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[Senate Hearing 106-808]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 106-808

     CLIMATE CHANGE: STATUS OF THE KYOTO PROTOCOL AFTER THREE YEARS

=======================================================================

                             JOINT HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS

                                AND THE

                        COMMITTEE ON ENERGY AND
                           NATURAL RESOURCES

                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 28, 2000

                               __________

   Printed for the use of the Committee on Foreign Relations and the 
               Committee on Energy and Natural Resources

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

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
67-624                     WASHINGTON : 2000

                     COMMITTEE ON FOREIGN RELATIONS

                 JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana            JOSEPH R. BIDEN, Jr., Delaware
CHUCK HAGEL, Nebraska                PAUL S. SARBANES, Maryland
GORDON H. SMITH, Oregon              CHRISTOPHER J. DODD, Connecticut
ROD GRAMS, Minnesota                 JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                RUSSELL D. FEINGOLD, Wisconsin
CRAIG THOMAS, Wyoming                PAUL D. WELLSTONE, Minnesota
JOHN ASHCROFT, Missouri              BARBARA BOXER, California
BILL FRIST, Tennessee                ROBERT G. TORRICELLI, New Jersey
LINCOLN D. CHAFEE, Rhode Island
                   Stephen E. Biegun, Staff Director
                 Edwin K. Hall, Minority Staff Director

                                ------                                

               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  FRANK H. MURKOWSKI, Alaska, Chairman
PETE V. DOMENICI, New Mexico         JEFF BINGAMAN, New Mexico
DON NICKLES, Oklahoma                DANIEL K. AKAKA, Hawaii
LARRY E. CRAIG, Idaho                BYRON L. DORGAN, North Dakota
BEN NIGHTHORSE CAMPBELL, Colorado    BOB GRAHAM, Florida
CRAIG THOMAS, Wyoming                RON WYDEN, Oregon
GORDON H. SMITH, Oregon              TIM JOHNSON, South Dakota
JIM BUNNING, Kentucky                MARY L. LANDRIEU, Louisiana
PETER G. FITZGERALD, Illinois        EVAN BAYH, Indiana
SLADE GORTON, Washington             BLANCHE L. LINCOLN, Arkansas
CONRAD BURNS, Montana
                  Andrew D. Lundquist, Staff Director
                      David G. Dye, Chief Counsel
                 James P. Beirne, Deputy Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                    Bryan Hannegan, Staff Scientist
                Shirley Neff, Staff Economist, Minority

                                  (ii)

  
?

                            C O N T E N T S

                              ----------                              
                                                                   Page

Loy, Hon. Frank E., Under Secretary of State for Global Affairs..     9
    Prepared statement...........................................    11

                                Appendix

Additional questions submitted for the record by Senator 
  Murkowski to Under Secretary of State Frank Loy................    31
Statement submitted for the record by Senator Lincoln Chafee.....    36

                                 (iii)

  

 
     CLIMATE CHANGE STATUS OF THE KYOTO PROTOCOL AFTER THREE YEARS

                              ----------                              

                      Thursday, September 28, 2000

                               U.S. Senate,
                    Committee on Foreign Relations,
                 Committee on Energy and Natural Resources,
                                                   Washington, D.C.
    The committees met jointly, pursuant to notice, at 3:08 
p.m. in Room SD-419, Dirksen Senate Office Building, Honorable 
Chuck Hagel presiding.
    Present from the Committee on Foreign Relations: Senators 
Hagel [presiding] and Lugar.
    Present from the Committee on Energy and Natural Resources: 
Senators Murkowski [chairman], Craig, and Bingaman.
    Senator Hagel. Good afternoon and welcome. Mr. Secretary, 
welcome.
    The Honorable Frank Loy, Under Secretary of State for 
Global Affairs, is our witness today, and we appreciate you 
being here, Mr. Secretary. I asked Secretary Loy to meet with 
us today to discuss the status of the Kyoto Protocol 3 years 
after its negotiation and 6 weeks before an important U.N. 
climate change conference in The Hague, the Sixth Conference of 
Parties, or COP-6, of the Framework Convention on Climate 
Change.
    The mandates of the Kyoto Protocol would have a dramatic 
effect on our Nation's energy use and policies. I welcome the 
participation of my friends and colleagues from the Senate 
Energy and Natural Resources Committee as the co-sponsors of 
this hearing this afternoon. Chairman Murkowski will be here 
shortly. We have Senator Bingaman with us now and we will ask 
Senator Bingaman for his comments in a moment.
    Secretary Loy, although our views have sometimes differed, 
particularly on the Kyoto Protocol, you have always been 
straightforward in your testimony before the Foreign Relations 
Committee on this issue, and all other issues. Our two 
committees today now look forward to your appraisal of the 
status of the Kyoto Protocol 6 weeks before the convening of 
COP-6 in The Hague.
    Three years ago the protocol was agreed to in Kyoto and, as 
you know, I was in Kyoto and had strong objections to the terms 
of the protocol. The language of the Kyoto Protocol does not 
meet, and directly conflicts with, the clear baseline of the 
United States Senate as represented in the 95 to 0 vote on S. 
Res. 98, or the so-called Byrd-Hagel Resolution. That 
resolution called on the President: one, not to agree to any 
treaty that would exclude developing countries from ``legally 
binding obligations in the same compliance period'' as 
developed countries; and two, not to agree to any treaty that 
would cause serious harm to the U.S. economy.
    Two years ago at COP-4 in Buenos Aires, President Clinton 
announced the decision to sign the Kyoto Protocol and later 
signed it. However, he and Vice President Gore refuse to submit 
it to the Senate for ratification. This committee, the Senate 
Foreign Relations Committee, has yet to receive a treaty agreed 
to by this administration nearly 3 years ago.
    I need not remind you, Mr. Secretary, that the Kyoto 
Protocol is meaningless in the United States until its 
ratification is supported by the United States Senate. In 
Buenos Aires a target of November 2000 was set for completing 
the negotiations over how to implement the Kyoto Protocol. That 
day is now almost upon us.
    This November, a week after our Presidential and 
congressional elections, the nations of the world will meet in 
an attempt to work out the final details of the implementation 
of the Kyoto Protocol. This will be difficult since no 
industrialized nation has yet ratified the treaty and, unless 
you have new news today, Mr. Secretary, not a single developing 
country has agreed to accept legally binding commitments to 
reduce their greenhouse gas emissions within the treaty's first 
compliance period.
    This is a good time to review the Kyoto Protocol because 
over the last few months there have been a series of 
developments that present a considerably different perspective 
than the one of doomsday certainty advanced by climate change 
activists just a decade ago. One by one, reports have come out 
showing these early doomsday predictions to be not only grossly 
overstated, but quite inaccurate. The uncertainties and 
complexities of the climate change question have become more 
and more apparent as we look at it more scientifically.
    Some of the earliest and strongest advocates of global 
warming have now revised their conclusions. Even the scientist 
most associated with global warming, Dr. James Hansen, the 
Director of NASA's Goddard Institute for Space Studies, has 
revised some of his earlier statements based on new research. 
In 1981 Dr. Hansen was the primary author of a report 
describing a connection between carbon dioxide emissions and 
warming temperatures. In 1988 he testified before a Senate 
committee that human activities were causing global warming.
    Just last month Dr. Hansen issued a new analysis which said 
the emphasis on carbon dioxide may be misplaced. He found that 
manmade emissions of carbon dioxide have already been falling 
and that they shrank in 1998 and 1999. In his new report he 
stated that other greenhouse gases, such as methane, black 
soot, CFC's, and the compounds that create smog, may be causing 
more damage than carbon dioxide and efforts to affect climate 
change should focus on these other gases. Furthermore, 
technology already exists to capture many of these gases. ``The 
prospects for having a modest climate impact instead of a 
disastrous climate impact are quite good, I think,'' said Dr. 
Hansen, as he was quoted in the New York Times. I hardly see 
this as an endorsement for the draconian measures of the Kyoto 
Protocol.
    We also have the changed position of one of the early 
architects of the U.S. negotiating position that led to the 
Kyoto Protocol. On June 22nd of this year, the Financial Times 
reported on a speech by Eileen Claussen before the Royal 
Institute of International Affairs in London. As many of my 
colleagues know, Eileen Claussen was an Assistant Secretary of 
State for Oceans and International Environment and Science 
during much of the Clinton Administration. Ms. Claussen left 
the administration just a few months before the Kyoto 
conference and now heads the Pew Center on Global Climate 
Change.
    In her speech she called for a renegotiation of the Kyoto 
targets and timetables. She said that Britain and Germany were 
the only two countries that looked like they had any chance of 
complying with Kyoto mandates. There are very clear reasons why 
these two nations could comply with the Kyoto Protocol. Both 
nations, as we know, are already below the baseline of 1999 
emission levels. With the reunification of Germany, the 
smokestacks of East Germany were included in the 1990 baseline 
of Germany and have since been shut down. Since 1990 Great 
Britain made the economic decision to switch from coal to 
natural gas for its power needs because of the great abundance 
of natural gas in the North Sea.
    Ms. Claussen then argued against countries even trying to 
meet their Kyoto obligations, saying that any effort to reach 
these unreasonable targets would cause so much economic harm 
that it would undermine international support for cooperation 
on all climate change issues. Ms. Claussen still supports the 
Kyoto Protocol, but believes it must be substantially 
renegotiated.
    I believe that it is time for us to move beyond the Kyoto 
Protocol so that we can restore a bipartisan, common sense, 
scientifically based approach to the important issue of global 
climate change. Secretary Loy, I will have a series of 
questions on these and other issues, as my colleagues will, 
relating to the protocol.
    Before receiving your testimony, sir, I would like now to 
recognize and introduce the co-chairman of today's hearing, the 
distinguished chairman of the Energy Committee, Senator Frank 
Murkowski.
    Senator Murkowski.
    Senator Murkowski. Thank you very much, Senator Hagel. I 
want to thank Senator Helms as well and recognize the ranking 
member of the Energy Committee, Senator Bingaman.
    You know, in a lighter moment my staff occasionally puts 
little ditties on the front of my briefing book. This one shows 
a group of gentlemen--and it is gentlemen because there are no 
ladies in the group--standing up, making the announcement: 
``The only solution I can see is to hold a series of long and 
costly negotiations in exotic locations in order to put off 
finding a solution.''
    Well, I am not suggesting that is applicable here today, 
but this is something we have been seeking a solution for a 
long time and have not found one. I do not think we are in an 
exotic location today, but nevertheless some of those who 
negotiate seem to enjoy these extended meetings, and I am not 
one of them.
    Let me get into what I think is appropriate that we 
consider here, and that is that the risk of human-induced 
climate change is a risk that we have to take responsibly. Now, 
my committee, the Energy Committee, has had significant 
interest in climate change in the last two Congresses and I 
think this joint hearing demonstrates our view that climate 
change is fundamentally an energy issue.
    Eighty-five percent of the energy consumed by the U.S. 
comes from combustible or fossil fuels, a major source of 
greenhouse gases. Interestingly enough, that is not so in 
France. France made a decision in 1973, after the Arab oil 
embargo, not to be held hostage by the Middle East and imparted 
on a commitment to nuclear energy, and as we know nuclear 
energy is very kind to global warming in the sense of any 
additional greenhouse gases.
    Now, energy is the principal driver of our economy. We heat 
and light our homes, we transport back and forth, we power the 
new economy, an electric-dependent economy--e-mails, computers, 
you name it--and it produces the conveniences of modern life. 
Yet our energy policy in this country has detracted from our 
conventional sources. We have seen the price of gasoline as a 
consequence of our increased dependence on imports. About 56 
percent of our oil is now coming from abroad--Saudi Arabia, 
Venezuela, Mexico.
    Who sets the price of energy? Is it big oil profiteering in 
this country, our oil companies, or is it those that control 
the supply? Well, clearly if you control the supply you control 
the price because they set the price, we are addicted to it and 
we pay it.
    We have not built a new coal-fired generating plant in this 
country since the mid-nineties. We are talking about tearing 
down hydro dams, offsetting those with barge traffic that would 
move to the highways. The nuclear industry that supplies 20 
percent of our generating is capacity choking on its own waste 
because we will not address what to do with the waste.
    So this forces us over to one area and that is natural gas. 
Natural gas is the favorite energy source. But you cannot in 
this mix move off your conventional sources to rely on natural 
gas without a tremendous price surge. We have seen natural gas 
go in 10 months from $2.16 to delivery in November at $5.43. It 
has doubled.
    Now, the reason it has doubled is if you are going to build 
a generating plant and help San Diego out you are going to go 
to natural gas. We are now depleting our natural gas reserves 
faster than we are finding new ones.
    So I think we have got a problem here as we address global 
warming and we also have a problem of where this energy is 
going to come from. We would like to see renewables. We have 
spent an astronomical amount on renewables. We have not 
achieved the percentage of the market share we would like, but 
it is not because we have not expended the money.
    We cannot consider national or international climate change 
response without considering an entire energy-economy-
environmental system. They all kind of come together. We cannot 
abandon any one of them.
    Now, the Energy and Natural Resource Committee considered 
the economic impact of the Kyoto Protocol back in March of '99 
and we learned a few things that, frankly, disturbed us. 
According to the Energy Information Administration and their 
economic analysis, if we were to adopt Kyoto here is what an 
American consumer could face in the year 2010: Approximately 53 
percent higher gasoline prices; 86 percent higher electric 
prices. These are not my figures, those of you who are smiling 
out there. These are the Energy Information Agency's, put out 
by the Department of Energy. You either believe them or you do 
not. Upward pressure on interest rates and new inflationary 
pressures.
    Make no mistake about it, as it stands right now the Kyoto 
Protocol does not do enough to address the risk of climate 
change. It does not help the environment in a meaningful way 
because it does not stabilize greenhouse gas concentrations and 
overall it does not reduce global emissions, because, because 
developing nations basically get a free ride. They get a chance 
to expand their growth in the developing world and that will 
overwhelm emissions limits placed on industrial nations.
    We should be using our technology to mandate as they 
develop that they use the latest technology. The protocol only 
punishes the industrial countries with higher energy prices and 
reduced economic prosperity. Consider this for a moment: Higher 
energy prices have already sparked fuel protests and supply 
disruptions throughout Europe. Talk to Tony Blair. He will tell 
you about what it means at home. It is shaking the foundations 
of his government.
    Why should we further raise energy prices and disrupt our 
economy for a treaty that as it is structured in its current 
form, the bottom line, is largely ineffective?
    Prior to Kyoto the Senate provided a very clear instruction 
to the U.S. negotiators in the form of the Byrd-Hagel 
resolution. There should not be anybody be able to miss the 
intent of Congress. You know, we are an advice and consent 
body. We certainly gave our advice with that 95 to 0 vote. So 
no one should expect our consent.
    We said developing countries must also take on commitments 
to limit or reduce greenhouse gas emissions, the protocol must 
not result in serious harm to the economy. It is hard to 
imagine this Senate voting to ratify the Kyoto Protocol or any 
subsequent agreement if these two conditions are not met. So if 
the goal is to come home from The Hague with a protocol that 
the Senate can ratify, I am curious to know how this 
administration plans to get there by ignoring the need for 
developing country commitments, limiting use of emissions 
trading to meet targets, and excluding nuclear, hydro, and 
clean coal from clean development mechanisms, no mention of 
nuclear, and delaying the use of carbon sinks to offset 
emissions.
    Finally, there are things that the European Union and 
developing countries have said are nonnegotiable if there is to 
be an agreement, but for the most part these things that would 
increase the cost of the U.S. and undermine our economic 
stability in the coming decades appear apparent in their 
demands.
    What are the administration's alternatives? How do you plan 
to ensure that your position prevails in The Hague? Most 
importantly, is your negotiating position designed to result in 
a protocol that the Senate will ratify? If it is not, then 
really what is the administration's intent in the few months 
left to the administration? Should we not then start the 
process over with a focus on global longer term strategies to 
manage the risk of climate change?
    I do not envy the witness, but I wish him well. I look 
forward to the comments of my colleagues.
    Senator Hagel. Mr. Chairman, thank you. Senator Bingaman.
    Senator Bingaman. Thank you very much for having the 
hearing. Secretary Loy, thank you for being here. I look 
forward to hearing your testimony.
    I do think perhaps this committee has focused more 
specifically on the Kyoto Protocol than we have in the Energy 
Committee, although we certainly have gotten into it 
indirectly, because of our focus on energy issues more 
generally. My sense is that there is more of a consensus today 
than there was at the time Kyoto occurred on the fact of global 
climate change. I do not think we have a consensus yet as to 
the extent to which it is caused by human activity.
    We also do not seem to have much of a consensus on what 
types of solutions could be agreed upon that were binding and 
that would apply to all of the major contributors to the 
problem, to the extent that we understand the problem. I do 
think it is useful for us to have the hearing. We are, as 
everyone undoubtedly knows, extremely distracted, we the 
Congress, with other matters here as we try to complete this 
session. Well over half the Congress, of course, is running for 
reelection and that is another distraction.
    But I hope that we can learn something here and I know that 
you have been working hard in preparation for this meeting in 
The Hague and I am looking forward to hearing what your 
expectations are from that meeting.
    Senator Hagel. Senator, thank you. Senator Craig.
    Senator Craig. Mr. Chairman, thank you. To bring our two 
committees together I think is extremely important as we 
examine the issue of the Kyoto Protocol.
    December 1997--the Vice President personally negotiating 
the protocol--a promise to the American people that it would 
not threaten American security or American global economic 
competitiveness. He called the protocol the most important 
environmental agreement ever conceived. The administration 
called it a work in progress.
    Well, Mr. Chairman, here we are today asking where is the 
progress. Is there global scientific consensus that the 
protocol, if fully implemented, will actually prevent global 
warming? Is the protocol now more cost effective? COP-6, 
convening at The Hague in November, brings the critical phase 
of the Kyoto Protocol negotiations. Some claim that progress 
has been made on key issues that benefit the United States 
interests. Today I hope we can examine that claim.
    But my broader concerns are the kinds of concerns reflected 
by you and Chairman Murkowski, and that is--and let me 
underline those concerns with this question--is the protocol 
itself now obsolete? Is it something we are just in search of 
because it is something we have been in search of for a long 
time, but we have not stopped to analyze whether it is really 
still a player?
    The recent energy prices and the supply problems concern 
you, Mr. Chairman, they concern me, if you take a look at what 
the Department of Energy's analysis says will happen to the 
U.S. economy if we accede to the international energy limits 
the Vice President wants us to adopt in the Kyoto Protocol. 
Those predictions are found, as the chairman mentioned just a 
few moments ago, as a product of the Energy Information 
Administration study entitled ``Impacts of the Kyoto Protocol 
on U.S. Energy Markets and Economic Activities.''
    Simply summarized, as of October 1998: consumer energy 
prices skyrocket, inflation is up, employment opportunities 
down, economic growth potentially halted. EIA's econometric 
projections have understandably upset the White House, and I do 
not blame them. If they are all hooked on this and yet their 
own analyses are suggesting that these could be problems, they 
have a reason to be concerned.
    But now the increase in our oil prices has provided a 
glimpse, I think, of the economic and the political chaos that 
could result from a fully implemented and well enforced Kyoto 
Protocol. Politicians on every continent are now running for 
cover. Back in March, Japan's Kyoto negotiator acknowledged 
that Japan will not meet its Kyoto targets. We know what 
happened in Norway; it collapsed a government. That government 
had to leave town as the people chose another course for their 
energy needs.
    Canada, the Canadian environmental minister is quoted as 
doubting whether Canada can or will even meet its targets. In 
England, as we speak you see what is happening over there with 
Tony Blair's government on thin ice.
    Coincidentally, Mr. Chairman, it was in England this year 
that Ms. Claussen, a former administration official and 
experienced environmental negotiator, spoke bluntly to the 
Royal Institute of International Affairs. In that speech she 
said: ``With all due respect to my former colleagues in the 
current administration who negotiated the agreement, it is 
highly unlikely that the U.S. will be able to meet its Kyoto 
targets of reducing emissions by 7 percent below 1990 levels 
between 2008 and 2012. It does not take an engineer to see that 
a 7 percent reduction is overly ambitious in a country where 
emissions already have grown to more than 11 percent above the 
1990 levels and is likely to continue to rise.''
    A new Australian study entitled Climate Change Policy and 
the European Union, September 2000, says the same for Europe. 
It shows that the cost of compliance with the Kyoto targets in 
the first budget period, never mind the cost of even more 
severe energy rationing beyond Kyoto, will be higher than any 
government official in Europe has been willing to admit to 
their constituents.
    If they've got problems now politically, then wait until 
this is put upon them and they have to talk about it in the 
bold terms that they will. For example, the marginal cost of 
meeting its 2010 targets for Germany will be over $175, U.S. 
dollars, per metric ton carbon. If plans to eliminate nuclear 
power plants, all retired by 2021, forced on the German 
government by its political partner, begin now, the cost will 
rise to over $200 per metric ton. For Finland the cost will be 
$300 per metric ton carbon. For Denmark the cost will be $400 
per metric ton carbon.
    I am not sure any politician in any of those countries 
could withstand that, and this is now becoming a very real 
political issue.
    So let us bring it home, Mr. Chairman. It was after Ms. 
Claussen's speech that we heard from our constituents about the 
price at the pump. Even without Kyoto, prices are high and, 
guess what, they will probably get higher. Now home heating has 
so scared politicians that Vice President Al Gore, for example, 
has pressed the Clinton Administration to deplete the Strategic 
Petroleum Reserves to give him cover through the election.
    No wonder, no wonder at all. Home heating oil prices are 
going through the roof in the Northeast. DOE officials are 
saying there may have to be choices about eating and staying 
warm this winter. Those are choices none of us will ask our 
constituents to make.
    President Clinton is now downplaying the threat of 
recession, but Europe is in political chaos, with blockades at 
the refineries and traffic protests. Current European 
governments are under attack by their own people. Can we be far 
behind if this were carried out to its fullest?
    Mr. Chairman, preoccupation with the protocol is preventing 
us from dealing with the climate change issue in a more 
thoughtful, comprehensive, and, more importantly, immediate 
way. Chairman Murkowski, yourself, myself, others, have 
introduced what we think is responsible multi-track approaches: 
critical analysis, evaluation, integration of all scientific, 
technological and economic facts.
    We are not walking away from the issue. We are suggesting a 
blueprint for the coordination of action that is both practical 
and makes sense so that the government will not neglect an 
issue or back us into less optimum policy choices. Aggressively 
advanced climate science by integrating and focusing on the 
core question, encouraging practical technology development 
without picking winners and losers, and so on and so forth.
    Mr. Chairman, let me close by saying, as I mentioned 
earlier, the Vice President said that the protocol is the most 
important environmental document ever conceived. Well, let me 
suggest that if it was it is not any more. It is obsolete. He 
is right that the gravity of the Kyoto issue must not be 
underestimated. Our economic security hangs in the balance.
    I am anxious to hear Mr. Loy's testimony. It is critical as 
we move toward The Hague in November. I hope I can attend some 
of those meetings at The Hague. I am now planning to do so, as 
I think others are. I know of no other issue more important at 
this time to be dealt with in the right and appropriate manner, 
most assuredly in a way that does not lock us into an agreement 
that is both untenable and unrealistic for our people and our 
economy and our environment.
    Thank you, Mr. Chairman.
    Senator Hagel. Senator, thank you.
    Senator Lugar.
    Senator Lugar. Mr. Chairman, I want to hear Secretary Loy, 
but I will briefly comment that it appears to me that the 
timing of The Hague meeting is unfortunate. It seems to me that 
the politics in this country, and perhaps the politics in many 
countries that are even more severely affected by the high 
prices of oil, have made the negotiating position a good bit 
more tenuous and difficult.
    I am eager to hear what our strategy is going to be, but it 
appears to me as I visit with constituents that the Kyoto 
Protocol is perceived more as an academic interest and pursuit, 
but without political relevance at all. The anticipation is 
that officeholders in this country, whether it be the 
President, the Vice President, or members of Congress, are 
going to provide an energy policy for the country, a plan in 
which we will have sufficient energy to do our work. That is 
the preoccupation.
    To the extent we are able to deal with the Kyoto Protocol, 
that becomes interesting in the event we are able to solve this 
initial quest.
    Thank you.
    Senator Hagel. Senator, thank you.
    Mr. Secretary, thank you again for being here and we look 
forward to your testimony. Please proceed.

 STATEMENT OF HON. FRANK E. LOY, UNDER SECRETARY OF STATE FOR 
                         GLOBAL AFFAIRS

    Mr. Loy. Thank you, Mr. Chairman. Good afternoon. I want to 
thank both committees for having me here today and giving me a 
chance to talk about the upcoming COP-6, the conference that 
will take place at The Hague in November. I have a longer 
statement that I would like to submit, but make a few remarks 
now.
    Firstly, I want to thank the members of this committee for 
the remarks that they have made and giving me a chance to 
address some of them in the near future here.
    Eight years ago, the United States under the Administration 
of President George Bush joined with more than 150 countries 
around the world to begin to tackle the challenge of global 
climate change. Then 5 years later, as has been noted, in Kyoto 
we took the next step in addressing this challenge by 
negotiating a historic agreement to limit the emissions of 
greenhouse gases.
    As policymakers, we have to base our decisions on the best 
scientific evidence available. We cannot wait until the details 
of the climate system have been understood 100 percent. We 
ought to ask, are the risks of human-induced climate change 
great enough to justify taking action? We answer emphatically, 
yes.
    We need, in essence, to take out an insurance policy to 
protect us against the risk of climate change. This insurance 
policy is fully justified today based on our understanding of 
the science. If we act now, the insurance premium will be far 
more reasonable than if we delay and hope the problem will 
simply go away.
    A crucial element of our insurance policy against global 
warming is to complete the work on the Kyoto Protocol. As has 
been said and as we have said, the protocol is both an 
achievement and a work in progress. It combines ambitious, but 
I would say realistic, environmental targets with other, with 
innovative market-based mechanisms to help parties achieve the 
targets and achieve them in a cost-effective manner.
    We negotiated for, the U.S. negotiated for, and won 
acceptance of a multi-year time frame for emissions reductions. 
That allows us greater flexibility and lowers the cost. We 
negotiated for and won inclusion of all six significant 
greenhouse gases. We insisted on and won inclusion of market-
based mechanisms, such as emissions trading, that will 
dramatically lower costs. We insisted on and we won the 
inclusion of carbon sinks, so that activities such as planting 
trees and restoring degraded soils would create economic 
opportunities for the U.S., for U.S. farmers and the U.S. 
forest industry. We rejected both unrealistic and prohibitively 
expensive targets and mandatory policies and measures, such as 
carbon taxes.
    That said, we made it clear from day one that the Kyoto 
Protocol is not yet a finished product and that by itself it is 
not a complete solution to the problem of climate change. As we 
try to complete Kyoto, we must address three fundamental 
issues: the environmental effectiveness, the economic cost, and 
the participation of developing countries. Let me say a word 
about each of those three.
    First, environmental effectiveness. Any elaboration, any 
implementation of the protocol, must ensure that the reductions 
and the removals of greenhouse gases from the atmosphere 
required by the protocol actually occur. Toward this end, the 
U.S. has taken the lead in developing comprehensive, effective, 
binding rules to estimate, to report, and to review emissions 
and to track the trading of the parties' emission allowances. 
We are vigorously promoting provisions that would ensure 
compliance with the obligations of the protocol.
    The second fundamental issue that we need to resolve in 
order to complete the work of the Kyoto Protocol is economic 
cost. The final agreement, and it has been mentioned here, must 
ensure that overall costs will be reasonable. We must get the 
greatest environmental benefit for every dollar devoted to 
addressing climate change. In a world of limited resources, it 
makes no sense to design deliberately a system that is any more 
expensive than necessary.
    Furthermore, overly bureaucratic requirements or artificial 
limits will only restrict the ability of parties to meet their 
targets at reasonable costs and thereby undermine support for 
the protocol.
    I am pleased to report that we have come a long way since 
Kyoto, when emissions trading was little understood by 
developing or industrialized countries. Many nations are now 
enthusiastic about designing trading systems on the national 
level. In the past year the parties also have moved forward 
with a process to define sinks activities that will be included 
in the protocol.
    The United States believes that a comprehensive, broad-
based accounting approach that includes sinks, provides a 
critical long-term incentive to protect existing carbon 
reservoirs, increase carbon sequestration, and reduce 
greenhouse gas emissions through better land management 
practices, actions that not only mitigate climate change but 
have other environmental benefits.
    In order to combat climate change, of course, key 
developing countries will need to join in the fight against 
climate change and recognize that it is a global problem that 
requires a truly global solution. Industrialized countries must 
take the lead, but other countries must contribute in ways that 
promote sustainable development.
    In the past 3 years we have seen some notable progress in 
the area of developing country participation, both within the 
context of the Kyoto Protocol and apart from it. In the Kyoto 
negotiations there is now a genuine and enthusiastic support 
among many developing countries for the clean development 
mechanism that would allow industrialized countries or their 
private entities to earn emission credits through projects in 
developing countries.
    The CDM also will stimulate investment and economic growth. 
We are working hard in the negotiations to shape strong market-
based operational rules for the clean development mechanisms 
that will be high on the agenda for The Hague. Furthermore, 
several countries have stepped forward and moved to take on 
national emissions targets. We have urged the parties to build 
on these successes and to establish mechanisms that enable 
developing countries that voluntarily limit their emissions to 
reap all of the rewards in terms of technology and investment 
that will come from joining in Kyoto's emissions trading 
system.
    Quite apart from the context of Kyoto, many developing 
countries are making real strides to mitigate their greenhouse 
gas emissions by improving energy efficiency, by expanding the 
use of renewable energy, by slowing deforestation, and 
otherwise stemming their emissions.
    The U.S. fully intends to be an active partner in this 
progress. In March, in connection with the President's visit to 
India, for example, the United States and India announced a 
joint statement on cooperation on energy and environmental 
issues, in which India pledged to improve energy efficiency in 
power production by 15 percent by the year 2007 to 2008. China 
also is making dramatic progress in improving energy efficiency 
and carbon intensity per unit of GDP.
    As was noted, 2 years ago in Buenos Aires the parties 
agreed to a plan of action for advancing the ambitious agenda 
outlined in the protocol. We anticipate that many very complex 
issues in this action plan will come to a head at The Hague and 
that COP-6 will be a very significant conference, maybe the 
most significant since Kyoto.
    As we approach these negotiations, I want to assure both 
committees of three things. First, the U.S. is committed to 
making as much progress as possible at COP-6. We believe that 
the stakes demand no less. Second, however, we will not seek 
progress or agreement at the expense or at the sacrifice of our 
principles in these negotiations. Finally, as we go forward I 
pledge to you that we will continue to consult closely with you 
the Congress, with the American business community, and with 
the environmental community.
    I thank you very much and I am ready for your questions.
    [The prepared statement of Mr. Loy follows:]

                    PREPARED STATEMENT OF FRANK LOY

    Good afternoon. I want to thank both Committees for having me here 
today to talk about the upcoming Sixth Conference of the Parties to the 
United Nations Framework Convention on Climate Change (UNFCCC), which 
will take place this fall in the Netherlands at The Hague.
    Eight years ago, the United States, under the administration of 
President George Bush, joined with more than 150 countries from around 
the world in forging an agreement to begin to tackle a great 
challenge--the challenge of global climate change. Five years later, in 
Kyoto, Japan, we took the next step in addressing this challenge, by 
negotiating an historic agreement to limit emissions of greenhouse 
gases.

                         SCIENTIFIC ASSESSMENT

    In taking these actions we were spurred by the overwhelming weight 
of scientific authority, which tells us that the build-up in greenhouse 
gases in the atmosphere creates risks that are too serious to ignore. 
Since Kyoto, this scientific consensus has only gotten stronger--both 
as to the evidence that human-induced climate change is occurring and 
as to the dangers it presents.
    Today, there is indisputable evidence that the Earth is warming.

   Studies show that the 20th century has been the warmest 
        century in the past 1,000 years and that the 1990s have been 
        the warmest decade in that period, while 1998 was the single 
        warmest year on record.

   Temperature profiles in boreholes, for example, now provide 
        independent verification of surface warming of 1 degree C over 
        the last 500 years--with 50 percent of this warming occurring 
        since 1900.

   New evidence shows that the top 300 meters of the ocean have 
        also warmed by about 1/3 of a degree C over the past 50 years.

   New research reveals that arctic sea ice thickness has 
        declined by about 40% over the past 20 to 40 years.

    These and other studies make scientists more confident than ever 
that natural processes cannot explain the dramatic warming we have seen 
in the 20th century. Indeed, the data only makes sense if one includes 
the effects of human-induced warming.
    Scientists predict that, if we continue on our current course, 
concentrations of greenhouse gases in the atmosphere will reach roughly 
twice pre-industrial levels during this century--a level not seen on 
this planet for the past 50 million years--and proceed upward from 
there. The Intergovernmental Panel on Climate Change (IPCC), which 
represents the work of more than 2,000 of the world's leading climate 
scientists, estimates that a doubling of pre-industrial levels will 
lead to an increase in average global temperature of 2 to 6.5 degrees 
F, and significantly more at some locations. By way of comparison, the 
last ice age was only 5 degrees to 10 degrees F colder than today.
    Scientists warn that these unprecedented changes in our atmosphere 
will bring many potential dangers--including more severe and extreme 
weather events, such as storms and droughts, increases in respiratory 
and infectious diseases, rising sea levels, and widespread damage to 
forests and other ecosystems.

              NEED FOR PRUDENT ACTION AT A REASONABLE COST

    As policymakers, we must base our decisions on the best scientific 
evidence available. But we would fail in our duty to safeguard the 
health and well-being of our citizens and the environment they cherish 
if we waited to act until the details of the climate system have been 
fully understood. The science tells us that this would be a recipe for 
disaster, for we will only fully confirm the predictions of climate 
science when we experience them, at which point it will be too late. 
Instead, we should ask, ``Are the risks great enough to justify taking 
action?'' When it comes to the challenge of climate change, the answer 
is an emphatic ``yes.''
    We need, in essence, to take out an insurance policy to protect us 
against the risks of climate change. This insurance policy is fully 
justified today, based solely on our current understanding of the 
science. If we act now the insurance premium will be far more 
reasonable than if we delay and hope the problem will simply go away.
    That is why the President has proposed increased investments for 
the research and development of clean energy technologies, and 
voluntary partnerships with industry to reduce emissions. We have also 
proposed tax credits for clean and efficient cars, homes and 
appliances. These are ``win-win'' programs that not only reduce 
greenhouse gas pollution and energy consumption, but also save money 
for consumers and businesses. Unfortunately, Congress has not 
adequately supported this aspect of the Administration's energy 
policies.

                  U.S. NEGOTIATING OBJECTIVES AT KYOTO

    A crucial element of our insurance policy against global warming is 
to complete work on the Kyoto Protocol.
    As we have often said, the Kyoto Protocol is both an historic 
achievement and a work in progress. The agreement negotiated in 1997 
reflects the core objectives that the United States sought to achieve 
and provides a basis for real action, at a reasonable cost. The 
Protocol combines ambitious but realistic environmental targets with 
innovative market-based mechanisms to help Parties achieve those 
targets in a cost-effective manner. It represents an important and 
judicious step forward in meeting a very great challenge. And it is 
undeniably a document that reflects our key negotiating objectives.

   We negotiated for--and won acceptance of--a multi-year time 
        frame for emissions reductions, which allows us greater 
        flexibility than a fixed single-year target, lowers costs, and 
        smooths out the effects of short-term events such as 
        fluctuations in the business cycle and hard winters or hot 
        summers that would increase energy use.

   We negotiated for--and won--inclusion of all six significant 
        greenhouse gases, including the fastest growing and longest 
        lasting gases. By including all of these gases, we will both 
        better protect against climate change and reduce the cost of 
        doing so.

   We insisted on--and won--inclusion of market-based 
        mechanisms, such as emissions trading, which will dramatically 
        lower the cost of meeting greenhouse gas emission reduction 
        targets.

   We insisted on--and won--the inclusion of carbon ``sinks,'' 
        so that activities such as planting trees, restoring degraded 
        soils, and adopting best land-use management practices can 
        potentially be counted against emissions targets--thereby 
        creating economic opportunities for U.S. farmers and the U.S. 
        forestry industry.

   And we rejected both unrealistic, prohibitively expensive 
        targets and mandatory policies and measures, such as carbon 
        taxes.

    That said, we made it clear from Day One that the Kyoto Protocol is 
a work in progress and not yet a finished product, and that by itself 
it is not a complete solution to the problem of climate change. In 
order to do so, we believe that three fundamental issues must be 
addressed: environmental effectiveness, economic cost and developing 
country participation. Let me briefly speak to each of these.

                      ENVIRONMENTAL EFFECTIVENESS

First: environmental effectiveness
    Any elaboration and implementation of the Protocol must assure the 
world that the reductions and removals of greenhouse gases from the 
atmosphere required by the Protocol actually occur. Toward this end, 
the United States has taken the lead in developing comprehensive, 
effective, and binding rules to estimate, report and review emissions, 
and to track trading of Parties' emissions allowances. We can report at 
this point that these vital elements of environmental effectiveness 
have already gained wide acceptance in the negotiations.
    We are also vigorously promoting provisions to ensure compliance 
with the obligations of the Protocol. The United States supports 
legally-binding consequences for exceeding emissions targets, and 
believes that these consequences should be non-punitive and agreed upon 
in advance. A meaningful and predictable compliance regime is critical 
not only to achieving our environmental objectives, but also to 
assuring that other countries will fulfill their commitments and that 
the Protocol's cost-reducing market-based mechanisms will work as 
planned.

                             ECONOMIC COST

    The second fundamental issue that must be resolved to complete work 
on the Kyoto Protocol is economic cost. The final agreement must ensure 
that overall costs of compliance will be reasonable and no higher than 
necessary.
    Only if we adhere to this principle will the planet get the 
greatest environmental benefit possible for every dollar, euro, or yen 
devoted to addressing climate change. In a world of limited resources, 
it makes little sense deliberately to design a system that makes 
removing a ton of greenhouse gases from the atmosphere any more 
expensive than necessary.
    In our view, cost-effective action is possible only if the Kyoto 
mechanisms and the Protocol's sinks provisions can be implemented as 
simply as possible, while preserving the environmental integrity of the 
Protocol. Overly bureaucratic requirements or artificial limits on 
these important tools will only restrict the ability of the Parties to 
meet their targets at reasonable cost and thereby undermine support for 
the Protocol.
    Let me just touch on two specific, key topics that affect 
critically both environmental effectiveness and economic cost.
Number one: emissions trading
    The inclusion of emissions trading in the Protocol was an important 
victory for our negotiators at Kyoto. At the time, the potential 
benefits of trading were little understood or appreciated among most 
international climate negotiators. I am pleased to report that we have 
come a long way since then, both among developing and industrialized 
nations. In fact, many nations are now enthusiastic about designing 
trading systems on the national level, realizing that it will help them 
meet their emissions target more quickly and more cost-effectively.
    At the international level, we recognize that we still have a lot 
of heavy lifting to do to finalize how trading will work under Kyoto. 
But it is an endeavor that will be well worth the effort.
    We believe that well-designed emissions trading system will:

   Cut the cost of reducing greenhouse gases by allowing the 
        marketplace to identify the most cost-effective reductions, 
        thereby making efficient use of limited global resources; and

   Quicken the pace at which countries address climate change 
        by creating a market for innovative ways to reduce emissions 
        cost-effectively and fostering the rapid development and 
        diffusion of new technologies that reduce emissions.

    As I have already summarized, the United States has been a forceful 
advocate for strong provisions on monitoring, reporting, and tracking, 
which are needed to assure the integrity of international emissions 
trading. But we will continue to reject restrictions that would not 
contribute at all to environmental integrity but would only burden the 
market and impose unnecessary costs. In particular, we will resist 
efforts by the European Union to put an arbitrary and distorting 
``cap'' on a Party's ability to use the mechanisms--an idea, I would 
note, which they do not propose be applied to their own ability to 
``bubble'' their emissions under a different article of the Protocol.
Number two: carbon sinks
    The Kyoto Protocol recognizes that sinks must be included as part 
of an economically and environmentally sound approach to climate 
change. Specifically, Article 3.3 of the Protocol requires certain 
forestry activities--afforestation, reforestation, and deforestation 
since 1990--to be counted toward a party's reduction commitments. 
Article 3.4 allows the Parties to the Protocol to add additional sink 
activities, such as those related to agricultural soils.
    In the past year, the Parties have moved forward with a process to 
define those sinks activities that will be included under the Kyoto 
Protocol. The United States has stated its support for:

   Broad and comprehensive inclusion (based on sound science) 
        of land use, land use change, and forestry activities;

   Inclusion of forest management, cropland management and 
        grazing land management under Article 3.4;

   Rules--including definitions of key terms such as 
        ``reforestation''--that help protect forests and avoid creating 
        ``perverse incentives'' (for example, to log old-growth 
        forests); and

   A strict accounting system that looks at the total impact of 
        land management on carbon stock changes, including both 
        emissions and removals, and that requires Parties to be able to 
        accurately monitor and verify emissions and removals.

    To address the concerns of some countries about the effect of 
comprehensive greenhouse gas accounting on the first budget period 
targets, the United States has indicated its willingness to consider a 
``phase-in'' during the first commitment period (2008-2012), under 
which countries would be allowed to count a portion of the total amount 
of carbon they sequester.
    The United States believes that a comprehensive, broad-based 
accounting approach that includes sinks provides a critical long-term 
incentive to protect existing carbon reservoirs, increase carbon 
sequestration, and reduce greenhouse gas emissions through better land 
management practices--actions that not only mitigate climate change, 
but have many other environmental benefits. A comprehensive approach 
will also be easier to monitor and verify than narrow practice-based 
accounting and will minimize leakage and double counting.
                       developing country action
    The final issue that must be addressed is developing country 
action. In the long-run, in order to combat climate change, key 
developing countries will need to join in the fight against climate 
change. Climate change is a global problem that requires a global 
solution. Industrialized countries must take the lead, but other 
countries must also contribute in ways that promote their sustainable 
development. Kyoto's Clean Development Mechanism--which allows 
industrialized countries or their authorized private entities to earn 
emission credits through projects that contribute to the sustainable 
development of developing countries--is an important step forward.
    In the past three years, we have seen some notable progress in the 
area of developing country participation--both within the context of 
the Kyoto Protocol and apart from it.
    In the Kyoto negotiations, there is now a genuine and enthusiastic 
support for the Clean Developing Mechanism among many developing 
countries. Nations that were suspicious of the idea at Kyoto now have a 
further understanding of the economic incentives it will provide for 
both emission reductions and for investment that can power their 
economic growth. We are working hard in the negotiations to shape 
strong, market-based operational rules for the Clean Development 
Mechanism. This will be high on the agenda at The Hague.
    Furthermore, several countries have stepped forward and moved to 
take on national emissions targets. Argentina has, in fact, announced a 
target. Kazakhstan and Bolivia have announced a willingness to do the 
same. The United States has voiced its strong support for these 
actions. We have urged the Parties to build on these successes and to 
establish mechanisms that enable developing countries that voluntarily 
limit their emissions to reap all of the rewards (in terms of 
technology and investment) that will come from joining in Kyoto's 
emissions trading system.
    Quite apart from the context of Kyoto, many developing countries 
are making real strides to mitigate their greenhouse gas emissions by 
improving energy efficiency, expanding the use of renewable energy, 
slowing deforestation, and otherwise stemming their emissions growth. 
The United States fully intends to be an active partner in this 
progress.
    The President's Committee of Advisors on Science and Technology 
projects that the markets for energy technology in developing countries 
will total $4 to $5 trillion over the next 20 years and $15 to $25 
trillion over the next 50 years. To accelerate the development and 
deployment of clean energy technologies around the world, President 
Clinton proposed in his FY 2000 budget an International Clean Energy 
Initiative--a $200 million multi-agency effort to encourage open 
competitive markets and remove market barriers to clean energy 
technologies in developing and transition countries and to provide new 
incentives for clean energy technology innovation and export. This 
initiative will promote U.S. exports and create high-value jobs, and 
will assist countries to power their economic development while 
fighting air pollution and climate change.
    Internationally, the President has been a forceful advocate of the 
concept that in today's global environment, countries can have both 
economic growth and environmental protection. The ``Big Idea'' of the 
Industrial Revolution--that for an economy to grow, pollution will also 
grow, is no longer true. Over the past year, the President's advocacy 
of the new paradigm has borne fruit.
    In March, in connection with the President's visit to India, the 
United States and India announced a joint statement on cooperation on 
energy and environment issues. In addition to underscoring both 
nations' determination to cooperate in completing work on Kyoto, the 
statement outlined a common agenda on clean energy development. 
Importantly, India outlined two important goals. First, that 10 percent 
of its new electric power will come from renewable energy sources by 
2012. Second, that it will improve energy efficiency in power 
production by 15 percent by 2007-08.
    In May, the United States and China signed a joint statement on 
environmental cooperation. In the statement, our two nations committed 
to further our ongoing cooperation to address global environmental 
challenges, including climate change. In the past, China has opposed 
international dialogue regarding the role of developing countries in 
taking action to address climate change. The statement reflects a new 
openness to engagement. Furthermore, the statement expresses the view 
that sustained economic growth can be achieved while still taking 
action to address climate change.

                               CONCLUSION

    In conclusion, let me state that we all recognize that shaping the 
rules and procedures of the Kyoto Protocol is a highly complex and 
difficult process. But it is one at which we must succeed, relying on 
science to guide our negotiations and taking strength in our common 
commitment to protect this Earth for future generations.
    Two years ago, in Buenos Aires, the Parties agreed to a plan of 
action for advancing the ambitious agenda outlined in the Protocol. In 
particular, they agreed to a plan and a process to reach decisions on a 
number of key outstanding issues, including not only the specific 
topics I have discussed here today, but also the rules on compliance 
and the consequences for noncompliance; the development and transfer of 
cleaner, climate-friendly technologies, and consideration of the 
adverse impacts of climate change and response measures.
    We anticipate that many of these highly complex issues will come to 
a head at The Hague and that COP-6 will be the most significant 
conference since Kyoto. As we approach these negotiations I would like 
to assure both Committees of three things. First, that the United 
States is committed to making as much progress as possible at COP-6--
the stakes demand no less. Second, however, we will not seek progress 
or agreement at the expense or sacrifice of our core principles in 
these negotiations. And finally, as we go forward, I pledge to you that 
we will continue to consult closely with you, the Congress, with the 
American business community, and with the environmental community.
    Thank you very much.

    Senator Hagel. Mr. Secretary, thank you.
    If it is acceptable to my colleagues, why do we not take a 
series of 7-minute rounds; that way all Senators have an 
opportunity to ask questions, and we will keep at it until we 
get all our questions asked and answered or until any Senator 
drops.
    Senator Craig. What about the Secretary? Does he count?
    Senator Hagel. The Secretary is nuclear powered and goes on 
and on.
    Mr. Loy. I am prepared to stay indefinitely.
    Senator Hagel. Mr. Secretary, let me pick up on your last 
points about your three assurances you are giving to the 
Congress. You mentioned one of them being not sacrificing our 
principles. Would you identify the principles that you are 
talking about?
    Mr. Loy. Senator, we are determined not to sacrifice 
important principles such as making this a cost effective 
agreement, making sure that the environmental benefits that are 
promised and that are contemplated actually happen, and making 
sure that the burden is shared as fairly as we can do so. Those 
are the principles that I have in mind.
    Senator Hagel. When you say cost effective, what numbers 
are you referring to? What baseline numbers do you reach to, or 
reference?
    Mr. Loy. When I say we are determined to make this a cost 
effective agreement and to negotiate in that respect at The 
Hague, I have in mind the tools that we want to use to make the 
agreement as cost effective as possible. Those are the ones 
that I have mentioned. That is, they include above all the use, 
the ability to use market mechanisms without limitations and 
without excessive bureaucratic costs. They include the use of 
sinks as a means of reducing our carbon concentrations.
    Those are some of the key methods that we use in order to 
reduce costs, and we are focusing on making those as effective 
tools as possible in order to achieve the lowest cost.
    Senator Hagel. But what costs are you referring to? Is 
there a baseline? Is there a number? Is there a percentage? 
What do you attach to the language, what numbers? Where do you 
start as a base, a reference to ``cost effective''? What do you 
mean by that?
    Mr. Loy. Well, as I said--
    Senator Hagel. Do you take the Energy Information Agency's 
numbers that Chairman Murkowski recited?
    Mr. Loy [continuing]. Well, I noted the reference to those 
numbers. I will just note in passing that that analysis as far 
as I know did not include any emissions trading, nor did it 
include the use of any sinks. So in my opinion those are very 
key assumptions that were different from assumptions that we 
are making.
    We of course have, Senator, we have had an economic 
analysis, and you have had that economic analysis also, 
produced by the administration several years back, and 
Chairwoman Yellen testified before your very committee on that. 
That remains a solid analysis and a very good starting point 
for determining what might be the level of cost, recognizing, 
Mr. Chairman, that constantly the circumstances change and the 
facts change and that you have to evaluate the significance of 
those changes.
    Senator Hagel. On that point, I recall vividly that this 
committee, and I believe other committees in the House as well, 
had continually asked for that White House economic analysis; 
and I am not sure that there was a White House economic 
analysis in Kyoto in 1997. Ms. Yellen did the best she could, 
but that was like a 3-year project, the Congress getting it. 
You might recall that. That was before you had this fortunate 
assignment.
    But I would be a little hesitant if I were you, Mr. Loy, to 
use that, because this body did not get that analysis; and 
again, I am not sure that there was an analysis when Kyoto was 
agreed to in 1997. But that being said, let me move on to a 
couple of other areas that you mention in your statement.
    You said that some developing countries have voluntarily 
committed to doing something about these emissions. Could you 
update the committee on any developing countries that have come 
forward since the signing of the agreement at Kyoto, have 
agreed to commit themselves in the same way that the United 
States would be committed to cut greenhouse gas emissions?
    Are there any developing nations that have put themselves 
in that position?
    Mr. Loy. Senator, there are several nations that are in the 
process of doing the work that they would have to undertake in 
order to eventually take on a commitment, a binding commitment 
that would be similar to that of the United States. They have 
not yet completed that work. I think we have to recognize that 
that actually takes a lot of analysis, for a country to figure 
out what would be an appropriate commitment level to undertake.
    But several of them are doing it. None of them have 
completed that process and are therefore not in the same legal 
status as we are.
    Senator Hagel. Does that concern you a little bit, that not 
one of these nations has stepped up and said, we intend to make 
a binding commitment, the same as the United States would be 
bound in this agreement, especially since China and India and 
most all of the parties to this treaty, are very significant 
greenhouse gas emitters, and some in fact will be in the top 
five here shortly. That does not bother you?
    Mr. Loy. Senator, we are very aware of the fact that a 
number of countries are very key factors in the emissions 
picture. We are very aware of the fact that countries 
generally, not just the industrialized countries, have to 
participate in this process of reducing or abating emissions, 
and there are several things that are actually taking place 
that are quite hopeful.
    One of them is that the interest in the clean development 
mechanism, which is one of the mechanisms under the Kyoto 
Protocol, which was very small 2 or 3 years ago, is now very 
substantial. I just recently met with a number of Central and 
South American officials, all of whom expressed an interest in 
finding ways by which they could use that mechanism to reduce 
their emissions and get new investment in technology that would 
be better for the climate than the old one. So that is a very 
encouraging thing.
    Secondly, a lot of countries, a number of key countries 
included, are taking very real measures domestically to reduce 
their emissions. That is a step, that is a mind set, that did 
not exist before and I think that is a very positive step.
    Third, there are commitments made, such as the Indian 
commitment that I mentioned a moment ago, to actually take very 
specific and quantified steps to reduce their emissions. I 
think all of those are steps in the right direction and steps 
that we welcome and that we continually try to pursue.
    Senator Hagel. Thank you.
    Senator Bingaman.
    Senator Bingaman. Thank you very much.
    Secretary Loy, you begin by saying that there is 
indisputable evidence that the Earth is warming, and I agree 
with that, from all I have been able to read and learn on this 
subject. But after you reach that conclusion, the next several 
are the ones that I think are still troublesome. Of course, the 
main one is what is the cause of that warming.
    There are certain assumptions built into the Kyoto Protocol 
about the cause of that warming and the importance that 
greenhouse gases play in bringing about that warming, which I 
am just wondering if there is any concern on your part about 
the validity of those assumptions. I notice Dr. Hansen has been 
referred to by the Chairman, specifically his recent statements 
or recent report where he questions the significance of the 
various gases and the various environmental factors that might 
be leading to the warming.
    Are these issues relevant to this upcoming Hague 
negotiation?
    Mr. Loy. Senator, we believe that the global warming is 
taking place and that there is a significant human component in 
that causation. I say that not because I am a scientist, 
because I am not, but because by far the most authoritative 
scientific evidence agrees on that much, and I refer 
particularly to the IPCC report, including the assessment of 
the report that came out recently, not too long ago, and there 
will be a new one next year.
    It is my judgment from having talked to some of the people 
that are involved in that report that it will strengthen, it 
will strengthen, the scientific consensus that in fact there is 
a global climate change under way and that human activity is a 
significant part of that cause.
    We use that as an assumption which drives us to address the 
problem. It is fair to say that new questions arise all the 
time and new studies are made all the time. There was a 
reference to Mr. Hansen's recent comment. I think that is an 
important comment. The way I think we have read Mr. Hansen's 
comment is that there are several gases that cause global 
climate change and it may be that we must shift some attention 
to methane and other gases, gases other than carbon, because 
there may actually be an opportunity to abate climate 
concentrations in those gases.
    I think that is a very sound piece of advice that we need 
to examine. But what it tells me, first of all, is that the 
United States was extremely wise in insisting at Kyoto that all 
six of the major gases be included and not just carbon. But it 
also--as I read Mr. Hansen's statement, he in no way suggests 
that we can now afford to ignore carbon as a major source of 
greenhouse gas concentrations or that the entire process ought 
to in some way be slowed down.
    Senator Bingaman. Is there anything in what he has said 
that leads you to believe that this is less of an urgent matter 
than was originally thought or that the extent of the cost that 
should be incurred to deal with this is less than we previously 
thought? I mean, obviously if you think that the problem is 
overwhelming us at a rapid rate you are willing to pay a very 
substantial cost to deal with it. If, on the other hand, you 
believe it is a much more modest problem, presumably the cost 
you are willing to incur to deal with it would be more modest.
    Is there anything in what he said that leads you to 
reconsider any administration position on that issue?
    Mr. Loy. Senator, the problem of climate change we think is 
huge and real, as I suggested, and it is quite possible that as 
we go further we will learn that some techniques we have to 
abate that are successful and that perhaps it will be easier 
than we thought. I am afraid it may also be possible that the 
opposite will be true.
    In any event, my belief is that the overall effort of the 
administration is a beginning of that process and the Kyoto 
Protocol if it were implemented tomorrow would only make a dent 
in that process, a significant dent, but it would not solve it. 
So that I think we cannot drop our guard and cease our efforts 
to reduce these emissions.
    Senator Bingaman. Well, let me just say, since the light 
has come on here, I will not ask another question. I agree with 
you that the issue is real. The connection between human 
activity and the warming seems to me to be well agreed upon by 
the scientific community. But I do think there are still a 
great many questions as to what action we should take and what 
costs we should incur in order to deal with this in the 
immediate future. Clearly, there are many actions we can take 
and should be taking here in this country that we should be 
taking even if there were not a global warming problem, it 
would make good sense for us economically to be taking, to 
improve energy efficiency and reduce emissions, a variety of 
emissions, for environmental purposes more generally.
    But I commend you on what you are doing and I wish you well 
in the upcoming negotiations.
    Mr. Loy. Thank you.
    Can I just say one word about the pricing issue that you 
raise, Senator. Even before the suggestion of Mr. Hansen that 
maybe it will be easier than we thought, and that is an 
assumption that obviously needs to be tested, we have been the 
country that has insisted in every meeting that we have had and 
will insist in The Hague that we find ways to deal with this at 
the most reasonable possible cost. That has been part of our 
approach from day one and will certainly be our approach at The 
Hague.
    Senator Hagel. Senator, thank you.
    Senator Craig.
    Senator Craig. Mr. Chairman, thank you very much.
    Mr. Secretary, I thank you for being here. I have in front 
of me a letter that was sent to you on July 25th by signatories 
from the House, four minority members of the House: Congressmen 
Dingell and Boucher and Hall and Klink. Has there been a 
response to this letter, to your knowledge? And if there is, 
could we get a copy of it?
    Mr. Loy. Senator, to be honest, I am not quite sure whether 
there has been. The team that would be necessary to respond to 
that letter has been on the road until this last weekend and I 
am not sure I know the answer to the question.
    Senator Craig. The reason I say that, because while it 
quotes in here the high expectation of the convention's 
executive secretary as it relates to the upcoming COP-6 and the 
hope that signatures can occur and that that will cause the, if 
you will, success of it by the sufficient entry of forces into 
it, it also suggests that, wisely, you did not commit the 
United States to such a timetable when you spoke on that 
question at the last COP session, and I think that was 
appreciated.
    But beyond that, there are some valuable questions asked in 
the letter and, instead of re-asking them if they have already 
been answered, we would simply like a copy of that letter. I 
think it would be very helpful to us in our files.
    Mr. Loy. I will be certain that you get that.
    Senator Craig. I think all of us are interested in the 
issue of sinks and what we have available to us in this 
country. To my right sits the chairman of the Senate 
Agriculture Committee, and I guess my concern is as it relates 
to how we credit or how we look at sinks.
    Has the administration accepted anything less than full 
credit for our forests or, should I say, for our soil 
management practices or our crop or grassland management 
practices?
    Mr. Loy. Senator, what we have said is that we want what we 
call a full accounting system for our--for any sequestration 
that takes place either in our forests or in our agricultural 
lands and we want that a broad-based system. We think that is 
in some ways the easiest to manage. We have also said, however, 
that in the first budget period if it were necessary we would 
consider a phase-in of the actual use of that on our part, and 
maybe on everybody's part, in order to make that an acceptable 
solution for the system as a whole.
    Senator Craig. The reason I suggest that, we not so wisely, 
a good number of years ago, took away the tax incentives for a 
reforestation of private lands. When I look at our ability to 
do that as a country and our ability to turn our country even 
greener by management practices on our lands, that is a 
phenomenally inexpensive and tremendously positive way to do 
things compared to the other kinds of suggestions that are 
being made out there.
    Obviously the Hansen study gets quoted here as an 
indication that CO2 is not a problem. Now we have 
got other studies that indicate that North America appears to 
be absorbing more of its share of emissions than might 
otherwise have been thought by not only current practices, but 
potentially future practices.
    Would not phase-in of sinks generally increase the cost of 
compliance for the U.S. if we were to do that?
    Mr. Loy. Senator, we think that use of sinks would decrease 
the cost of compliance.
    Senator Craig. I agree, but to phase it in, would that not 
increase the cost?
    Mr. Loy. If we used it fully it would probably in some ways 
reduce the cost further. This is going to be a tough 
negotiation. The ability to get the architecture of this 
agreement right is important. It is important we think for both 
environmental and cost reasons to include sinks, and therefore 
we think that sinks ought to be included in a rather broad-
based fashion. The notion that we would phase it in is an 
effort to make that acceptable and achievable.
    Senator Craig. Is your primary source of science the IPCC 
and these kinds of determinations?
    Mr. Loy. I think the IPCC is perhaps the most authoritative 
single collection of views. It is like a giant peer review 
group and we take its reports quite seriously. But our staff 
studies basically all the new analyses that come out.
    Senator Craig. The reason I ask that question, as you know, 
the Energy Committee here has held considerable hearings on 
this issue. We have brought before us about all the experts we 
can find, and to sit and say, well, yes, man's participation in 
this environment is clearly a contributor or a significant 
contributor to what might be a bit of an evolutionary cycling 
of our globe, the National Academy of Science would suggest to 
you in their science that the jury is still clearly out on that 
issue, and there is a difference of opinion, a relatively well 
defined difference of opinion, between IPCC and National 
Academy people as it relates to, yes, emphatically yes, versus 
possibly yes kind of arguments.
    I guess the question is whose science do you come down on 
if in fact the scientists are not agreeing?
    Mr. Loy. Senator, I deal with a number of public policy 
issues that have scientific uncertainty attached to them in 
some fashion, and there is considerable scientific uncertainty 
with respect to the pace and the amount of global warming and 
the global climate change. But I would say that on the issue of 
the causation of climate change and on the issue of the fact 
that it exists, there is more consensus than on most issues 
that I can think of.
    Senator Craig. I am not suggesting the lack of agreement on 
that there is a change going out there. I am suggesting the 
lack of agreement on what is the primary cause of the change.
    Mr. Loy. I understand, but I think there is consensus on 
that, too, Senator. With all respect, my reading--and this was 
some time ago--of the National Academy report was not that it 
differed in any significant fashion with the IPCC, but that 
they came out quite similarly.
    Senator Craig. Well, I read them. We all read them. I think 
we agree that they agreed that there was warming. I think there 
is an element of disagreement on the why's that still remains 
out there. At least that has been my observation. I say that 
not in the sense of trying to suggest that we not continue to 
do what we are doing, but we have as a Senate spoken pretty 
clearly about what is acceptable if in fact we can arrive at 
levels of commonality and understanding and bringing together 
of the developing economies along with ours and the ability to 
move technologies and those types of things. That is why we 
obviously watch this issue very closely.
    My time is up. Thank you very much, Mr. Secretary.
    Mr. Loy. Thank you, Senator. May I just say that I just got 
a note that says that we have replied to the letter.
    Senator Craig. Oh, good.
    Mr. Loy. And that we will provide you with a copy.
    Senator Craig. Thank you. I think we would very much 
appreciate that for the record, because it was a thorough 
letter, well detailed, and it I think would help us all to 
understand those answers. Thank you.
    [The material referred to follows:]

     letter from members of the commerce committee to secretary loy
                     U.S. House of Representatives,
                                     Committee on Commerce,
                                                     July 25, 2000.
Hon. Frank E. Loy,
Under Secretary of State for Global Affairs,
Department of State
Washington, DC.
    Dear Under Secretary Loy, The Conference of the Parties (COP) to 
the Framework Convention on Climate Change (FCCC) is scheduled to hold 
its annual session in The Hague, Netherlands next November, preceded by 
two one-week meetings of its subsidiary bodies in Lyon, France in 
September and in The Hague. This will be the sixth Convention session 
and the third since the Kyoto Protocol was negotiated and adopted in 
1997.
    Expectations are high that the session will produce decisions that 
would enable many of the Convention Parties to ratify the Protocol. 
They apparently have been fueled by the Convention's Executive 
Secretary, who last April released a ``Background Note'' saying that 
the sixth session will be judged successful if it triggers such 
ratification, particularly by Annex I Parties, ``sufficient for its 
entry into force.'' Also, on June 22, the European Union concluded that 
a ``successful outcome at COP-6'' is one that creates ``the conditions 
for the ratification and entry into force of the Kyoto Protocol by 2002 
at the latest.'' Wisely, you did not commit the United States to such a 
timetable when you spoke on the question at the last COP session. The 
wisdom of that position is bolstered by the meager results of the most 
recent session of the Convention's subsidiary bodies session in Bonn, 
Germany, in June. It shows that much work lies ahead to resolve many 
extremely difficult and complex issues from the standpoint of the 
interests of the United States in a manner fully consistent with the 
Administration's July 1998 economic analysis of the Protocol and the 
principles of the Byrd-Hagel Resolution, S. Res. 98, passed by the 
Senate in 1997.
    We are writing to express our support for the view inherent in your 
resistance to such a ratification timetable. If and when the U.S. 
ratifies the Protocol and it enters into force, the implementing rules, 
guidelines and procedures should ensure that the costs to the United 
States of complying are completely in accord with that economic 
analysis and that the Protocol should be truly global.
    As matters stand in the wake of the June session, such assurances 
are not currently foreseeable insofar as COP-6 is concerned. As we 
understand the June results, the provisions of Articles 3.3 and 3.4 of 
the Protocol regarding sinks have only just recently begun to receive 
serious attention by FCCC Parties. Additionally, the latest negotiation 
text on the Kyoto mechanisms, particularly Article 17 on emission 
trading and Article 12 on shared credit for projects abroad, includes 
so many hurdles and requirements that the usefulness of these 
mechanisms in reducing mitigation costs of the Kyoto emissions target 
is in serious doubt. While some of these provisions may have been added 
for purposes of negotiation, we fear that given the short timeframe 
remaining for negotiation at Lyon and The Hague, the necessary 
compromises are likely to be unacceptable to the Administration and 
Congress. Insofar as sinks are concerned, no text exists to even 
commence negotiations. Yet, inclusion of sinks provisions pursuant to 
both Articles 3.3 and 3.4 in the first commitment period of 2008-12 is, 
like the Kyoto mechanisms, also essential to help offset the costs to 
our economy of mitigation.
    In our view, some of the objectionable proposals put forth in the 
negotiation text for mechanisms by your negotiating Convention partners 
include: buyer liability, or a hybrid of buyer and seller liability in 
emissions trading; the setting of quantitative or qualitative caps or 
limitations on trading emissions; setting forth lists of projects that 
would effectively exclude clean coal and other energy sources and sinks 
for the Clean Development Mechanism (CDM); expansion of the ``share of 
proceeds'' provisions of Article 12 of the Protocol to the other 
mechanisms contrary to the Protocol; expanding additionality 
consideration for CDM projects beyond environmental additionality so as 
to include, for example, financial additionality; and proposals to 
effectively rewrite the Protocol so as to make Article 12 requirements 
applicable to one or more of the other mechanisms.
    For the United States, the November session cannot succeed if 
decisions on all of the key issues regarding each of the mechanisms and 
Articles 3.3 and 3.4 are not fully resolved at COP-6 in a way that, 
when examined in the light of a needed updated economic analysis, will 
demonstrate that the costs are truly modest. In short, deferral of some 
issues, such as the methodologies for determining baselines, to another 
COP session, or delaying the resolution of Article 3.4 issues until 
some undefined future commitment period, is unacceptable.
    In addition to the many unresolved sinks and mechanisms matters, 
there are also important concerns about proposals for a compliance 
system with multiple layers of institutions that strongly suggests that 
the sovereign nations that may ratify the Protocol will not act in good 
faith and try to game the Protocol. These complex proposals include 
various concepts concerning financial penalties to be adopted not by 
amendment as called for in Article 18 of the Protocol, but by COP 
decision. While we think it important to ensure compliance with the 
Article 3 commitments by all Parties, when and if the Protocol enters 
into force (if ever), the establishment of such a complex international 
compliance system for the laudable objective seems unnecessary, 
inappropriate, and potentially overly intrusive of the sovereignty of a 
country by a U.N. body.
    Additionally, there are significant Convention implementation 
issues and related Protocol matters that the developing country Parties 
are apparently quite insistent about also deciding at COP-6 as anything 
approaching a final act leading to submission of the Protocol to the 
Senate for advice and consent to ratification and ultimately to entry 
into force. Too much needs to be done with care, not haste. Proposals 
to defer so-called technical and procedural details in order to claim 
success are, in our view, misleading. Such details are more important 
than broad agreements on targets, as they address issues of 
practicality, workability, and acceptability.
    We nevertheless would welcome your perspective prior to Lyon on 
these matters and on what you anticipate will be the likely results of 
COP-6. Your early reply is appreciated.
            Sincerely,

                                   John D. Dingell,
                                            Ranking Member,
                                             Committee on Commerce.

                                         Ron Klink,
                                            Ranking Member,
                      Subcommittee on Oversight and Investigations.

                                       Rick Boucher
                                            Ranking Member,
                                  Subcommittee on Energy and Power.

                                        Ralph Hall,
                                                    Member,
                                             Committee on Commerce.

                   THE DEPARTMENT OF STATE'S RESPONSE
                          United States Department of State
                                               Washington, DC 20520
    Dear Mr. Dingell (Klink, Boucher, and Hall): This is in response to 
your July 25 letter regarding the ongoing international negotiations on 
climate change.
    We agree that there are many challenging and complex issues that 
remain unresolved as we move toward the sixth Conference of Parties 
(COP-6) to the U.N. Framework Convention on Climate Change (FCCC), 
scheduled for November 2000 in The Hague.
    We are committed to making as much progress as possible at COP-6. 
COP-6 has the potential to arrive at a number of important decisions 
that advance the interests of the United States, including possibly on 
such issues as the role of carbon sequestration, the nature of the 
compliance system and the rules for the Kyoto mechanisms (including 
emissions trading and the Clean Development Mechanism (CDM)). At the 
same time, we have made clear to our negotiating partners the 
importance of: (i) achieving maximum environmental effectiveness at low 
cost; and (ii) securing meaningful participation by key developing 
countries in combating global climate change.
    A reasonable approach on both the Kyoto mechanisms and sinks will 
help assure that the fight against global warming proceeds in a manner 
that is practical, workable and acceptable to the American people. The 
steps we take now can have far-reaching consequences since addressing 
the threat of climate change will take several generations. We welcome 
your views on the climate change negotiations.

    Senator Hagel. Senator, thank you.
    Senator Lugar.
    Senator Lugar. Mr. Chairman, Secretary Loy, it appears as I 
have listened to you that there are at least two large 
negotiations going on in which you are involved, and maybe 
more. The first one is the United States with the rest of the 
world, with our external partners. Much that has been written 
about those negotiations would imply that many nations believe 
that we are by far the wealthiest nation, that we have 
developed our industries and our wealth and we have used energy 
in wasteful ways, that we continue to do so--that we are a 
profligate state. It is almost a guilt trip suggestion that we 
have enjoyed good times and there ought to be sacrifice here in 
order that others might prosper in due course.
    Obviously, when you reflect upon the difficulty of the 
architecture of the agreement, whether we are talking about the 
accounting agreement or the overall situation, that is very 
difficult, because there are a good number of states which have 
a gut feeling that we ought to be sacrificial, that we ought to 
give heavily at the office to begin with. So you face that 
issue.
    Now, back here you face hearings like this, in which we are 
talking about what we are prepared to do in this country and to 
build a constituency so that you have some credibility when you 
go to The Hague or wherever you go and everybody is reading 
about what we are having to say back here.
    It appears to me that the first situation maybe works out 
in time, but obviously the American people are going to find 
unacceptable the thought that we ought to take a guilt trip, 
and you understand that and are telling them that, so they will 
have to get over it. Now, they might not get over it for a 
while; and it is not really clear in the case of, for instance, 
China and India and other large states that they are in any 
mood to agree with our views that they need to participate in 
the same wholesome way that we do. They will have to decide 
that some day, but I am not sure what year that will come. That 
is some ways down the trail.
    Meanwhile, there are some things probably we can do that 
you have suggested and Senator Craig is alluding to. I picked 
up the thought of the forests and the lands from an 
agricultural standpoint. Here is an American constituency--
American farmers, American foresters. By and large, most of the 
major farm groups do not support the Kyoto Protocol; and, as a 
matter of fact, they have been working avidly against it.
    But it is conceivable that this administration or the next 
one or the one after this may be persuaded that in fact farm 
income could be substantially enhanced if we were thoughtful 
about the accounting with regard to tilling of the soil, or 
even if we were to plant trees in large numbers and in a lot of 
acreage.
    For instance, in a very microeconomic sense, on my farm 
which is now located inside the city limits of Indianapolis, we 
have about 205 acres in tree plantations. This came to the fore 
because our Mayor a while back was under criticism by those who 
said the very few trees that he was planting up and down major 
streets of the city were not doing very much with regard to 
being carbon sinks or anything else. And cheerfully I pointed 
out that here within this city, 200 acres of trees are 
absorbing all of this.
    This is a meaningful thing with regard to all the walnut 
growers that came to my farm in a national convention. They are 
interested as tree growers and environmentalists, farmers, and 
in what there might be in this situation. It has just not been 
very well developed and probably needs to be soon, because my 
sense is that if all of what we are talking about today were to 
have some currency there would have to be constituencies of 
Americans who see this in their self-interest, in addition to 
having a keen sense that there is an environmental problem out 
there. In fact, I do not see any solution until a large number 
of Americans see that this is in their self-interest.
    Now, the pricing mechanism that you have talked about with 
regard to trades offers a broad avenue here. But this is going 
to take a lot of creativity and imagination to fashion for a 
great number of industries how they are likely to prosper. 
Unhappily, most of the rhetoric has been how they will not 
prosper, how they must curtail whatever they were doing, sort 
of the general bromides about a country of SUV's and a 
profligate group of wastrels.
    But that may be the feeling of an elite group who have 
strong theological thoughts about this. It is not the view of 
ordinary Americans, so politically it is dead so long as things 
are on that track.
    But thinking through an accounting system, either with our 
friends abroad or with ourselves at home, I think offers some 
promise. You have already thought a lot more about that than I 
have as I hear the testimony today as to how things might move 
ahead, as opposed to what I see as a general impasse 
domestically. It may be that way abroad, but you will have to 
gauge that when you get to The Hague again.
    I just wonder, how much has been written? What is out 
there? If you were to be a farmer advocate for the carbon sink 
system or whatever, what would somebody latch onto? I say this 
as one that has been searching for such materials, for such 
arguments, or even some outline of such an accounting system 
that we could discuss over in the Agriculture Committee, for 
example, with a group of Americans who might be interested in 
this.
    Mr. Loy. Senator, let me comment on both of the battles 
that you are talking about, first the international one and 
secondly the effort to build a constituency. Internationally, I 
think the way you describe the feelings of some of the parties 
is quite, quite right. There is a feeling on the part of some 
that, because we are such a big emitter and because we became 
rich by using industrial technology and fuels, we ought to in 
some way or another go on a guilt trip.
    We absolutely reject that notion. This is a very practical 
effort to solve a problem. This is not an effort to atone for 
some past efforts.
    It is also true that there are some, particularly in 
Europe, who kind of have a feeling that it is important to not 
make this too inexpensive because if you make it too 
inexpensive you do not make enough changes in your system to 
change the climate. We disagree with that. We think it makes no 
sense why this problem should not be solved, like every problem 
we know, in the most inexpensive way we can, as long as we 
actually get the job done.
    But I think your sense of the international discussion is 
quite accurate. I also agree that we do not have enough of a 
constituency for climate change in this country. The 
environmental community obviously focuses on the environmental 
aspect and it is right to do so and very vocal and frequently 
very constructive, but it is only a part of America.
    One of the encouraging things is that the business 
community, the business community, has I think in the last 
couple years considerably changed the way it looks at this 
problem, not unanimously of course, but in very substantial 
numbers. There is a feeling that there is a problem here, that 
they are part of it, and there has to be some sort of action 
taken to solve it.
    That is not saying that they are cheerleaders for Kyoto, 
because that is a different story. But they are definitely in a 
fashion that did not exist 2 years ago saying, this is a 
problem we have to address and we are part of the problem. So 
that is a very encouraging sign.
    There is a third group and that is the group of high tech 
and environmental technology companies who particularly see a 
significant export market, a significant market domestically 
and export market, if in fact there are continuing efforts to 
reduce greenhouse gas emissions.
    That brings us to the agricultural community. I was very 
intrigued by your story of your 205 acres in the midst of 
Indianapolis because you are quite right, the reforestation or 
afforestation is an important way in which we can help address 
the problem. My hope is that as the American agricultural 
sector learns how this system might work and what is in it for 
them they will become supportive, as part of the business 
community, not only for the climate reasons, but also for the 
reasons that there are tangible advantages.
    Let me just mention two of them. One of them, I can see the 
possibility that by changing practices, either forest practices 
or land management practices, and thereby reducing emissions or 
increasing sequestration, you could actually--that that would 
be a new source of revenue or cash income.
    Secondly, the President has made it very clear that part of 
the overall solution to this problem in his mind is an 
increased emphasis on biomass as a source, as a fuel for source 
of energy, and that is potentially a very sizable business and 
it would be a business that would have very big climate 
positive effects.
    Senator Lugar. As you know, Secretary Loy, I have presented 
legislation in several fora to try to accelerate this. I 
appreciate the administration's support, and likewise we have 
made some headway with grants by USDA even in this year. But I 
think this is a critical problem. But we still need some more 
of the accounting structure to talk about so there is, with 
practical farmers, some idea of how revenue might be obtained.
    Mr. Loy. Senator, I agree with you that we need a simple 
piece of paper that explains how the system works. Right now it 
is not so simple. My hope is that after The Hague we will have 
some of the uncertainties removed and we will actually be able 
to produce the kind of document that you could use and others 
could use to explain to the American farmer how this might 
work.
    Senator Lugar. Thank you.
    Senator Hagel. Senator, thank you.
    Mr. Secretary, you probably have been noting some bells 
going off around here and it is not feeding time for Senators. 
It means that we have actually got to do something. I am going 
to hang on as long as I can and what we will do is submit the 
remainder of the questions for the record.
    In listening to this this afternoon, my colleagues' 
questions, thoughts, observations, and yours as well, let me 
take you back to the more general dynamic of what we are 
dealing with here in the Kyoto Protocol, not the issue of 
climate change but the Kyoto Protocol. I would like you to 
respond to Ms. Claussen's recent comments about her feeling 
that we should renegotiate because what we have got here, what 
we did in '97, is not going to work. As you know, she still is 
a believer; and her bottom line is, let us renegotiate, let us 
make it more workable, use common sense, and let us get at it, 
rather than this intellectual exercise that Senator Lugar 
talked about.
    I do not mean to say that in a demeaning way, because we 
are driving towards something and I think we all recognize 
that. But just listening to some of your comments, things that 
you said about, well, it would only make a dent in the process 
and one, two, three, four, five, we all understand that. This 
is a huge issue and nobody quite understands it all.
    Some of the questions I asked you were about the economic 
dynamics and the cost effectiveness; and one of the responses 
you had was, well, we are not taking into consideration 
emissions trading and so on. You are right, but we do not have 
an emissions trading program here. We have not signed off on 
one. A long way down the road we might get one. I doubt it 
because I know a little something about how that works, as you 
do.
    But you see, we are kind of going through this if, but, 
and, well, maybe, I do not know, and where are we? I understand 
that is part of science, but I would like you to focus a little 
bit on Mr. Hansen's response over the last few weeks that now, 
maybe, the carbon dioxide is not the big problem we once 
thought, and his comments about black soot and so on.
    If in fact Hansen is right on any of this, or maybe he 
would be right, or maybe he is 20 percent right, then it puts 
us back to where we were a few years ago, because the 
developing countries that are not held to any standard in Kyoto 
are obviously the biggest polluters when it comes to the black 
soot and some of these other emissions. The United States has 
made good progress on carbon dioxide, as have most developing 
countries. Imperfect yes, but we are not the problem.
    So in light of Ms. Claussen's renegotiation comment, Dr. 
Hansen's thoughts, and some of the give and take we have had 
today, I guess the first question is should we think about 
renegotiating this so that we can get at what you want to get 
at, what I think we all would like to get at, and that is 
actually doing something about this rather than, as you noted, 
just doing the best we can and maybe making a dent?
    Mr. Loy. Senator, our mind set is that we are approaching 
The Hague not with a sense of renegotiating the targets or 
anything of that sort. We are approaching The Hague with a 
sense that we have to finish the job and that in fact our hope 
is that we will make quite a bit of progress in doing that, and 
that we will then have an agreement that actually will work or 
that we can look at and determine what still is needed to be 
done.
    At the moment I would say that Ms. Claussen's idea would be 
a big step backwards. It would certainly mean that we would 
lose many years of effort and we would sort of start from 
scratch. We do not think that is the right way to go. And I 
would say that if Mr. Hansen's analysis is read to say it may 
be somewhat easier than we thought to deal with this problem, I 
say hurrah. Of course that would be terrific good news.
    But I would also say one of the things that that tells us 
is that it would be less costly to solve. I cannot see how you 
can read what he said as saying we do not need to deal with the 
problem, and I know you are not reading it that way. In our 
opinion, the problem remains, the problem is major. We have an 
approach to address it. It is called--Kyoto is part of that 
approach, and we hope to come back from The Hague with 
substantial progress.
    Senator Hagel. Well, let me put a sharper definition on the 
question. She specifically mentions that she believes only two 
countries could even come close to complying, Germany and Great 
Britain. Do you agree with that?
    Mr. Loy. I think it depends very much on how some of the 
issues that are open are resolved. I mentioned--I will mention 
two of them particularly. That is, I mention the way in which 
sinks are included and whether there is a limitation on trading 
and whether the CDM is given a full green light to go ahead or 
whether it is hobbled by bureaucratic or other tools.
    I think if the answer to that is one way you have got a 
very difficult time meeting your targets. If it is the other 
way, it becomes much easier.
    Senator Hagel. Well, let me see if I can get one more 
specific question in which relates to the bigger theme of what 
we are talking about here. I am going to read this so I do not 
waste any time. You are aware of a September 14th proposal of 
the Group of 77 and China, of course, which seeks establishment 
of a developing countries' technology transfer fund. Are you 
aware of that and the specifics of it?
    Mr. Loy. I have heard of that idea, yes.
    Senator Hagel. Well, you obviously need to be very aware of 
it. My understanding is that it would be funded at a rate of 
some multiple billions of dollars a year, yet to be determined. 
The money would come from the United States and other developed 
countries according to some formula yet to be set, and it would 
be legally obligated, legally obligated by the United States 
and developed countries to pay into that fund. The proposal 
calls for an executive body to administer this fund consisting 
of equal representation from the five U.N. regional groups.
    Obviously, the question I would like to ask you is where 
will we be on that in our negotiations? I hope we will not be 
party to that and we will not commit to that. I am a little 
concerned that you do not know about it.
    Mr. Loy. Oh, no, I do know about it. I do know about the 
proposal of the fund, absolutely.
    Senator Hagel. So where are we?
    Mr. Loy. We oppose that concept and have said so. We very 
much want to facilitate the transfer of technology to a lot of 
these countries, which is one of the things that they want, but 
we want to do it through the mechanisms that we have designed, 
through investments by private enterprise that provide those. 
We would oppose a fund that is managed in the fashion that you 
describe or that is described in that paper for that purpose.
    Senator Hagel. I am glad to hear you say that. As you know, 
we are not limited to just that fund. There are other 
technology funds and ideas that the Group of 77 and China are 
talking about, all at the expense of the United States. This 
gets us right back to Senator Bingaman's comment about what is 
the cost here and what is the reward.
    I know you are going to be very disappointed, Mr. 
Secretary, but we are going to have to gavel this hearing to an 
end. As always, sir, you have been generous and direct and we 
appreciate that. Thank you for what you are doing, and we will 
talk again, obviously, before November.
    But let me ask you, if I could--we will submit questions. I 
know I have other colleagues that have questions for the 
record. If you could ask your people to try to get those back 
to us 2 weeks before The Hague meeting, we would like to take a 
look at those, see where we are, because one of the points of 
this business, as you know, is that we would like to get some 
of these things on the record so that we know where you all 
are, where the administration is going to be. We will have 
Senators there and members of the House that we are 
coordinating with your staff. So it would be very helpful if we 
could have those answers back at least 2 weeks before The 
Hague.
    We will keep the record open for other Senators who want to 
submit statements or if you would like to submit anything in 
addition and questions. We will keep the record open officially 
until the close of business on Tuesday.
    Mr. Loy. Thank you, Senator, and thank you for your 
courtesy and for the opportunity to share these thoughts with 
you. I look forward to seeing you and I hope many others at The 
Hague, and let us see what we can work out.
    Senator Hagel. Well, thank you. We will have some time, I 
think, with you and Mr. Sandalow and others. Maybe we can all 
visit a little bit a couple times before we have our happy 
journey to The Hague.
    But with that, thank you, sir.
    [Whereupon, at 4:34 p.m., the committees were adjourned.]

                            A P P E N D I X

                              ----------                              

 Additional Questions Submitted for the Record by Senator Murkowski to 
                   Under Secretary of State Frank Loy

                               MECHANISMS
    Question. Is the U.S. delegation committed to opposing limits of 
any kind (including qualitative) on the mechanisms?

    Answer. The United States opposes the EU concrete ceilings 
proposal, as well as any other limits on the mechanisms not aimed at 
assuring their environmental integrity.

    Question. Will you also oppose any qualitative conditions, such as 
excluding nuclear, hydro and clean fossil projects from the Clean 
Development Mechanism?

    Answer. The United States opposes rules that exclude categories of 
projects from the Clean Development Mechanism. The United States 
believes that a developing country host to a CDM project should have 
the right to determine whether that project promotes its sustainable 
development.

                     DEVELOPING COUNTRY COMMITMENTS

    Question. Do you agree that these Articles are not adequate because 
they do not include developing country commitments?

    Answer. Yes. We continue to believe that climate change is a global 
problem that requires a global solution

    Question. Can you assure the Senate that the U.S. delegation will 
insist that the Parties must take a decision at COP-6 regarding 
developing country commitments?

    Answer. At COP-6, the United States will continue to pursue 
meaningful participation by key developing countries in the fight 
against climate change.

    Question. If this effort is successful, how does the U.S. 
delegation plan to respond to ensure that developing country 
commitments are discussed?

    Answer. Any change in the agenda must be agreed by consensus. At 
COP-5, the United States and other developed country Parties did not 
agree to the change proposed by the G-77. At COP-6, the United States 
will continue to press for consideration of developing country actions.

    Question. Will you commit to ensuring that the topic of developing 
country commitments is specifically on the agenda for COP-7?

    Answer. As it has at every previous COP, the United States will 
continue to push for a meaningful discussion of how developing 
countries can contribute to the global effort to combat climate change.

    Question. Is it your view and the view of the Administration that 
these joint statements fulfill the condition set forth in S. Res. 98?

    Answer. The Administration believes that these joint statements 
reflect a strong political commitment by the governments of China and 
India to take action that will promote clean energy and address their 
emissions of greenhouse gases.

    Question. Are these voluntary agreements intended to encourage them 
to take on commitments under the Protocol to reduce emissions?

    Answer. These joint statements are distinct from any additional 
commitments that may be undertaken by China or India under the 
Framework Convention on Climate Change. Nevertheless, they demonstrate 
the growing political will in these countries to promote clean energy 
and address the challenge of climate change.

    Question. What signs do you see that these countries will make 
commitments in the near future?

    Answer. See previous response.

    Question. Will the Administration continue to decline to submit the 
Kyoto Protocol to the Senate if requirements of S. Res. 98 are not met?

    Answer. No decision has been taken as to when the Kyoto Protocol 
will be submitted to the Senate for advice and consent

                          TECHNOLOGY TRANSFER

    Question. Given that this proposal takes technology transfer 
decisions out of the hands of the U.S., and--by definition--increase 
the cost of the Protocol to the U.S., will the U.S. position be to 
oppose this kind of ``blank check''?

    Answer. The United States and other developed country Parties 
oppose this proposal.

    Question. Similarly, will the U.S. position be to oppose any 
financial compensation to oil-producing countries to compensate for 
their loss of revenue if the Protocol is entered into force?

    Answer. Yes.

                         EXPECTATIONS FOR COP-6

    Question. Do you believe that the meeting in The Hague can succeed 
in its goal of completing work on the outstanding issues of the Kyoto 
Protocol?

    Answer. That depends on many factors, including the willingness of 
all countries to work in good faith toward a successful outcome. Though 
significant progress has been made at previous negotiating sessions, 
much work remains to be done. We intend to make as much progress as 
possible while protecting the interests of the United States.

    Question. Which issues are most likely to be resolved and what is 
the most likely resolution for each?

    Answer. There are many complex issues on the agenda at COP-6 and 
many significant differences remain among the Parties. As all decisions 
are by consensus, Parties can block a particular decision. Accordingly, 
it is not possible to predict which are the most likely to be resolved 
or the resolutions of these issues.

    Question. If the differences and obstacles are not resolved this 
year, what are the prospects for resolving them, and when would you 
expect that to happen?

    Answer. That depends on many factors, including the outcomes at 
COP-6.

                       POTENTIAL FOR RATIFICATION

    Question. While so many issues are at loose ends, does the 
Administration expect that any industrialized/developed country will 
choose to ratify the Kyoto Protocol at COP-6?

    Answer. To our knowledge, no country has committed to ratify the 
Kyoto Protocol at or prior to COP-6. The French Government informs us 
that they have taken all the political steps necessary for ratification 
of the Protocol.

    Question. Presuming that all rules regarding the Protocol are 
negotiated to completion at COP-6, when would the Administration expect 
to send the Protocol to the Senate for its advice and consent?

    Answer. No decision has been taken as to when the Protocol might be 
submitted to the Senate for its advice and consent.

    Question. Do you see any potential for ratification by other 
developed countries, or that the Protocol would enter into force in the 
next several years?

    Answer. Many other developed countries, including Japan and members 
of the EU, expect that COP-6 will pave the way for ratification and 
entry into force by 2002.
                         alternatives to kyoto
    Question. Will the U.S. delegation be able to evaluate the 
economic, energy supply, and national security aspects of this possible 
scenario (and others) prior to COP-6?

    Answer. As various combinations of proposals emerge at COP-6, the 
U.S. delegation will carefully consider the implications of these 
combinations.

    Question. Has this analysis already been undertaken--and if so, can 
you share it with these Committees? If not, wouldn't this be a useful 
activity to undertake?

    Answer. Since the precise outcomes at COP-6 cannot be known at this 
time, it is not possible to analyze all possible implications. However, 
the Administration will carefully consider various issues in the 
negotiations using a variety of tools, including the 1998 analysis 
undertaken by the Council of Economic Advisers.

    Question. Would there be any set of circumstances that would cause 
you--as the Chief U.S. negotiator--to get up and walk away from the 
Protocol negotiations?

    Answer. Yes. The Administration will not support an agreement at 
COP-6 that would not be in the interests of the United States.

    Question. Are you and this Administration committed to bringing 
home a complete resolution of Protocol issues--even if it does not meet 
the tests set forth in S. Res. 95 (Byrd-Hagel)?

    Answer. The United States is committed to working toward a result 
at COP-6 that will help maintain momentum in the fight against climate 
change.

    Question. If all remaining issues cannot be worked out at COP-6, 
will the U.S. delegation press to reopen the targets worked out at 
Kyoto with an eye towards a longer-term commitment that includes 
developing countries?

    Answer. The U.S. does not support renegotiating the Kyoto targets.

                     LAND USE AND CARBON ``SINKS''

    Question. What is the status of the U.S. comprehensive proposal on 
land use and land use change that would allow broad inclusion of land 
use management practices, including carbon sequestration in soils and 
vegetation in accounting net greenhouse gas emissions?

    Answer. Our proposal was submitted formally on August 1 and 
discussed widely both during the September subsidiary body meetings in 
Lyon and the October 9-11 consultations outside of Rome.

    Question. Do you anticipate that COP-6 will accept this U.S. 
proposal?

    Answer. That depends on many factors, including ongoing discussions 
on the elements of the proposal and the resolution of other issues.

    Question. If there is widespread objection to the U.S. position, 
what would you see as the most likely adopted decision on sinks?

    Answer. See previous response.

    Question. For what reason has the U.S. delegation already agreed to 
consider a ``phase-in'' for carbon sinks during the first commitment 
period? Doesn't this increase the overall cost of the Protocol relative 
to a case where full use of carbon ``Sinks'' to offset emissions is 
possible?

    Answer. The U.S. delegation has agreed to a ``phase-in'' to enhance 
the likelihood that the U.S. sinks proposal would be accepted by the 
international community and to help advance our positions on other key 
issues in the negotiations. The extent to which sinks will reduce the 
overall costs of implementing the Protocol will, of course, depend on 
the marginal cost of sequestration in sink activities in the United 
States. Acceptance of the U.S. proposal would reduce the cost of U.S. 
implementation of the Protocol and strengthen the environmental 
effectiveness of the treaty. In contrast, the sink proposals supported 
by some governments would severely limit credit for carbon 
sequestration.

                           EMISSIONS TRADING

    Question. How close are we to a goal of unrestricted trading and 
what will the Administration do if we don't get it?

    Answer. The United States and its Umbrella Group partners oppose 
quantitative restrictions on the use of the mechanisms, including 
emissions trading.

    Question. Which countries are objecting now to unrestricted 
emissions trading? How likely is an accommodation between their 
positions and that of the United States?

    Answer. The EU and most members of the G-77 object to unrestricted 
emissions trading. The likelihood of reaching a result acceptable to 
all Parties depends on many factors.

                       REPORTING AND VERIFICATION

    Question. What progress has been made in assuring that adequate and 
appropriate monitoring and verification systems can be designed and 
implemented?

    Answer. There has been significant progress in elaborating the 
national systems required for accurate monitoring of net emissions, the 
manner in which estimates might be adjusted to conform with the 
guidelines and good practice guidance of the Intergovernmental Panel on 
Climate Change, how these emissions and other information should be 
reported, and the processes for expert review of this data and other 
information.

    Question. What are the major concerns and goals of the United 
States in this process?

    Answer. The United States believes that rigorous, binding 
monitoring and reporting requirements are necessary to ensure that all 
Parties meet their commitments under the Protocol and, hence, that the 
Protocol achieves its stated environmental purpose without compromising 
the economic interests of the United States.

    Question. Does our understanding of the global carbon cycle suggest 
we can make a rigorous estimate of carbon fluxes to/and in natural 
systems? How does this impact the use of ``Sinks''?

    Answer. Yes. Hence, the United States believes that sinks can make 
a valuable contribution to reducing our net emissions.

    Question. Will reporting and verification guidelines be modified as 
needed to reflect changing scientific or technical inputs? How would 
this amendment process proceed?

    Answer. We anticipate that the IPCC will develop further good 
practice guidance, elaborating the 1996 IPCC reporting guidelines, to 
reflect the COP-6 decisions on sinks.

                               COMPLIANCE

    Question. How can an amendment be assured to implement a compliance 
regime in a Protocol that has not been ratified?

    Answer. There are numerous options for incorporating the compliance 
regime into the Protocol. The COP could recommend that a particular 
amendment be adopted by the COP/moP. Alternatively, the COP could adopt 
a supplementary agreement before entry into force of the Protocol that 
would be part of the Protocol once the latter enters into force.

    Question. What sorts of ``binding consequences'' are anticipated to 
be part of a compliance regime?

    Answer. It is anticipated that the compliance regime will contain 
legally binding consequences for non-compliance with emissions targets 
under Article 3.1 of the Protocol. The precise consequences are being 
negotiated. We support consequences that encourage compliance, and 
restore the environmental damage, rather than those (such as financial 
penalties) that are punitive in nature.

    Question. Under such an option, would the compliance system enter 
into force without the advice and consent of the U.S. Senate?

    Answer. Legally binding consequences would apply to the United 
States only with the advice and consent of the U.S. Senate.

    Question. How would you seek to safeguard our national sovereignty 
under such circumstances?

    Answer. We would not support a regime, including consequences, that 
would be at odds with our national sovereignty.

    Question. How would you ensure that existing U.S. programs that 
measure and track greenhouse gas emissions (and reductions) would be 
consistent with any international compliance regime?

    Answer. U.S. programs that measure and track greenhouse gas 
emissions and removals would need to implement Articles 5 and 7 of the 
Protocol and requirements thereunder. These Articles, as well as 
requirements thereunder, are being designed, among other things, so as 
to enable U.S. compliance.

    Question. Would such an amendment be formulated and adopted at COP-
6? Is this likely?

    Answer. The precise manner in which the compliance regime is to be 
adopted is still a matter of discussion. There are several options. If 
the amendment option were chosen, COP-6 could recommend the contents of 
such an amendment to the COP/moP, which would be the body to actually 
adopt it.

    Question. If an amendment on compliance is sought, will you commit 
to ensuring that such an amendment also includes emissions reduction 
commitments on the part of developing countries?

    Answer. Securing meaningful participation from key developing 
countries remains a priority for the United States. However, we do not 
believe it would be possible at COP-6 to reach agreement on an 
amendment that includes emission reduction commitments on the part of 
developing countries.

                         SUBSEQUENT COMMITMENTS

    Question. Do you anticipate that discussions will begin at COP-6 on 
the extent of commitments in the second and subsequent budget periods 
(2013-2018 and beyond)?

    Answer. Negotiation of subsequent commitment periods is not on the 
COP-6 agenda.

    Question. If so, what kinds of emissions reduction targets could 
the U.S. reasonably meet in the second budget period, assuming current 
policies and practices and continued efficiency improvement?

    Answer. The Administration has not determined its goals for 
subsequent commitment periods.

    Question. Will developing countries be asked to take on commitments 
in the second budget period? If not, why not?

    Answer. There is no specific mandate for the negotiations of the 
second commitment period. The United States will, of course, continue 
to explore ways in which developing countries can contribute more fully 
to the effort to combat climate change.

    Question. Will you ensure that any discussions of commitments 
beyond the first budget period consider the long-term emissions 
trajectory needed on the part of all Parties to achieve stabilization 
of greenhouse gas concentrations?

    Answer. Any discussion of subsequent commitment periods would 
likely include various long-term emissions paths and alternative means 
to achieve those paths.

      Statement Submitted for the Record by Senator Lincoln Chafee

    While I am unable to be present at today's hearing, I am pleased to 
submit my statement on the important issue of the Kyoto Protocol and 
global climate change for the record. I would also like to thank Mr. 
Frank Loy, a close friend of my father's, the late Senator John Chafee, 
for coming before this joint session of the Foreign Relations and 
Energy and Natural Resources Committees to testify today. I would also 
like to thank the Chairmen of the Committees, Senator Helms and Senator 
Murkowski, for holding this hearing.
    Despite having the most stringent and effective environmental laws 
in the world, the United States ranks top among the largest polluters 
and consumers. With one-twentieth of the world's people, we consume 
one-fourth of the world's energy. We generate twice as much waste per 
person each year as a European country and many times more than most 
third world countries. Clearly a deep worry as we move forward in the 
21st century is the possible warming of our globe through the 
greenhouse effect. By disrupting the balance of carbon dioxide, methane 
and other gases in the atmosphere, the earth is expected to become 
either hotter or cooler than it is now. The science overwhelmingly 
supports the notion that increased levels of greenhouse gases in the 
atmosphere will make the earth warmer. The world's leading atmospheric 
scientists are telling us that global warming is already occurring and 
the hottest 10 years on record have all occurred since 1980, with 1998 
recorded as the hottest year ever.
    When my father introduced Mr. Loy during his nominations hearing 
before the Foreign Relations Committee for the position of 
Undersecretary of State for global affairs, Senator John Chafee 
mentioned that Mr. Loy had dedicated his life to environmentalism and 
the vision that no lasting environmental progress can be made unless it 
has broad bipartisan support; is economically sound; and global in 
nature. This vision holds true today, and I thank Mr. Loy for his work 
on the Kyoto negotiations.
     I believe we would all be wise to develop this vision of reaching 
a bipartisan consensus on climate change that regards the issue as 
global in nature. All countries, regardless of size or developmental 
state, must come together to solve this problem. While I strongly 
believe the United States must take a lead role in reducing greenhouse 
gas emissions, I also believe developing nations must play a role in 
the reductions. We must find an accord that is economically sound and 
reduces greenhouse gas emissions while ensuring the economies of 
industrialized and developing nations are not jeopardized.
    While I did not have an opportunity to participate in the Kyoto 
Protocol negotiations nearly three years ago, I look forward to the 
upcoming Sixth Conference of the Parties to the United Nations 
Framework on Climate Change, which will take place this fall in the 
Netherlands at the Hague. The 1997 Kyoto agreement included a framework 
for identifying 6 greenhouse gases and committed industrialized nations 
to specified, legally binding reduction targets. Specifically, the 
United States is to reduce emissions by 7 percent from 1990 baseline 
levels by 2012. In order to reach these levels, the US must move 
quickly to have any effect on long term greenhouse gas emissions.
    This is an extraordinary level of reduction that will not be easy 
to achieve. I am encouraged by the historic Kyoto Protocol, but 
understand many of my colleagues reservations with the agreement. While 
the industrialized nations are the primary emitters of greenhouse 
gases, releasing 75 percent of the world's total carbon dioxide 
(CO2) but making up only 22 percent of the world's 
population, the growth rate in the release of CO2 by 
developing nations is extremely rapid, due to the greater burning of 
coal and the increased use of motor vehicles.
    I believe it is important to obtain emission reduction commitments 
from the developing nations. This is particularly important when 
looking ahead. Greenhouse gas emissions from these countries, when 
taken together, are projected to surpass the overall emission levels of 
the industrialized world by the year 2015. At The Hague in November, 
the US will have another opportunity to attempt to persuade key 
developing countries to join in this important effort. As things now 
stand, there is little prospect for Senate approval of any new climate 
treaty unless developing countries agree likewise to control the growth 
of their greenhouse gas emissions.
    The Kyoto agreement included the outlines of an international 
trading program and a cross-border emission reduction project plan. 
Many believe that emissions trading will reduce dramatically the cost 
of a legally binding treaty. By creating an emissions trading market 
for carbon, the Clean Development Mechanism, as it is known, would 
provide emissions reduction credit to industrialized countries that 
provide the means of reducing greenhouse gas emissions in developing 
countries. The types of projects that are envisioned include carbon 
sequestration projects through forest preservation and agricultural 
soil activities, and/or the export and development of clean, efficient 
power generation technologies. While the administration of such a 
program would be a real challenge, involving hundreds of thousands of 
sources across international boundaries, I believe this mechanism 
offers tremendous promise for cost-effective emissions reductions and 
international forest preservation.
    As we approach the November Conference of the Parties at the Hague, 
I believe the two key issues that remain regarding the accord are to 
obtain the active participation of key developing nations and to firm 
up many of the details regarding the credit trading programs. Climate 
change is a global problem that deserves a global solution. I am 
optimistic that the ongoing Kyoto negotiations are a step in the right 
direction.

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