, and in our view they advance

the goals of Byrd-Hagel in that they build capacity in developing

countries to take further action to address global climate change.

In addition, USAID has been an active participant in the interagency policy process and in multilateral activities of the Framework Convention on Climate Change, working to strengthen the

mechanisms under the convention that promote wise development

and environmental protection.

Looking back, we see that in 1990 USAID submitted its first report to Congress on global climate change and developing countries, and the agency was active in support of the negotiations of

the Framework Convention. Our approach has consistently focused

on opportunities to advance economic development goals while

curbing greenhouse gas emissions. More efficient use of energy, renewable energy applications, and sustainable forestry practices are

good examples of this common sense approach to climate change

and development.

5

In 1994, responding to the Framework Convention and to congressional requests, we issued our first climate strategy. In June

1997, prior to the negotiation of the Kyoto Protocol, President Clinton announced to the United Nations General Assembly Special

Session on the Environment a renewed U.S. effort to help developing countries address climate change. Called the Developing Country Climate Change Initiative, it is a 5-year, $1 billion commitment

to work with developing countries to encourage climate-friendly energy and natural resource management policies and practices in developing countries.

USAID is carrying out this initiative which focuses on mitigation

of emissions by targeting clean energy applications, forest conservation, and support for policy reform and privatization. This

year the agency is funding approximately $150 million in climate

related activities in energy and forestry in 44 countries.

Meeting the challenges of climate change and encouraging sound

energy policy will create significant opportunities for U.S. business

and vast new markets for U.S. technology worldwide. The potential

market for climate friendly technologies is enormous. The world

market for energy efficient technologies has been estimated at almost $1.8 trillion over the next 40 years. The potential market for

renewable energy is also vast and incentives for cleaner production

will help to create new markets overseas in an area where the U.S.

is highly competitive.

Mr. Chairman, as you know, we have notified Congress of our intent to invest in several important energy programs in India which

are related to climate change. USAID’s global climate change program in India targets the development of clean energy policies and

projects. The program helps encourage India to take practical steps

to reduce emissions. With our assistance, India has made impressive progress in improving the efficiency of its power plants, reducing pollution in key industries, and expanding the use of renewable

energy technologies nationwide. These actions have resulted in a 2

million ton reduction of annual carbon dioxide emissions by power

plants of the National Thermal Power Corporation and by the Gujarat Electricity Board.

Our activities in India are good for U.S. business. The program

is a decade old and is reaching maturity with regard to its results.

For example, the recent signing of a new partnership agreement

between leading Indian and U.S. power utilities and regulatory

agencies provides a long-term mechanism for transfer of U.S. technology and experience. Moving forward with the global climate

change program will enhance U.S. commercial interests in India, as

well as addressing our concerns about the global environment.

Thank you very much, Mr. Chairman. I would be happy to answer any questions I can.

[The prepared statement of Ms. Babbitt follows:]

PREPARED STATEMENT OF HON. HARRIET BABBITT

Thank you, Mr. Chairman. I’m glad to be here today to discuss an issue of great

interest to us all, that of global climate change.

I know we all agree on the importance of protecting and preserving our environment. We in the United States take pride in our initiatives to limit pollution, improve energy efficiency and preserve the world’s resources.

6

We believe that from an environmental and economic, global climate change is of

the utmost importance. It poses profound threats to international economic development and ecological balance.

Although the United States remains the world’s leading emitter of greenhouse

gases, developing countries make up an increasingly large share of the global emissions problem. Their emissions are expected to surpass those of the industrialized

nations in the next twenty years. As countries like India and China bring dozens

of new coal-fired power plants on line each year, their emissions of carbon dioxide

will grow greater and greater.

The predictable impact of global climate change endangers our best efforts to

build sustainable economic and social progress in developing nations. And obviously

the threats to our own country, in terms of our people’s health and our national

economy, are a most serious concern.

A worldwide issue of this complexity demands a cooperative approach. We at

USAID believe that our relationships with Congress, the private sector, nongovernmental organizations and the developing nations have been open and productive,

and we are proud of the support we have received in this decade and the successes

we have achieved.

We believe that climate-related programs are essential to our development mission, that they promote our national interests, and that they are consistent with our

national obligations under the Framework Convention on Climate Change (or

FCCC) and with Congress’ approach to international action on climate change. Let

me state emphatically that USAID’s climate related activities are fully consistent

with the administration’s pledge not to implement the Kyoto Protocol before the

Senate has given its advice and consent and it has been ratified by the President.

We are carrying out a climate-change strategy that was developed and announced

before the Kyoto Protocol was negotiated. Our programs stand on their own merits,

and in our view they advance the goals of Byrd/Hagel in that they build capacity

in developing countries to take further action to address global climate change.

In addition, USAID has been an active participant in the interagency policy process, and in multilateral activities of the Framework Convention on Climate Change,

working to strengthen the mechanisms under the Convention that promote wise development and environmental protection.

Looking back, we see that in 1990, USAID submitted its first report to Congress

on Global Climate Change and Developing Countries, and the agency was active in

support of the negotiations of the FCCC. Our approach has consistently focused on

opportunities to advance economic development goals while curbing greenhouse gas

emissions. More efficient use of energy, renewable energy applications and sustainable forestry practices are good examples of this common sense approach to climate

change and development.

In 1994, responding to the FCCC and to Congressional requests, we issued our

first climate strategy. In June, 1997, prior to the negotiation of the Kyoto Protocol,

President Clinton announced to the United Nations General Assembly Special Session on Environment a renewed U.S. effort to help developing countries address climate change. Called the Developing Country Climate Change Initiative, it is a fiveyear, $1 billion commitment to work with developing countries to encourage ‘‘climate-friendly’’ energy and natural resource management policies and practices in

developing countries.

USAID is carrying out this initiative, which focuses on mitigation of emissions by

targeting clean energy applications, forest conservation and support for policy reform and privatization. This year, the agency is finding approximately $150 million

in climate-related activities in energy and forestry in 44 countries.

Our worldwide efforts have met with a great deal of success. For example:

• The USAID forest management program in Mexico has reduced the deforestation rate on 3.1 million hectares of protected land by more than 30 percent.

• The agency’s Sustainable Forestry Practices Initiative, worldwide, has reduced

by 70 percent the damage caused by poor land management on over 3.4 million

hectares of forests.

• A rural electrification program in the Philippines has reduced power line losses

by three percent and reduced carbon dioxide emissions by 250,000 metric tons.

Promoting the balancing of economic growth with sound environmental practices

is central to our mission and serves the U.S. national interest. In the long term,

economic development will be enhanced, not compromised, by efforts to reduce

greenhouse gas emissions. Our efforts promote a ‘‘win-win’’ approach by addressing

the impact of climate change through long-term partnerships with developing countries that engage market forces and produce mutual economic and environmental

benefits for all involved.

7

Meeting the challenges of climate change and encouraging sound energy policy

will create significant opportunities for U.S. business and vast new markets for U.S.

technology worldwide. The potential market for climate friendly technologies is

enormous. The world market for energy efficient technologies has been estimated at

almost $1.8 trillion over the next 40 years. The potential market for renewable energy is also vast and incentives for cleaner production will help to create new markets overseas in an area where the U.S. is highly competitive.

The technology, capital and innovation of the private sector are the driving forces

that will make a lasting difference in the carbon intensity of development in the

next century. USAID’s role is to help enable the private flows of capital and technology by supporting appropriate polices, privatization, capacity building measures,

and efforts to overcome market barriers in the developing world.

Ours is a practical approach. We promote energy efficiency by encouraging integrated resource planning and demand side management, creating financing mechanisms for energy efficiency, developing standards and codes for efficient buildings

and appliances, and carrying out pilot and demonstration projects for steam, lighting and motor efficiency. We encourage privatization and work to reform inefficient

state-controlled energy systems. We encourage market-based incentives for the application of clean technologies and practices (natural gas, energy efficiency, renewable energy, low impact logging) to meet the growing demands of industrializing

economies. And we address foreign legal and policy constraints to cleaner energy

production and use, and improved natural resource management.

Mr. Chairman, as you know, we have notified Congress of our intent to continue

to invest in several important energy programs in India which are related to climate

change.

India is the sixth largest and second fastest growing emitter of greenhouse gases

in the world. India has serious air pollution problems; air pollution will cause an

estimated 2.5 million premature deaths there this year. India’s environmental challenges have global implications.

USAID’s global climate change program in India targets the development of clean

energy policies and projects. The program helps encourage India to take practical

steps to reduce emissions. With our assistance, India has made impressive progress

in improving the efficiency of its power plants, reducing pollution in key industries,

and expanding the use of renewable energy technologies nationwide. These actions

have resulted in a two million ton reduction of annual carbon dioxide emissions by

power plants of the National Thermal Power Corporation and by the Gujarat Electricity Board.

Our activities in India are good for U.S. business. The program is a decade old

and is reaching maturity with regard to its results. For example, the recent signing

of a new partnership agreement between leading Indian and U.S power utilities and

regulatory agencies provides a long-term mechanism for the transfer of U.S. technology and experience. Moving forward with the global climate change program will

enhance U.S. commercial interests in India, as well as addressing our concerns

about the global environment.

We believe that our efforts, in India and throughout the world, directly promote

Congressional goals, especially the engagement of developing countries in aggressively combating climate change. And, finally, we believe that these programs are

good, common sense development—and that they are effective.

Thank you. I’ll be glad to take your questions.

Senator HAGEL. Madam Administrator, thank you very much.

Are you in need of more water up there? Senator, she is having

a little respiratory problem. So, she is not coughing at us, she said.

Ms. BABBITT. I am coughing but not at you.

Senator HAGEL. Yes. Well, it is another global climate change

ploy that you are using, I know, Administrator Babbitt, coughing

and blaming it on greenhouse gases.

What we will do, Senator Sarbanes, if it is agreeable with you,

with the two of us here, we will do 10-minute rounds and go from

there. Thank you.

Madam Administrator, this year—I think it was in June—I mentioned it in my earlier statement—AID notified this committee of

its intent to obligate additional funds for an energy efficiency and

market reform program begun in 1992. And we have, I think, refVerDate 11-SEP-98 14:03 Dec 10, 1999 Jkt 549297 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 61046 SFRELA1 PsN: SFRELA1
8

erenced it. The notification indicated that the additional resources

would be used in Europe and the New Independent States for, as

I mentioned in my opening statement, ‘‘tracking emissions reductions and developing an institutional infrastructure that will stipulate emissions trading and joint implementation investments.’’

Further, the notification indicated to this committee that funds

would be used for ‘‘identifying policy changes which are necessary

to move the climate change agenda forward and assisting the countries in adopting and implementing appropriate policy measures.’’

Using that as a base, I have a series of questions, Madam Administrator, that I would like to ask you about.

The pilot program funding is part of, my understanding, a 10-

year project that has, I understand, no estimated cost for the life

of the project. Now, if you have different information, I know you

will share that with me. What are the expected costs? And if you

do not know those estimated costs now, I know you will provide

them for the record. But if you do not know those costs or have

some sense of it, then maybe you could explain why would you engage a project without costing it out. But you might have the answers on the numbers, so we will allow you to respond. Thank you.

Ms. BABBITT. Senator, I am unable to tell from your question

which congressional notification [CN] your question refers to.

Senator HAGEL. It was June 30, 1999. You have a copy there.

Ms. BABBITT. Are you referring to the copies I was given right

before this?

Senator HAGEL. Yes. Funds for an energy efficiency and market

reform program. What we can do is let us move on to another question, and we will pick that up as we go along when you find—she

is giving it to you.

Ms. BABBITT. I believe that the CN to which you refer or the

issue to which you refer is with reference to our program in

Ukraine.

Senator HAGEL. And the New Independent States. I said generally and Ukraine would be one of them. Yes, that is right.

Ms. BABBITT. It is the Ukraine program with which I have some

familiarity.

Senator HAGEL. OK.

Ms. BABBITT. I am not going to be able to answer your question

at this time about the——

Senator HAGEL. Costs?

Ms. BABBITT [continuing]. What funds flow. But I am generally

familiar with the Ukraine program. I underscore generally because

we have lots of these programs around the world.

The Ukraine program is designed, as I understand it, to deal

with institutional reform, that is, the policy reform within Ukraine,

to assist with the creation of an evaluation program within

Ukraine nationally to devise a national climate change program for

Ukraine. I do not know how to say it any more elaborately than

that.

It is also designed to bring into the Ukraine discussion nongovernmental actors, an important aspect of many of our programs

in the former Soviet Union, that is, to bring in industry and environmental groups and the public. It is designed to help administer

a national climate change program and to establish market mechaVerDate 11-SEP-98 14:03 Dec 10, 1999 Jkt 549297 PO 00000 Frm 00011 Fmt 6633 Sfmt 6602 61046 SFRELA1 PsN: SFRELA1
9

nisms to reduce greenhouse gas emissions domestically within

Ukraine. That was really the extent of my knowledge about the

Ukraine program.

Senator HAGEL. If Mr. Hales would like to add anything, he is

certainly welcome to do so.

Mr. HALES. Thank you, Senator. I think that the Administrator’s

response captures it.

Ukraine, as you know, is an Annex 1 country under the Framework Convention on Climate Change. We have been working with

them for some time to reduce the pollution, both global and local,

that comes from inefficient energy systems. The approach to that

essentially involves the strengthening of regulatory and policy

measures so that subsidies are reduced and privatization is encouraged. It involves technology transfer which is greatly in our interest because we tend to be a major supplier of those technologies.

And it also involves helping them measure their own greenhouse

gas emissions and the source of those emissions which is an activity absolutely necessary for the eventual adoption on their part of

the climate action plan.

Senator HAGEL. Do you know, Mr. Hales, what the numbers are

on projected costs?

Mr. HALES. I do not, Senator. I apologize. I do not. We will provide that answer for you.

[The following response was received subsequent to the hearing.]

INFORMATION ON TN SUBMITTED TO CONGRESS ON JUNE 30, 1999—PROJECT #110–

0003

The TN for Project 110–0003 includes three activities to be implemented on a regional basis in the New Independent States, including the Ukraine.

1. The Environment Information Systems and Networking project (EISN) addresses environmental information needs and awareness by promoting internet-based

networks in the region. The Life of Project cost for this activity is $1,480,025, of

which $996,025 has been notified (including $450, 000 in this TN).

2. The Environmental Partnership Program activity promotes environmentally focused partnerships between local governments, enterprises and associations in the

ENI region and counterpart organizations in the United States, and across borders

within the region. Life of Project cost is $12,466,815, of which $4,462,500 has been

notified (including $267,700 in this TN).

3. The Global Climate Change activity includes two components that support the

Agency’s Climate Change Initiative. One component supports training and technical

assistance in developing policy incentives and measures to reduce greenhouse gases.

The second component supports the development of institutional capability for NIS

countries to better track greenhouse gases and to take advantage of flexible mechanisms to stimulate investment in energy saving and less greenhouse gas intensive

activities. Total Life of Project cost is $2,084,800. This TN includes $796,800 for this

activity; this is the only notification to date for this activity.

Senator HAGEL. Do you know if the United States is funding the

creation of an emissions trading system there? Is that part of the

program?

Mr. HALES. I cannot answer it directly, Senator, but it would

seem to me, just looking at the CN, that we probably here are looking at a typo in the CN. I would be willing to bet you that it says

‘‘stimulate’’ not ‘‘stipulate’’ in the original that came up. But I cannot answer your question. Certainly any emissions trading activities that we would be engaging in with Ukraine would be under activities implemented jointly which is a not-for-credit activity under

10

the Framework Convention for Climate Change, not under the

Kyoto Protocol, which of course is not in effect.

[The following response was received subsequent to the hearing.]

INFORMATION ON TN SUBMITTED TO CONGRESS ON JUNE 30, 1999—PROJECT #110–

0003

Mr. Hales noted a possible error in the TN provided to Congress on this project.

USAID confirmed that mistake. The description of the ‘‘Global Climate Change’’ activity should read (change in bold):

Europe and New Independent (ENI) States key countries lack the financial resources and institutional capabilities to address climate change problems on their own. The funds will be used to help ENI countries meet climate change requirements by a) tracking emission reductions and developing an institutional infrastructure that will stimulate emissions trading

and joint implementation investments, and b) identifying policy changes

which are necessary to move the climate change agenda forward and assisting the countries in adopting and implementing appropriate policy measures.

Senator HAGEL. Has that project changed its focus from its original intent? If my understanding is right, the original intent you

suggested: energy efficiency, market reform. You each mentioned

that. On notifications that we receive now, there is a shift to environmental policy. Is that intentional or was that phased in? Was

that part of what was envisioned over a 10-year period?

Mr. HALES. I think the focus, Senator, evolves but it remains

fundamentally the same. It targets the constraints that an inefficient energy system has on both a society and an economy. I suspect that we have distinctions without differences in terms of those

words because the fundamental focus of this program remains on

trying to create a sustainable and economically effective energy

system within the Ukraine.

Senator HAGEL. The notification that was sent to this committee

references an AID climate agenda. Can you describe AID’s climate

agenda?

Senator SARBANES. Where is that reference, Mr. Chairman? I am

trying to find it.

Senator HAGEL. You have it right there.

Senator SARBANES. Thank you.

Ms. BABBITT. Senator, I was unable to find the reference in the

notification, but our climate change initiative, our broad climate

change agenda, is aimed at reducing greenhouse gases either by reducing emissions or conserving forests, conserving sinks, that sort

of thing, by policy and institutional change in developing countries

or in countries with whom we work and also, to a certain extent,

to decreasing the vulnerability of developing countries to those climate change implications. That is our climate agenda.

Senator HAGEL. It is in here. In fact, what it says—the Administrator has this. Right? OK. It is the United States Agency for International Development justification for technical notification, project

110–0003. Under the global climate change, $796,000, down toward

the bottom of that paragraph, it says which are necessary to move

the climate change agenda forward in assisting the countries in

adopting and implementing appropriate policy measures. That is

where I was getting that, and that is why I asked the question.

11

Did you want to add anything to that before we go to Senator

Sarbanes? Mr. Hales, would you care to?

Mr. HALES. No, except to say, Senator, that I think the use of

that wording in that particular paragraph refers to the ongoing activities within Ukraine that we have tried to describe. And if the

Agency has an agenda, it certainly is represented in the Agency

Climate Change Initiative documents which you have and which

were announced 2 years ago.

Senator HAGEL. Let me just also for the record and for Senator

Sarbanes’ benefit note my understanding is that the committee

staff had notified AID of the specific notifications that would be the

subject of this.

Ms. BABBITT. I am sorry not to have been prepared to discuss

this one, but I had not seen this document until just when it was

handed to me when I arrived.

Senator HAGEL. OK.

Senator Sarbanes.

Senator SARBANES. Mr. Chairman, just to be clear, it was our impression that the three notifications that this hearing was going to

address involved the three programs in India. That was what we

had been led to understand. I do not know what understanding

AID had. I would ask AID. What understanding did AID have?

Ms. BABBITT. My understanding was the concern was with the

three Indian notifications, 312, 313, and 314. I apologize for not

being more familiar with the one with which the chairman began

the questioning, but I just had not had a chance to review it.

Senator HAGEL. That is all right. Those answers can be supplied

for the record. Sure. Thank you.

Senator SARBANES. The first question I want to put forward regards the United Nations Framework Convention on Climate

Change, which was ratified by the U.S. Senate in 1992 and therefore is in effect. Is that correct?

Ms. BABBITT. Yes, Senator Sarbanes, that is correct.

Senator SARBANES. The Framework Convention says that the

U.S. has an obligation to ‘‘promote and cooperate in the development, application, and diffusion, including transfer of technologies,

practices, and processes, that control, reduce, or prevent anthropogenic emissions of greenhouse gases.’’ It goes on to say that we

have an obligation to ‘‘promote and cooperate in education, training, and public awareness related to climate change and encourage

the widest participation in this process.’’

The first question I would put forward is whether you regard

USAID’s programs as consistent with our responsibilities under the

Framework Convention, which was ratified by the U.S. Senate.

Ms. BABBITT. Senator Sarbanes, we do. It is the United States’

obligation under the Framework Convention to encourage the participation of developing countries in meeting the goals of the

Framework Convention. We believe that our climate change activities are part of the U.S. responsibility with respect to that obligation.

We look at our development responsibilities through the lens of

our overall goal to promote sustainable development and look at

the obligations under the Framework Convention as one of the

ways in which we try to mitigate the damage that climate change

12

and non-efficient energy use in the developing world undermines

that basic goal of promoting sustainable development in the countries in which we work.

Senator SARBANES. Yes. As I look at these three Indian programs, even if there were no Framework Convention in effect

through Senate ratification, all three seem to be desirable programs as part of a U.S. effort to help sustainable development

around the world. It seems to me that energy efficiency, for example, is a desirable objective. I have difficulty seeing what the problem might be with any of these proposals.

In any event, let me go on. To what extent do USAID’s projects

in India involve the participation and support of U.S. businesses

and business organizations?

Ms. BABBITT. Senator, we have had enormous support from U.S.

business with respect to the programs in India. India, as you may

know, is one of the major contributors to greenhouse gas emissions.

It is an enormous country, will be a billion people soon, and provides an enormous opportunity for the export of U.S. clean technology.

The bad news is that India gets an enormous percentage of its

energy from coal, which is not used in an energy efficient way. The

very good news is that the United States leads the world in energy

efficient technology, and there is an enormous amount of interest

by U.S. business in participating in a very large, very important

Indian market. We have worked with General Electric, with Bechtel, with Enron, with American Electric Power, with Commonwealth Edison, with BP Amoco, with the Chicago Board of Trade,

with the Air and Waste Management Association, with Duquesne

Light, Edison Electric Institute, and others with respect to this

very large potential market for U.S. technology.

Senator SARBANES. I went with Secretary Daley, the Secretary of

Commerce, on a trade mission to India. One of the items that was

on the agenda and very much sought after by the Indians was to

develop energy efficient technologies.

You point out in your statement that there is a very serious air

pollution problem in India. I can certainly testify to that from personal experience. You go on to say that, ‘‘air pollution will cause

an estimated 2.5 million premature deaths there this year.’’ It is

obviously a pressing problem.

I was struck when you reference in your statement that ‘‘the

world market for energy efficient technologies has been estimated

at almost 1.8 trillion over the next 40 years.’’ Earlier you pointed

out that there were significant opportunities for U.S. business and

large new markets for U.S. technology worldwide.

It is my understanding that the other advanced industrial countries are aware of the possibilities of the so-called green technology.

This would include Japan, Germany, the UK, France, and others.

They recognize the potential there. I saw these AID programs as

an opening beach head for U.S. business to develop that market for

green technologies. I gather that the U.S. businesses you have been

working with see it the same way. Is that correct?

Ms. BABBITT. They do, Senator. We have engaged them in some

of the programs thus far in terms of providing technical assistance

13

and in terms of interchanges. But obviously it is this potential,

very large market that is of enormous interest to them.

Senator SARBANES. One of the major concerns in the Senate, a

concern that I shared, along with most of my colleagues was the

fact that key developing countries were not encompassed within

the regime of meaningful participation in the Kyoto Protocol.

Leaving the protocol aside, it seems to me that many Members

are concerned about the contribution to the problem made by a

number of these major developing countries?

One of the major developing countries is India. It is the second

most populous nation and is projected to be the most populous nation, on the basis of current trends, by about 2025. Any measures

designed to help India achieve energy efficiency and apply some

modern technologies to their energy use are highly desirable. I do

not see why we would have any reason to not support that development. Aside from whether there will be a Kyoto Protocol, these are

the sort of environmental measures we should support absent the

protocol especially in an environment absent the Framework legislation.

Is that not the way AID sees this matter?

Ms. BABBITT. Senator, you are exactly right. The India energy efficiency program predates the conventions or the protocols, all of

the documents in question, and fits directly into the issue of energy

efficiency, that is, the pollution which results from the lack of energy efficient combustion in the old-time, old-fashioned Indian facilities and the danger to health, as you mentioned, with respect

to the impact on children’s health, but also with respect to greenhouse gas emissions.

We have had some real success fairly recently in working with

India and particularly with the National Thermal Power Corp.,

which is the largest electrical provider in India, in an energy efficiency program which has worked for them, which allows them to

burn less fuel, which is efficient for them, and saves them money,

which produces fewer pollutants, which helps with respect to both

greenhouse gases and the health issues arising from particulates in

the air, and which has the benefits associated with—and is sustainable because of—the economic efficiency that goes along with fuel

efficiency. So, this is an ongoing relationship which is bearing some

very important fruit.

Senator SARBANES. I see my time is up. I gather these programs

are very much sought out on the Indian side. It is my understanding that they really want these programs. I take it they are also

sought by American business.

Ms. BABBITT. Yes. We have been provided a little bit of a matchmaking facility but they are eager participants. We have not had

to work to create interest on either side once the elements of the

benefits were evident, and they certainly are to both American industry that senses the market and an opportunity to do the right

thing in terms of the global climate issues and also with respect

to the Indian industry which sees the opportunity to compete better

because of the more efficient fuel use and help with their respective

health issues as well.

Senator SARBANES. Thank you.

Senator HAGEL. Senator, thank you.

14

Staying on point, Madam Administrator, with the Indian

projects, as you know, May 27 of this year the committee received

notification from AID regarding three climate change projects in

India. According to that notification, the trade in environmental

services and technology test project is designed to support pilot

projects in industry sectors. According to AID’s further description

of the project, the test project will examine the cost effectiveness

of voluntary pilot carbon emissions trading within India in targeted

industrial sectors. The program is intended to use market based instruments as a tool for improving the energy efficiency production.

Now, with that as a base, I would like to ask a couple of questions. Actually going back for a moment to what Senator Sarbanes

was referencing, regarding the protocol, self-interest of nations,

most specifically nations that you mentioned, China and India

being the two which will soon be in the largest manmade greenhouse gas emitters category, has India, to your knowledge, demonstrated any intention of taking on binding obligations which obviously, as you know, is prescribed in the Kyoto Protocol and the

main reason, as Senator Sarbanes referenced, the Senate passed 95

to 0 the Byrd-Hagel resolution which said that the United States

would not bind itself to a treaty or a protocol unless all nations,

but in particular India, for example, would do that? Have you

sensed any change of heart with India that they are rushing forward to bind themselves to Kyoto standards?

Ms. BABBITT. Senator, I have not been involved directly with the

negotiations, but I have heard nothing that would indicate that

India was moving forward with respect to voluntarily assuming a

binding commitment.

Senator HAGEL. Mr. Hales, is there anything that you want to

add to that?

Mr. HALES. No.

Senator HAGEL. That is rather discouraging, would you not say?

Ms. BABBITT. Senator, this protocol is a work in progress. We feel

that the work we do is very much in the nature of promoting the

goals of Byrd-Hagel, that is, in promoting the greater participation

of developing countries in this clearly worldwide global issue. The

mechanisms under Kyoto were left undefined and unelaborated.

We believe that some of our work contributes to the further elaboration and strengthening of Kyoto, but it is a work in progress certainly.

Senator HAGEL. Do you believe that we could ever go forward realistically with the Kyoto Protocol unless you get India and China,

for example, to bind themselves to those protocols and those commitments?

Ms. BABBITT. Those kinds of decisions are certainly above my pay

grade, but I would certainly recognize the sense of the Senator’s

question which is that India is currently the world’s sixth largest

emitter of greenhouse gases and the second fastest growing emitter. The solution to the greenhouse gas emissions issue is one that

would need to include the large contributors to the problem.

Senator HAGEL. You see, part of the concern that many of us

have up here has nothing to do, first of all, with whether we support AID. In any case, you know I am a strong supporter of your

15

organization. I think most of us up here are strong supporters of

environmental efforts, energy efficiencies.

But as we frame this up in the real world, we step back and we

look at the commitment that the United States would have to take

on, moving 7 percent below 1990 levels, when in fact the rest of

these nations would be essentially held harmless, and then we are

paying for their progress on different programs like what you are

doing, what other organizations are doing. It gets to a point where

it certainly goes beyond a cost-benefit analysis for the United

States. Are we in fact undermining our own competitiveness in the

world? And in the end, India, China, other nations probably will

not take on mandatory binding obligations.

So, if you are not aware of some of the sense up here, Administrator Babbitt, I wanted to kind of frame that up as to why many

of us are concerned about this. I know you have other things to do,

as I do, so this is not just an exercise in ‘‘let us have another hearing’’ when we ask you to come up and talk about these things. You

know these are serious things and I wanted you to understand a

little bit of the perspective on where some of us come from on this.

Staying with the subject, focus on this May 27 notification and

tying a little bit back to what Senator Sarbanes said, what you

have said, and I think the general consensus up here that AID is

a very important organization, AID, and rightfully so I believe, continually notes its concern regarding the reductions in the development assistance account of AID. But when I asked for your budget

the other day to review it again, I noted—and you can correct me

here, obviously as you will if I am wrong—in your fiscal year 2000

request that the development assistance account—you have a request for $780 million versus $1.19 billion that you had in fiscal

year 1999. My understanding is that some of these programs that

we are talking about today are being funded through or money

taken away from the development assistance account.

Could you clarify that? Is that not true, or maybe to start with,

why is that development assistance account less, what you are asking for in fiscal year 2000?

Ms. BABBITT. Senator, that is I believe a function of the account

having been divided into one account for child survival and disease

and two other development assistance [DA] accounts.

Senator HAGEL. So, no environmental programs are being funded

out of development assistance.

Ms. BABBITT. Oh, no, they are. They are. I am sorry. I misunderstood your question. I thought your question was why has the request gone down so much from 1999 to the year 2000. My answer,

if that were the question, would have been it has not. In 1999 there

are two DA accounts, but FY 2000 is now broken up into one child

survival account and two DA accounts, and the total is slightly

larger, I believe, for fiscal year 2000.

Senator HAGEL. For the child survival. Well, actually it is a little

less in the account that I am looking at.

But let me ask it a different way then. Are the numbers that are

coming out of the development assistance account dramatically different for fiscal year 2000 in using moneys out of that account for

these environmental programs versus what you had been doing?

16

Ms. BABBITT. I do not believe so, sir. I believe that the environmental levels are roughly $270 million both years. Now, I would

have to look at the figures to be able to verify them exactly, but

I believe it is roughly $270 million each year.

Senator HAGEL. We have the exact account here, and if there is

any change to that, you can supply that for the record.

[The following response was received subsequent to the hearing.]

USAID FY 1999 AND FY 2000 DEVELOPMENT ASSISTANCE ACCOUNTS

In FY 1999, USAID has two development assistance program accounts: the Development Programs account with a level of $1.194 billion, as Senator Hagel has noted,

and the Child Survival and Disease Programs account at $595 million (including

$50 million of emergency supplemental funds and excluding $105 million directed

for UNICEF). These two accounts total $1.789 billion.

The FY 2000 request includes three development assistance accounts. The Development Programs account at $780.4 million and the Development Fund for Africa

at $512.6 million total $1.293 billion; this is the equivalent of the FY 1999 level of

$1.194 billion—that is, in FY 1999 African development programs are being funded

out of the regular Development Programs account. The Child Survival and Disease

Programs account, originally requested at $555 million, was recently adjusted to

$600 million as part of the President’s new AIDS Initiative. Adding in the Child

Survival request brings the total requested for the three accounts to $1.893 billion

that compares to the FY 1999 appropriated total of $1.789 billion.

Finally, to clarify the record with regard to funding for environment programs,

USAID will allocate approximately $255 million in FY 1999, and intends to provide

$290 million for environment programs in FY 2000, from development assistance accounts (no funding for these programs comes from the Child Survival and Disease

account).

Senator HAGEL. Another program on India that AID notified the

committee of its intent to fund is the Energy Conservation and

Commercialization program, I think referred to as ECCO. That program, which also uses development assistance funds will provide

technical assistance for an electric vehicle program for two or

three-wheelers. Are you kind of with me on this?

Ms. BABBITT. Yes.

Senator HAGEL. OK. A couple questions on that. I suspect, as you

know, electric vehicles have had a difficult time with their development, even in the sophisticated U.S. market because of high cost,

limited range, long recharging times, and other difficulties. In contrast, most automotive manufacturers believe now that fuel cells

have the most significant potential to offer a zero emission vehicle

without most of the limitations of electric vehicles.

Now, if you accept that—and I do—why is AID concentrating on

electric vehicle research in this proposed grant?

Ms. BABBITT. I am the one who you called to testify, so I am

going to give you as much information as I can on this, and then

if David has some more, ask him to fill in the blanks.

My understanding, both from spending too much time in traffic

on the streets of New Delhi and from some of the information I

have received from our folks, is that a large percentage of the traffic in the metropolitan and the urban areas in India are these twostroke vehicles, which are notoriously fuel inefficient. They also

represent vehicles that only go short distances in an urban environment. So, that particular configuration makes electrical vehicles

more applicable than they would be in a rural environment or if

they were replacing already energy efficient vehicles.

17

There is a great incentive, which is relatively new in India, to

upgrade or to decrease the polluting aspects of these vehicles.

There are new regulations in place, new laws in place, and a rising

consciousness in the Indian public about the dangers of the pollution from these two-stroke vehicles which may combine to make the

electrical vehicle in this context a winning combination.

David is just back from India and I think is more personally familiar with this project. So, if it would be all right——

Senator HAGEL. Sure, Mr. Hales.

Ms. BABBITT [continuing]. I would like for him to expand on that.

Mr. HALES. Thank you, Chairman.

Hattie I think has captured the essential differences between a

market for electric vehicles in India, say, and a market for electric

vehicles in Chicago or Miami. Essentially what we are looking at

there is a situation where almost 70 percent of the pollution that

we are dealing with in major urban areas comes from those twostroke vehicles. They are used for very short hauls. They are used

at a very low speed. So, they are, both in terms of range and in

terms of power, within the capacity of existing storage batteries.

In addition, there is another substantial advantage for India in

that the actual recharge of those batteries provides them with an

additional use, a very effective use for off-peak power. So, there are

a number of technical issues or contextual issues which makes this

worth taking a close look at in India.

In addition, as the Administrator pointed out, there is a very

strong growing awareness, including on the part of the manufacturer who dominates the market for two- and three-wheeled vehicles in India, of a social responsibility to take part in reducing local

health impacts that are associated with this. In many ways, it is

the leadership from Bajaj Motors that is driving this project.

Our role with it is simply—Bajaj is funding all of their activities.

We are not subsidizing an Indian motor company, but what we are

trying to do is help U.S. technology suppliers be engaged in the research and development that Bajaj is using to try to move to an

electric vehicle that would meet India’s needs.

Senator HAGEL. Well, I just say I think those are very credible

explanations. Most of the manufacturers who are going to, obviously, have much to say about the future of this, as you know, have

moved rather significantly to fuel cell technology. I am not aware

of any who are now really focused on the electric piece of this partly because the cost still cannot get down into a range that is usable

essentially and achievable for what we need to do with them, and

India being a good area to test these things and your answers are

exactly right. Their world is a little different, obviously. But still

it is the cost and it is where the new technology is going, and it

is not going in the area of the electric car.

We have been joined by our colleague, Senator Kerry. Senator

Kerry, welcome.

Senator KERRY. Mr. Chairman, thank you.

You have already had——

Senator SARBANES. I already had a round.

Senator KERRY. I know that the chairman, whom I respect and

is a good friend of mine, has great qualms about global warming

and Kyoto and the protocol, and seems to be the most vigilant

18

Member of the Senate in trying to make certain that we are not

implementing it somehow surreptitiously or otherwise. I look forward to the day that we have persuaded him of the efficiency of

emissions trading and of the importance of people’s concerns about

this on a global basis, and I really do look forward to his participation in the long run in what I think is an important effort.

But let me just say for the record here I just this year chaired,

in concert with the World Bank—and I thank Jim Wolfensohn for

his vision on this—a conference in Vietnam with many of the donor

countries in Asia regarding environmental development practices.

All of these countries have enormous choices in front of them.

Guangdong Province in China has two water treatment facilities

for the entire province, one of the fastest growing regions in all of

China. They are in desperate need of technological assistance. Anyone who has traveled abroad—and I know my colleague has—you

can see the pollution rising from the streets of Bangkok and Shanghai and various places. It is hard to breathe. Most of us who have

been there have been happy to leave not because we do not like the

place, but because it is a relief for our systems just to be able to

get out and breathe again.

The problems of development in these countries undergoing fast

economic development are just enormous. As a country that turned

the corner on leaded gas and turned the corner on emissions controls and are still fighting with our own SUV standards and other

issues—the United States should be sharing this information and

these technologies with these countries so they do not repeat the

mistakes we have made, so they do not contribute to bad air, bad

water, bad forestry practices, and a host of other things is just incomprehensible to me. I think we have got to be really careful, Mr.

Chairman, that we do not have a chilling effect on the willingness

and capacity of our agencies to engage in salutary, proactive efforts

to try to help other nations resolve these problems.

Moreover, let me just say, as the ranking member of the Small

Business Committee, there is a $280 billion market for environmental tehnologies out there and we only have 6 percent of it.

In 1980 when President Reagan came in, the immediate impulse

was to pull away from some of the environmental research in the

country. So, they took away what President Carter had created in

the Energy Institute out in Colorado, which had then transferred

professors who had been tenured at various colleges and universities who had gone out there, given up their tenure to become part

of the great research effort for new energy in America. We were the

world’s leader in photovoltaics and renewables, and they completely cut the guts out from that Federally supported research.

What happened is, in the ensuing years the Japanese and the

Germans replaced us as the leaders in those technologies. And

when the former Communist bloc countries fell, you could go to

places like Prague or other places in the Czech Republic, or in

Hungary where there were no living bushes within 50 miles of the

energy plants that they had there because of their emissions. You

could feel ash on the ground and so forth; the Danube River, completely polluted, dead. And they were seeking to undo the effects

of the 70 years of Communist rule, and where did they go for the

technologies? They went to Japan and they went to Germany, not

19

the United States anymore because we were no longer the leader.

So, we lost a lot of business.

I think we have to think about this in a very proactive and intelligent way, and I beg my colleagues on the other side of the aisle

to review some of the evidence. They may not like the methodologies chosen, and they may not like the protocol for various and sundry reasons, but that does not mean that we should turn our back

on the realities of the science and certainly practices that we ourselves have learned are inefficient.

Yesterday we had a debate on the Senate floor about the cleanup

impact of mining, which has left us with $32 to $72 billion worth

of cleanup, some 59 Superfund sites, some 12,000 rivers and

streams destroyed. So here we are still struggling in our own country with development practices.

I think what the Administrator is doing, what AID is doing is

completely consistent with the Framework Convention that was

passed by the U.S. Senate in 1992, which calls on us to share technology and information with other countries. And it is completely

inconsistent in my judgment with the notion underlying the chairman’s joint resolution with Senator Byrd, which I was very involved in as the manager on the other side on the Senate floor, not

to be reaching out to the less developed countries to bring them

into a broad, global participatory effort on the environment and development. I think we have everything to gain and nothing to lose.

I share with the chairman the notion that it is inconsistent to

have some kind of an international effort that does not require participation by less developed countries. Clearly, the more advanced

developing countries, Mexico, Korea, China, India, et cetera, are at

a threshold level where if they are left outside of participation, they

will undo everything we do. We understand that. So, we must have

their participation.

But I wish we were working in a concerted effort to try to make

it happen rather than this halting, somewhat suspicious and divided effort that seems to not reach to the best interests of the

country and I think in the long run our global interests.

I am not going to ask any questions. I assume the record would

stay open. But I did want to make a statement. I did want to stop

by because I think it is terribly important for us to be approaching

this thoughtfully. And I thank the chair.

Senator HAGEL. Senator Kerry, thank you.

Senator Sarbanes.

Senator SARBANES. I want to make one clarification. Some of the

previous questioning seemed to suggest that the money committed

for these various energy conservation and commercialization programs was being taken away from development assistance. My understanding is that these energy efficient programs have always

been a part of development assistance. In other words, it has been

treated by AID historically and traditionally as part of the development assistance package. You made reference earlier to sustainable

development.

I also have information which suggests that the ratio being committed to the environmental area within the development assistance program has not changed in any marked degree. Is that correct?

20

Ms. BABBITT. Senator, we have long viewed the climate change

and environment aspect of our portfolio, of our objectives as part

and parcel of the sustainable development mandate that we have.

If I can——

Senator SARBANES. You listed on your report that funding for

these programs comes out of the appropriation category for development assistance. It’s my understanding that it always comes out

of this category because it has always been part and parcel of development assistance. Is that not correct?

Ms. BABBITT. Yes, sir. If I can give you an example with respect

to that. We have a forestry program in the Congo. The forestry program in the Congo touches a variety of different goals. On one

level, the economic development level, it provides for sustainable

timber production. On another level, it is watershed management,

and on a third climate related level, it provides for sequestration

with respect to the climate change agenda. So, it would always be

our intention that our climate change related programs fit within

the broad development mandate which is the essence of what we

do.

Senator SARBANES. I am going to harken back to the trip I made

with Daley. This trip had an impact on my thinking, because it was

the first time I had been to India. At this time, several American

companies were interested in entering the Indian power sector.

They have a tremendous need for power. In many of the urban

areas, there are frequent brownouts and electricity is put on a rolling basis. They are quite anxious to have our involvement, and we

are quite anxious to be involved. But, there are problems.

I want to read one paragraph out of a summary the Energy Conservation and Commercialization program:

State Level Electricity Regulatory Commissions: At the state policy level, reforms

will provide an opportunity to incorporate market-based incentives into newly restructured electric utilities and in the policies of the independent commissions that

will regulate them. Creation of electricity regulatory commissions throughout the

country presents USAID with the opportunity to support and train a new cadre of

regulators in market oriented electricity regulation and incorporation of energy efficiency policies. These regulatory commissions will be crucial steps in helping to assure a ‘‘fair playing field’’ and commercial rule of law for U.S. and other private investments in the Indian power sector.

Every American company that was with us on that trade mission—a number of which were interested in the power sector—underscored how important it was to establish a fair playing field and

to have a commercial rule of law that governed American investment and other private investment. They were interested in exploring the Indian power sector. The Indians were interested in bringing them in but American companies asked if some preconditions

or basic requirements such as commercial rule of law could be established.

This seems to me to be an extraordinarily worthwhile effort that

you are undertaking. I want to commend you. I think this is a terrific activity, and think it will serve well your sustainable development goals abroad. It will certainly serve well the American industry interested in participating in this effort, whereas making a contribution on the one hand to sustainable development, while gaining an economic benefit on the other.

21

I am not asking a question. I am really making a statement. My

sense in reading over these Indian programs is that they have been

well thought through and arrived at carefully. I must say I am solidified in that view by the response you both gave to the chairman’s question about the automobiles and the fuel cells. When I

first heard him ask the question, I wondered to myself, why are

they doing that? When I heard your response, which I thought was

forthcoming and dealt directly with the concerns that the chairman

put forward, it seemed to me your reasoning was more than an

adequate. You are dealing with a situation that is affecting people’s

judgments.

Whether in the end these measures will prove successful, I do

not know. It certainly seems to make sense that you explore these

possibilities. The circumstances of the situation in India lend themselves to going down the path with that technology. In any event,

it seemed to me rather clear that you have not made a half-baked

judgment without careful analysis.

I have the same reaction to the proposals we have been looking

at today. So, I just wanted to make that point.

Senator HAGEL. Thank you, Senator.

Could I ask a couple of procedural questions? At AID who determines the appropriate technologies as you develop these programs,

to advance the appropriate technologies through these projects? Do

you get that expertise inside? Do you go outside? How is it done?

Ms. BABBITT. If I can address it in a general way, we do both.

We have some very talented folks within the Agency, but we do not

have the depth in every single issue that we cover, of course. So,

we often rely on assistance from without the Agency to determine

that.

Mr. HALES. I would add to that, Senator, only that we also have

a great deal of help from our partners in developing countries. In

India, for example, there is a very, very sophisticated scientific

community, academic community, and a very sophisticated corporate leadership in India, and it is in close partnership with them,

with folks inside the Agency, and with other areas of expertise,

various universities in the United States, think tanks, and our own

corporations that we try to evaluate which technologies would be

the most appropriate in a given situation.

Senator HAGEL. Yes. Do you want to add something further?

Ms. BABBITT. I did not want to add to that. I did want to go back

to the fuel cells issue, when it is appropriate.

Senator HAGEL. Yes. Go right ahead.

Ms. BABBITT. Part of this back and forth has been for me to satisfy myself that the examination of the new technology with respect

to fuel cells is already part of the plan with respect to the congressional notification.

Senator HAGEL. Part of your plan within AID working with electric car technology.

Ms. BABBITT. Yes. I did not want to represent that it was already

part of the plan, but we do recognize the fuel cell as an important

clean energy technology. And we will help Indian agencies assess

the applicability of fuel cells as well. My point is that, although we

feel for the reasons both David and I have testified that the electrical vehicle is potentially a viable one potentially because of the

22

short distances and the slow speeds at which the two-stroke vehicles travel, that is not to discard fuel cells as a possibly useful technology, and that is part of the plan under the CN which we have

already submitted to the Congress.

Senator HAGEL. Thank you.

In response to a question I had submitted earlier—actually it

was the second hearing when we had David Sandalow here—he

stated in response to that question that EPA had provided

$500,000 to Argentina’s Department of National Resources and

Sustainable Development with a commitment for an additional

$200,000 in connection with Argentina’s commitment to announce

an emissions target at the fifth meeting of the U.N. Climate

Change Convention Conference of the Parties. Would that be something that you would work with or did work with Sandalow and his

agency on in coordinating that outside money, program?

Ms. BABBITT. I am not familiar with what EPA did, but we do

not have a mission in Argentina and I do not believe we are involved in anything related to Argentina with respect to that meeting. Well, in Argentina, but with respect to the issue that you

raise.

Senator HAGEL. OK. So, you were not consulted on the EPA

grant to Argentina. This is not a trick question, by the way.

Ms. BABBITT. What does ‘‘consulted’’ mean?

Senator HAGEL. But if you find out differently, supply that as

well, if you would, Mr. Hales.

Mr. HALES. If I might, Senator. The interagency team that works

on all of the climate change issues is pretty generally aware of

what each of the agencies are doing, and in that sense I think we

are all consulted about what all of the other agencies are doing.

But Argentina is not a USAID country and we have neither direct

technical expertise nor funding in that program.

Senator HAGEL. Another India project that I do not believe has

come up specifically yet today. It includes an ongoing $193,400

grant to the Tata Energy Resource Institute which supports 70 percent of the time of a visiting fellow in India from November 1998

to January 2000. Are you familiar with that grant, generally with

that project?

Ms. BABBITT. I am familiar. I believe this is the Katie McGinty

issue.

Senator HAGEL. Yes.

Ms. BABBITT. I understand that Katie and her husband Carl are

working in India on global climate change issues. I was one of the

participants along with many other U.S. Government and U.S.

business participants in a conference that she helped organize in

May, but I frankly am not familiar with her exact relationship with

USAID in that so that I would need to get back to you on any details with respect to the relationship.

Senator HAGEL. Well, that is exactly my question. What does she

do? What activities are involved with that grant?

Ms. BABBITT. I can address the activities with which I am familiar which focus on the U.S.-Indo business dialog in May. I believe

she was instrumental in setting that dialog up. It occurred in

Washington. A number of us spoke, Larry Summers, Frank Loy, a

23

number of the members of the administration, and a number of the

members of the Indian business community.

Senator HAGEL. Would this be a one-time kind of grant? For example, is there any history? In 1998 would this kind of a grant

have been used?

Ms. BABBITT. It is my understanding that Katie’s engagement in

this is from some time during the end of 1998 through the end of

1999. I am confident that her engagement is broader than simply

this one U.S.-Indo dialog, but I am not able to detail what her activities are.

Mr. HALES. Just to say, Senator, that the relationship with the

Tata Institute is a longstanding one, and it has a number of facets

to it. Certainly those kinds of activities and that engagement have

taken place. I cannot tell you exactly how long. We could certainly

give you a history of that engagement.

The broad purpose of the kinds of activities we are dealing with

here are to help make it very clear that activities which reduce

greenhouse gas emissions are not always uneconomic activities. In

fact, there can be substantial economic benefit from that. Many developing countries are quite afraid that if they take actions to reduce greenhouse gases, that that will somehow cause an adverse

economic effect, and there is substantial conviction in the Indian

scientific community and among the Indian business leadership

that in fact there are opportunities present in the efforts to reduce

greenhouse gas emissions, as well as local pollution. The work with

Tata helps to try to demonstrate that in a wide range of ways, but

we could certainly provide you with detail of the history of that if

you would like.

Senator HAGEL. Well, that would be helpful. I appreciate it. Also,

if you could include in that answer what it is that Ms. McGinty is

doing on this project, what her activities are as well.

Ms. BABBITT. Certainly.

Senator HAGEL. I appreciate that.

[The following response was received subsequent to the hearing.]

USAID’S RELATIONSHIP WITH TATA ENERGY RESEARCH INSTITUTE (TERI)

The Tata Energy Research Institute (TERI) is an autonomous, not-for-profit research institute established in 1974 with core funding from an endowment from private sources. TERI conducts scientific and policy research in energy, environment,

biotechnology, forestry and related sustainable development issues. TERI has a

strong record in India as an independent policy research organization in energy and

has been able to mobilize attention to environmental issues among Indian decisionmakers. TERI also has a branch office in Washington, D.C., TERI North America.

USAID has a long history of collaboration with TERI as a grantee and partner.

For the past decade, USAID and TERI have worked together on several activities,

including the following:

• Under USAID/India’s Program for Acceleration of Commercial Energy Research

(PACER), TERI conducted studies from February 1989 to October 1990 in order

to identify possible technologies and private or public sector sponsors in India

eligible for funding under the PACER Project.

• From January to June 1993, USAID/W provided funding to TERI for establishment of the Asian Center for Energy Efficiency and Demand-Side Management

(ASCEND) for the purpose of promoting greater investments in energy efficiency and demand side management.

• In June 1994, USAID/W funded a TERI workshop on the concepts of Integrated

Resource Planning and Demand Side Management as an alternative to increasing power generation capacity. Indian power sector policy makers, financial inVerDate 11-SEP-98 14:03 Dec 10, 1999 Jkt 549297 PO 00000 Frm 00026 Fmt 6633 Sfmt 6621 61046 SFRELA1 PsN: SFRELA1
24

stitutions, state electricity board otficials, and the private sector attended the

workshop. • In July 1996, USAID partially funded a TERI Program on Energy, Environment, Resources and Sustainability (PEERS) that identified probable future

public and private sector leaders, and trained them on sustainable environmental issues. • TERI has been surveying industrial environmental management as part of a

USAID/India program on clean technology; the survey concluded in September

1999. • Several staff members of TERI have received USAID-funded training in the

U.S. on various energy and environmental issues, most recently training of two

TERI researchers in the use of state-of-the-art climate change policy models. • USAID provided funding to TERI in November 1998 to cosponsor an international symposium on renewable energy in association with the International

Society for Renewable Energy Education. • USAID provided support from March 1998 to February 1999 for TERI to write

a manual on solar photovoltaic technology. • From FY 1995 to FY 1997, USAID funded a cooperative program with TERI.

The U.S. Department of Energy collaborated in the program. The program promoted and supported policy and strategy development related to energy efficiency and environmental improvement, and fostered technology relationships

between the U.S. Electric Power Research Institute (EPRI) and related energy

and environmental organizations in Asia. EPRI also established an industrial

technology transfer program in India. • For the last five years, the U.S.-Asia Environmental Partnership (US-AEP) has

periodically funded joint activities with TERI. US-AEP contributed funding to

the program described above, and supports a current relationship with the

International City Managers Association (ICMA) to provide consultant services

for activities of mutual interest. Joint activities of US-AEP and TERI have included environmental policy analysis and conferences promoting improved

urban and industrial environmental management.

• In FY 1999, USAID/India awarded a grant to TERI North Anerica to support

70% of the time of a Visiting Senior Fellow, Ms. Katie McGinty, in India from

November 1998 until January 2000. Ms. McGinty is a former chair of the President’s Council on Environmental Quality. This grant came from USAID’s

Greenhouse Gas Pollution Prevention Project, as part of the Outreach and

Awareness activity. The objective of the grant is to increase awareness among

the Indian public and private sectors on global climate change issues facing

India and the world, and to identify opportunities for addressing processes that

result in environmental degradation or enhancement. As part of this objective,

the grant is also helping build partnerships between U.S. and Indian businesses

and industries to examine opportunities and challenges arising from global climate change mitigation.

KATIE MCGINTY’S ACTIVITIES IN INDIA

Ms. Katie McGinty, a former chair of the President’s Council on Environmental

Quality (1993–1997), is currently a Senior Visiting Fellow at TERI under a partially

USAID-funded fellowship (70%). Her role at TERI is to increase awareness among

the Indian government, NGOs and businesses on the linkages between greenhouse

gas emissions reduction and sustainable development. The objective is to help increase their participation in reducing India’s greenhouse gas emissions. Ms.

McGinty has carried out the following work:

• Organized a series of meetings with the Indian power sector, Indian businesses,

and Indian government officials to explore their understanding of the linkages

between environmental issues such as climate change and local development.

She found that the Indian business community had the most interest in reducing emissions via access to U.S. technologies and financing that could benefit

from the use of market-based mechanisms.

• Participated in a series of workshops conducted by the Confederation of Indian

Industry (CII) on greenhouse gas emissions. CII is one of the USAID local partners under ‘‘Climate Change Outreach and Awareness’’ activity of the Greenhouse Gas Pollution Prevention Project.

• Participated in U.S. Information Service (USIS) events on climate change, including a lecture series involving U.S. representatives from Enron and Dupont

discussing cost-effective approaches to achieving highest levels of efficiency in

reducing greenhouse gases. She will participate in similar USIS events this fall.

25

• Helped the Confederation of Indian Industry (CII) coordinate and plan a dialogue with U.S. businesses in Washington D.C. in May 1999 to discuss the possibility of Indian and U.S. businesses working collaboratively on climate change

opportunities and challenges.

Senator HAGEL. Let me get back to a point I made earlier in my

opening remarks about emissions trading projects. There is an

awful lot of confusion about what they are and what they would

do and the value and in fact would they work without the Kyoto

Protocol, what is the value for an American company. My friend,

John Kerry, talked a little bit about technology, and I share those

concerns, although I do not think America is about ready to run

out of leadership ability and quantity and quality in this business

if we do not do something in regard to the Kyoto Protocol. I have

a little difference of opinion with my colleague on the issue of voluntary versus mandatory, and that is where the difference really

resides, not that we both do not accept responsibility for each of us

and our country to deal with the environmental issues worldwide.

That is not the issue, never has been. It is about how we do it.

But emissions trading systems only work in a global context if

you have enough emission grants to go around. I would be interested in—take any dynamic of this you wish, Madam Administrator—your evaluation and perspective on emissions trading systems. We talked about Ukraine, for example. How do they work in

your opinion if you do not complete the Kyoto Protocol? What is the

value to an American company if they do not have something to

trade, if there is no value? If Russia does not participate, for example, or China does not participate, then where do you get enough

of those credits to make it worthwhile for an American company?

And then I guess the other part of that would be can or should

emissions trading systems work without a mandatory type of a protocol called for like in the Kyoto Protocol? And take any piece of

that you wish.

Ms. BABBITT. Well, I am not sure I am going to answer this in

the most important aspect first, but let me just take pieces of it.

The administration—and I do not want to state this too many

times—has made it clear to those of us in the administration that

it has no intention of submitting this treaty for ratification before

there is participation by the developing countries and that we see

this Kyoto Protocol as very much a work in progress.

The efforts which we make with respect to these emission trading systems with developing countries, which is USAID’s niche in

this larger issue, is to try to strengthen and elaborate on the Kyoto

mechanisms in a way to make sure that, as this work in progress

progresses, the mechanisms are elaborated upon and strengthened

in a way which best suits United States business interests, environmental interests, and governmental interests.

The Clean Air Act in the United States is an emissions trading

system with respect to SO2. We have that kind of experience in the

United States with an emissions trading system that works. It is

still very complicated stuff. There are still a lot of people, including

me, who do not understand it particularly well. But we have a

basis upon which to understand how a system like this might work.

The breadth and depth of understanding of a potential emissions

trading system and how Kyoto mechanisms might work in developVerDate 11-SEP-98 14:03 Dec 10, 1999 Jkt 549297 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 61046 SFRELA1 PsN: SFRELA1
26

ing countries is much less well defined and understood. It is our

intention, to the extent that our programs address this band of

issues, to help with the understanding in developing countries of

how these mechanisms could work to their benefit. And when I say

work to their benefit, I mean not just in the emissions trading narrow sense, but in the sense that if a system like this were developed to fruition, it would provide an opportunity for new resources

for developing countries. That is to say, developed countries could,

under some later agreed upon set of mechanisms, provide resources

to developing countries for energy efficient projects. By resources I

mean money. And it could also provide technical capacity that they

do not have. So, the development benefits of a developed emissions

trading system like the Clean Development Mechanism could be an

enormous boost to developing countries both from a resource standpoint and from a technology standpoint.

Now, as David pointed out a little bit earlier, most—I think

‘‘most’’ is the right way to characterize this—developing countries

are fearful of this whole subject because their instinct is to see it

as a sort of developed versus developing country kind of phenomenon. We do not believe that is the case. We believe that, properly

developed, these trading systems, the Clean Development Mechanism, for example, could be an enormous source of resources and

technology for developing countries.

It cannot be, as you have pointed out in both your opening statement and since then, a system which we can join unless developing

countries participate. So, there is a lot of incentive to work toward

elaborating and refining these systems, these mechanisms under

Kyoto in a way which is supportive of U.S. interests. We are not

there yet, but the potential benefit is an enormous one and a worthy one we believe.

Senator HAGEL. Do you believe that is part of the AID mission

statement?

Ms. BABBITT. We believe that the sustainable development mission statement of USAID includes trying to minimize those aspects

of climate change which undermine the economic development mission statement that we have. Senator Sarbanes’ example demonstrates, at least as clearly as any I can think of, the pollution

aspects of inefficient energy use, and the damage to health clearly

undermines our sustainable development goals.

Or in the Congo example I used earlier, the failure to manage

forestry resources undermines sustainable timber development. It

also undermines watershed management, and it also gets rid of

what could be a potential sink for greenhouse gases. So, we really

believe very firmly that these issues are united.

Senator HAGEL. Thank you.

Senator Sarbanes.

Senator SARBANES. I have nothing further.

Senator HAGEL. Well, again thank you, Madam Administrator,

for coming up this afternoon. We will keep the record open. Our

colleagues may have questions, and we will get those to you by the

end of the week if there are further questions to be answered for

the record. Again, I appreciate what you are doing, and thank you

for coming up.

27

1 COMMITTEE NOTE: Attachments referred to throughout are in the committee’s files.

Ms. BABBITT. Senator, I very much appreciate the opportunity to be here. I appreciate your permitting David to fill in the blanks.

I have a very large portfolio. This environment one is his, and I

knew he would have details that would be helpful. Thank you.

Senator HAGEL. Well, I think you did just fine, but we are always pleased to see Mr. Hales. He adds a very exciting dynamic to the

hearings. Thank you.

[Whereupon, at 3:32 p.m., the subcommittee was adjourned.]

Additional Questions and Responses for the Record

RESPONSES OF DEPUTY ADMINISTRATOR HATTIE BABBITT TO ADDITIONAL QUESTIONS

SUBMITTED BY SENATOR HAGEL

Question 1a. As was discussed during the hearing last week, in USAID notifica- tion of climate projects, there were references to the USAID climate agenda. Please

provide the following:

—Documentation describing this agenda and all programs and initiatives related to it, including descriptions and justifications for funding consistent with the

Government Performance and Results Act.

Answer. Since 1994, USAID has consistently assisted developing countries to ad- dress climate change through energy efficiency, renewable energy, forestry, and

urban sector activities. Key elements of the Agency’s climate change strategy have

been to promote policy reform and privatization, build indigenous capacity to address climate change concerns, demonstrate proven U.S. technologies that reduce

greenhouse gases, and encourage climate-friendly investment. These activities have

generally endorsed the successful U.S. approach of using market mechanisms to promote environmental protection.

In 1997, prior to the Fourth Conference of the Parties in Kyoto, Japan, the Agency launched its $1 billion, 5-year Climate Change Initiative. The Initiative proposed to

build upon the successes of previous climate-related assistance, with special emphasis on twelve key countries and regions. Guided by the goals of the UN Framework

Convention on Climate Change (FCCC), the Initiative is focused on three primary

objectives:

• Decreasing the rate of growth in net greenhouse gas emissions; • Increasing developing and transition country participation in the goals of the

Convention; and • Decreasing vulnerability to threats posed by climate change. A copy of the Climate Change Initiative (1998–2002) is attached for your reference.

Monitoring and measuring the results achieved through its programs is among the Agency’s highest priorities. Under the Initiative, the Agency makes a concerted

effort to measure the impact of programs, assess the most effective strategies for

combating the threat of climate change, and continue to improve and focus the

Agency’s approach.

The Agency established performance indicators to track progress across a range

of sectors and activities. Also attached are results reported for FY 1998 under the

Climate Change Initiative. These were reported in the climate change annexes to

the Results Review and Resource Request (R4) submissions. The R4s provide the

basis for the Agency’s Annual Performance Report and the Congressional Presentation, which fulfill USAID’s reporting requirements under the Government Performance and Results Act.

Attachments: 1 USAID’s Climate Change Initiative, 1998–2002. FY 1998 R4 Submissions: Climate Change Annexes.

Question 1b. As was discussed during the hearing last week, in AID notification

of climate projects, there were references to the USAID ‘‘climate agenda.’’ Please

provide the following:

—Documentation that identifies changes in the scope and funding for these programs for fiscal years 1997, 1998, 1999, and proposed 2000.

Answer. Speaking at the United Nations (UN) General Assembly Special Session

on Environment in June 1997, President Clinton announced that the United States

28

2Key countries/regions are: Brazil, Central Africa, Central America, Central Asia, India, Indonesia, Mexico, Philippines, Poland, Russia, South Africa, and Ukraine.

would provide $1 billion over five years to collaborate with developing nations and

countries in transition in reducing the threat of climate change. USAID was charged

with implementation of the President’s commitment to these countries. The Agency

proposed to meet this commitment with a minimum of $750 million in grant assistance and up to $250 million in climate-friendly investments stimulated through the

use of credit instruments during FYs 1998–2002.

USAID’s climate change strategy, drafted in 1994 in response to Congressional request and revised in 1997 to target twelve key countries and regions, implements

a ‘‘no-regrets’’ approach to climate-related intervention.2 ‘‘No regrets’’ refers to activities that provide climate change benefits in addition to their primary objectives

of increased energy efficiency, cleaner energy production, more effective natural resource management and reduced urban pollution. This focus has been the mainstay

of USAID’s climate change program since its inception. By addressing climate

change in conjunction with sector-specific and economic development goals, USAID

leverages existing resources and assures a greater level of sustainability.

USAID grant assistance for climate-related activities from fiscal year 1997

through proposed 2000 has remained steady at an average of just over $150 million

a year. The annual breakdown of climate related funding for the past several years

follows:

FY 1993: $199.1 million (actual)

FY 1994: $172.1 million (actual)

FY 1995: $191.7 million (actual)

FY 1996: $174.2 million (actual)

FY 1997: $147 million (actual)

FY 1998: $163 million (actual)

FY 1999: $150 million (estimate)

FY 2000: $150 million (proposed)

Question 1c. As was discussed during the hearing last week, in AID notification

of climate projects, there were references to the USAID ‘‘climate agenda.’’ Please

provide the following:

—An annotated copy of President Clinton’s April 20, 1999 submittal to Congress

in accordance with Section 573 of the Foreign Operations, Export Financing,

and Related Programs Appropriations Act, 1999 (P.L. 105–227) that indicates

where your ‘‘Climate Agenda’’ is discussed.

Answer. A copy of the Report to Congress on Federal Climate Change Expenditures is attached. This report, compiled by the Office of Management and Budget

(OMB), details actual and proposed funding levels for USAID’s climate change activities, provides a brief overview of the Agency’s climate-related activities, and

gives examples of intended results. Text relating to USAID programs is flagged.

Attachment: Report to Congress on Federal Climate Change Expenditures. Office

of Management and Budget (OMB).

Question 2a. During the hearing, you testified that India was the sixth largest

emitter of greenhouse gas and was the second fastest growing emitter. Please provide the following information:

—The list of the top ten developing countries ranked by emissions. Also, please

provide the most current actual emissions, the projected rate of growth, and the

projected emissions for the years 2010, 2015, and 2020.

Answer. Under the Climate Change Initiative, USAID sponsors climate related

activities in forty-four countries. However, the Agency concentrates resources on 12

priority countries and regions, selected because of their current and predicted contribution to net global greenhouse gas emissions and/or their governments’ receptivity to taking concrete action. Of the ten largest greenhouse gas emitters among developing countries and countries with economies in transition, seven are USAID key

countries. Three are countries in which USAID does not have a presence: People’s

Republic of China, Republic of Korea, and Saudi Arabia. The following table indicates the top ten developing country greenhouse gas emitters, according to the

International Energy Association (IEA). India, the sixth largest emitter of greenhouse gases overall, is the third largest emitter among these countries.

With respect to projected rates of growth and projected emissions for the years

2010, 2015, and 2020 for these top emitters, standardized projections are not currently available through the UN Framework Convention on Climate Change (FCCC)

Secretariat. Some organizations attempt to project future emissions for various

29

countries, but these estimates are speculative. The attached table from the IEA contains emissions projections for some countries for the year 2010.

Attachment: National CO2 Emissions: 1996, International Energy Association Report ‘‘CO2 Emissions from Fuel Combustion, 1971–1996.’’

Ranking of developing countries and countries with economies in transition by

1996 total emissions from fossil-fuel burning, cement production, and gas flaring.

Ranking Among Non-OECD Countries

(Million metric tons of carbon equivalent (mtc))

Rank and Country

Carbon

equivalent

(mtc)

1 China* .............................................................................................................................................................. 867

2 Russia .............................................................................................................................................................. 414

3 India ................................................................................................................................................................. 235

4 Republic of Korea* ........................................................................................................................................... 112

5 Ukraine ............................................................................................................................................................. 106

6 Poland .............................................................................................................................................................. 100

7 Mexico ............................................................................................................................................................... 93

8 South Africa ..................................................................................................................................................... 87

9 Brazil ................................................................................................................................................................ 78

10 Saudi Arabia* .................................................................................................................................................. 68

*Not a USAID assisted country.

Source: International Energy Association.

Question 2b. During the hearing, you testified that India was the sixth largest

emitter of greenhouse gas and was the second fastest growing emitter. Please provide the following information:

—For these countries indicate the USAID projects funded in fiscal years 1997,

1998, 1999, and proposed 2000.

Answer. USAID funds climate-related activities in seven of the top ten developing

and transition countries. Ranked by greenhouse gas emissions, these are Russia,

India, Ukraine, Poland, Mexico, South Africa, and Brazil. All are considered key or

priority countries under USAID’s Climate Change Initiative, begun in fiscal year

1998 and continuing through 2002.

The following table lists projects funded or proposed in these countries under the

Climate Change Initiative.

USAID Climate-related Projects in Developing and Transition Countries

(In millions of U.S. dollars)

Country FY 98 FY 99 FY 00

RUSSIA: ................ ................ ................

Power Restructuring & Pricing and Regulatory Reform ................................................. 1 0.055 0

Energy Efficiency through NGO Programs with Municipalities and Industry ................. 0.25 0.3 0.5

CFC Initiative .................................................................................................................. 1 1 1.5

Forestry Management ...................................................................................................... 1 1 0.7

Forestry and NTFP Business Development ...................................................................... 1 0.648 0.7

Emissions Trading ........................................................................................................... 0 0.006 0

Business Development & Small Grants .......................................................................... 0 1.148 1

INDIA: ................ ................ ................

Increased Env. Protection in Energy, Industry & Cities ................................................. 0 5.00 8.00

UKRAINE: ................ ................ ................

Power Restructuring and Financial Improvement of the Power System ........................ 5 4.9 4.9

Energy Efficiency in the Municipal Sector ...................................................................... 0.5 0.7 0.7

Global Climate Change Policy & Sustainable Development Work Group ....................... 0 1.4 2

POLAND: ................ ................ ................

Local Government Administration & Energy Efficiency .................................................. 3 2.5 0

Electricity Pricing and Regulatory Reform ...................................................................... 1.5 0.6 0

GCC ................................................................................................................................. 0 5 0

MEXICO: ................ ................ ................

Protecting Tropical Forests and Mangroves in Mexico’s Parks ...................................... 1.96 3.12 2.25

30

USAID Climate-related Projects in Developing and Transition Countries—Continued

(In millions of U.S. dollars)

Country FY 98 FY 99 FY 00

Renewable Energy, Energy Efficiency, Improved Environmental Management Systems

for Industry (Mexico Environmental Management Project) ........................................ 2.23 2.043 2.65

SOUTH AFRICA: ................ ................ ................

Improved Access to EnvIronmentally-Sustainable Shelter and Urban Services for the

Historically Disadvantaged Population ....................................................................... 2.8 3 3.5

BRAZIL: ................ ................ ................

Sustainable Forestry, Park Protection, and Sustainable Alternatives to Deforest in

the Amazon and Atlantic Coastal Rain Forest .......................................................... 4.98 5.32 5.2

Renewable Energy and Energy Efficiency (Integrated Environmental Management

Project) ........................................................................................................................ 0.42 0.797 0.8

Directed Research Component of the G–7 Pilot Program to Conserve the Brazilian

Rain Forest ................................................................................................................. 2 2 2

Source: USAID Management and Regional Bureaus.

Question 3. In your testimony, you mentioned ‘‘nothing indicates India is prepared

to accept binding commitments’’ as called for in the Byrd-Hagel resolution. For each

of the top ten developing countries identified in the previous question, please discuss

any public announcements by the governments of these countries to accept binding

commitments consistent with the Byrd-Hagel resolution.

Answer. Of the top ten developing and transition countries identified in the previous question, Russia, Ukraine, and Poland have each agreed to greenhouse gas

target levels under the Kyoto Protocol to the UN Framework Convention on Climate

Change. To the best of our knowledge, none of the remaining seven governments

(China, India, Mexico, South Africa, Brazil, and Saudi Arabia) has to date made

public announcements accepting binding commitments to reduce or limit greenhouse

gas emissions.

Question 4. For each of your projects in developing countries, please identify the

businesses involved and non-governmental organizations involved. Also, indicate the

extent to which taxpayer funds have been provided to these organizations for these

programs for the fiscal years 1997, 1998, 1999, and proposed 2000.

[NOTE: Inquiry clarified that this request pertains to information on energy and

environment programs in USAID-assisted developing and transition countries.]

Answer. USAID summarizes activities and results, including principal contractors, in its annual submissions to Congress. In addition, each Congressional Notification on new projects and activities lists the key U.S. implementing organizations,

if known. Also, the Agency tracks USG funding for climate change activities in

forty-four countries, by activity (See response to question 2b).

Each USAID Mission keeps records on its activities, including partners and funding. The Agency does not require Missions to identify to Headquarters each private

sector or NGO partner involved in each activity, or funding provided to each partner.

Question 5. For each of your projects, in both developing and developed (Annex

I) countries, please describe all projects which contain activities related to the Kyoto

Mechanisms, including emissions trading, joint implementation and the Clean Development Mechanism.

Answer. As the international development assistance arm of the U.S. government,

USAID has a critical role to play in working with developing nations to reduce the

rate of growth in emissions of greenhouse gases and decrease the threat climate

change poses to sustainable development. USAID’s climate change strategy, drafted

in 1994 in response to Congressional request and revised in 1997 (prior to Kyoto)

to target twelve key countries and regions, implements a ‘‘no-regrets’’ approach to

climate-related intervention. ‘‘No regrets’’ refers to activities that provide climate

change benefits in addition to their primary objectives of increased energy efficiency,

cleaner energy production, more effective natural resource management and reduced

urban pollution. This focus has been the mainstay of USAID’s climate change program since its inception.

Providing countries with the training and tools required to mitigate climate

change and reduce greenhouse gas emissions in a cost-effective manner is also central to USAID’s Climate Change Initiative. USAID has funded, and continues to

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fund workshops and technical training sessions for developing countries on flexible,

market-based mechanisms.

In FY 1998 and FY 1999, USAID sponsored capacity building and educational

training events on such flexible, market-based mechanisms. These events are related at least in part to elements of the UN Framework Convention on Climate

Change (FCCC) and to market-based mechanisms of the type described in the Kyoto

Protocol.

With these workshops and training sessions, we were able to strongly emphasize

the necessity of market approaches to environmental management, to stress the importance of broader-based participation in pursuing the goals of the FCCC, and to

elaborate and strengthen the market-based mechanisms and other elements, long

supported by the United States and included in the Kyoto Protocol, in ways that

protect and promote U.S. interests.

The attached summary describes activities USAID has sponsored in this regard.

Attachment: USAID Activities Related to the FCCC and the Kyoto Protocol.

Question 6. During your testimony you mentioned that you were not jointly funding any international climate related activities. You also mentioned that as a participant in the ‘‘interagency team’’ USAID was aware of all other federal climate programs. Please provide the planning document that sets out USAID funding by country in relation to activities by other agencies, including in Argentina and Russia.

Answer. We were unable to find a statement in the transcript that USAID does

not jointly fund international climate-related activities. For the record, it would be

incorrect to say that USAID does not jointly fund any international climate-related

activities. On the contrary, USAID works closely with other U.S. agencies, particularly DOE, EPA, USDA and the U.S. Forest Service, on climate-related activities

that increase the use of renewable energy and energy efficiency measures, disseminate clean energy technologies, improve natural resource management, and reduce

urban and industrial pollution and inefficiencies. These collaborations allow USAID

to draw on external expertise as need arises.

In addition to public sector collaboration, USAID is very proud of its private sector partnerships, in which we jointly fund climate-related activities with private sector partners from the United States and developing countries. These partnerships

allow the Agency to leverage its investment in training and capacity building into

sustainable long-term solutions that reduce greenhouse gases in economically viable

ways.

In his testimony, Mr. David Hales said that the interagency team that works on

climate change issues is aware of what each of the agencies are doing. This interagency team is composed of representatives from all of the U.S. agencies addressing

climate change. The team meets frequently to discuss and develop policy and to assure that the various agencies are coordinating their activities, where applicable, to

allow the United States to best meet its foreign and domestic policy goals.

While there is no formal planning document that sets out USAID funding by

country in relation to activities by other agencies, the OMB Report to Congress on

Federal Climate Change Expenditures details funding by agency for climate change

(see attachment to question 1c).

Question 7. During last week’s hearing you testified that USAID has an internal

and an external process for determining which technologies are suitable for inclusion in AID funded programs. Please provide these studies and indicate: 1) the nongovernmental organizations that have supplied the analysis, and 2) any peer review

done on these documents. Also, please provide documentation on which governmental staff and organizations participated in these evaluations.

Answer. In response to Sen. Hagel’s question as to how USAID determines appropriate technologies for our energy programs and whether that expertise comes from

inside or outside the Agency, I noted that USAID does both. As I said during the

hearing, USAID has very talented folks within the Agency, and that we also often

rely on experts from outside the Agency to help us determine appropriate technologies.

USAID uses a variety of methods for determining which technology is appropriate

for demonstration or application in developing countries, including using recommendations from experienced USAID field and technical staff, existing literature

and case studies, and commissioning feasibility studies and field assessments.

USAID often relies on U.S. agencies such as Department of Energy laboratories or

the U.S. Forest Service to assist in or to undertake assessments. In addition, USAID

works closely with indigenous institutions in recipient countries to assess and recommend appropriate technologies.

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Attached are representative samples of documents and organizations USAID uses in technology assessments for the energy, natural resource, and urban sectors. A

complete compilation of technology assessments for each activity under USAID’s Climate Change Initiative, with details on level of NGO involvement, peer review and

a listing of participants involved in the analysis, would require a substantial effort

by mission staff not required under existing reporting requirements. We are, however, happy to provide technology assessments for specific activities upon request.

Question 8. For technologies approved for your programs please provide docu- mentation on current costs to deploy these technologies, current use of these technologies in the United States, and required taxpayer subsidies for deployment of

these technologies in the United States.

Answer. USAID considers the deployment of economically viable technologies to be a key element of its sustainable development strategy. Technology scoping exercises for field application routinely cite the costs and benefits associated with deployment. A consideration of the cost-effectiveness of technology options is essential

for attracting private sector investment and assuring long-term sustainability. An exhaustive assessment of costs to deploy each technology and their current use in the United States would require a substantial effort by USAID Mission staff not

required under existing reporting requirements. However, in the technology assessments provided in response to question 7, we have flagged the cost estimates for

deployment. USAID does not have information on U.S. levels of taxpayer subsidy for domestic deployment of these technologies.

Question 9. For technologies deployed through AID programs, please provide esti- mates of the full cost of greenhouse gas emissions reduction in dollars per metric

ton carbon equivalent using such technologies.

Answer. Estimates for greenhouse gas emissions reductions in dollars per metric ton of carbon equivalent vary widely depending upon the technology and specific application. Factors such as fuel type and quality, estimation of quantity of fuel replaced or saved, the efficiency of the technology, and various other factors combine

to make estimation difficult.

Under its Climate Change Initiative, USAID tracks agency-wide climate change funding by activity. It also measures quantitative results for all climate-related activities using thirteen indicators. These indicators measure policy and regulatory advances, training and capacity building, dollars leveraged and greenhouse gas emissions avoided through USAID climate-related activities. However, since most climate-friendly technology deployment is coupled with policies or programs that have

other objectives than just greenhouse gas emissions reductions—such as power sector reform or sustainable forest management—it would be misleading to assess the

cost per metric ton of greenhouse gas emissions reductions by simply relating funding for an activity with the greenhouse gas emissions avoided by that activity.

Question 10. During the hearing last week you testified that all AID activities are

consistent with the voluntary commitments of the UN Convention on Climate

Change. However, I am unaware of any provision in that treaty that provides for

the trading of greenhouse gas emissions. If you believe that there is such a provision, please identify the provision, and explain how it would or could authorize AID

to fund emissions trading activities.

Answer. The UN Framework Convention on Climate Change, to which the United

States is a party, provides that the United States is obligated to ‘‘promote and cooperate in the development, application, and diffusion, including transfer, of technologies, practices and processes that control, reduce or prevent anthropogenic emissions of greenhouse gases . . .’’ It adds that parties have additional obligations to

‘‘promote and cooperate in education, training and public awareness related to climate change and encourage the widest participation in this process . . .’’.

USAID programs are part of the Administration’s efforts to engage developing

countries in activities that help them to build capacity and understand how these

mechanisms might work to reduce global greenhouse gas emissions in cost-effective

ways, while promoting sustainable development and supporting U.S. interests.

USAID believes emissions trading to be one of the potential tools for meeting all

three objectives.

Question 11. Please provide the Committee with any written legal opinion or decision and all reports, memoranda, or notes concerning any oral or written communications regarding AID’s ability to fund emission trading programs.

Answer. To the best of my knowledge, USAID has neither requested, drafted, nor

received legal opinions, decisions, reports, memoranda, or notes concerning any oral

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or written communications regarding the Agency’s ability to fund emissions trading

programs.

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