[Senate Hearing 106-242]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 106-242
 
   AGENCY FOR INTERNATIONAL DEVELOPMENT AND U.S. CLIMATE CHANGE POLICY

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON INTERNATIONAL ECONOMIC
                   POLICY, EXPORT AND TRADE PROMOTION

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 28, 1999

                               __________

       Printed for the use of the Committee on Foreign Relations


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




                      U.S. GOVERNMENT PRINTING OFFICE
61-046 CC                     WASHINGTON : 1999



                     COMMITTEE ON FOREIGN RELATIONS

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

                                 ------                                

             SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY,
                       EXPORT AND TRADE PROMOTION

                    CHUCK HAGEL, Nebraska, Chairman
CRAIG THOMAS, Wyoming                PAUL S. SARBANES, Maryland
BILL FRIST, Tennessee                JOHN F. KERRY, Massachusetts
RICHARD G. LUGAR, Indiana            BARBARA BOXER, California

                                  (ii)

  


                            C O N T E N T S

                              ----------                              
                                                                   Page

Babbitt, Hon. Hattie, Deputy Administrator, U.S. Agency for 
  International Development; accompanied by David Hales, Deputy 
  Assistant Administrator........................................     4
    Prepared statement of........................................     5
Responses of Deputy Administrator Hattie Babbitt to additional 
  questions submitted by Senator Chuck Hagel.....................    27

                                 (iii)

  


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

                              ----------                              


                        WEDNESDAY, JULY 28, 1999

                           U.S. Senate,    
     Subcommittee on International Economic
                Policy, Export and Trade Promotion,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met at 2:02 p.m., in room SD-419, Dirksen 
Senate Office Building, Hon. Chuck Hagel (chairman of the 
subcommittee) presiding.
    Present: Senators Hagel, Sarbanes, and Kerry.
    Senator Hagel. Good afternoon. Welcome.
    The subcommittee today considers the climate change 
programs of the Agency for International Development. I welcome 
our special witness, Hattie Babbitt, the acting Administrator 
for the Agency for International Development.
    Ambassador Babbitt comes with a distinguished public 
service background. Before joining AID, she served as U.S. 
Ambassador to the Organization of American States from 1993 to 
1997. From 1988 to 1993, she served on the board of the 
National Democratic Institute for International Affairs where 
she chaired the Latin American Committee. Prior to joining the 
administration, Ambassador Babbitt was an attorney with Robbins 
& Green from 1974 to 1993.
    Last month, this subcommittee heard from the State 
Department's nominee to head climate activities regarding his 
role in developing pilot emissions trading programs with 
Russia. The committee had received documentation of meetings by 
EPA to create a pilot program for trading in carbon emissions, 
a mechanism called for in the Kyoto Protocol on Climate Change.
    Previously the administration had assured this committee 
and the Congress that there would be no implementation of any 
aspect of the Kyoto Protocol unless the Senate gave its advice 
and consent. I was, therefore, surprised by the 
administration's legalistic view of ``implementation'' that 
came to light in that hearing. In fact, there were two 
hearings. According to EPA lawyers--and I quote--``because the 
possible pilot program would not impose any legal obligations 
on the United States or on the United States private sector, 
the issue of relying on authorities provided under the 
Framework Convention on Climate Change does not arise,'' 
referencing the Framework Convention on Climate Change which I 
think most of you understand is a United Nations organization.
    The contorted argument put forward by these lawyers is that 
the United States can engage in all activities called for in 
the Kyoto Protocol so long as the administration justifies its 
activities as the legitimate exercise of the President's 
foreign affairs powers.
    This subcommittee has over the past 3 years sought to 
address the issue of climate change directly and, I might say, 
honestly. This is the first time that we will hear directly 
from the Agency for International Development regarding its 
programs in this general area. I know, as Administrator Babbitt 
does, that we will both look forward to a direct and honest 
appraisal and discussion on this issue regarding the climate 
programs specifically that AID is undertaking with its current 
budget.
    One of the key issues of this hearing is what constitutes 
implementation of the Kyoto Protocol. It is rather clear to me 
that creating an emissions trading system directly tied to 
implementing or preparing to implement the Kyoto Protocol is, 
in fact, implementation of the protocol.
    Credits gained through emissions trading can only have 
value in the context of a global rationing system that was 
envisioned by the Kyoto Protocol, and only if the Kyoto 
Protocol is ratified and implemented. Development of an 
emissions trading system within a country will have no value 
unless an international mechanism exists to trade the 
emissions. I will look forward to Administrator Babbitt's 
response to this statement.
    Madam Administrator, there is a long and unfortunate 
history of broken assurances by this administration on the 
climate change issue with the Congress, and I am hopeful that 
we will be able to get over some of that in our dialog today.
    One 1999 AID notification that I would like to discuss this 
afternoon in some detail funds a project in the Newly 
Independent States. Funds for the project are to be used for 
``tracking emission reductions and developing an institutional 
infrastructure that will stipulate emissions trading and joint 
implementation investments.'' Now, it strains credible debate 
to suggest that this program is not designed to lay the 
groundwork for an international emissions trading scheme, as 
called for in the Kyoto Protocol.
    Programs such as these not only further erode the trust 
Congress has toward this administration regarding the Kyoto 
Protocol, but also jeopardize cooperation on other energy 
efficient projects that will benefit developing countries while 
also reducing greenhouse gas emissions.
    Just last week, the President stated that the Kyoto 
Protocol was not yet in his terms ``ripe'' for Senate 
consideration. Now, it strikes me that with this 
administration's variations in definitions, the Senate will be 
asked to consider the Kyoto Protocol only after a worldwide 
emissions trading scheme is a done deal and funded by the 
United States. Now, that is hardly a means to engage the 
Congress in an honest, open debate on the wisdom of the 
emissions trading schemes and other mechanisms created by the 
Kyoto Protocol.
    And I might ask the question, what about the limited 
resources that are redirected away from important AID programs 
to fund Kyoto Protocol type programs?
    Madam Administrator, I hope we can agree on some boundaries 
today that cut directly to the AID climate change initiatives. 
If AID is to become one of the funding mechanisms for the Kyoto 
Protocol implementation, the agency is in for some very 
difficult work ahead, especially in justifying its expenditures 
of taxpayers' dollars to implement a treaty that has not yet 
been ratified, as a matter of fact, a treaty that has not even 
yet been submitted to the U.S. Senate. This action, of course, 
as you would understand, would have very significant 
consequences on future funding and current programs.
    This committee looks forward to your testimony and we thank 
you very much.
    Just in time, we have our distinguished colleague, the 
senior Senator from Maryland. Senator Sarbanes, welcome.
    Senator Sarbanes. Thank you very much, Mr. Chairman.
    I am pleased to join you in welcoming Hattie Babbitt, the 
acting Administrator of USAID, before the subcommittee this 
afternoon.
    USAID has a number of interesting projects in India and in 
other developing countries to help improve energy efficiency 
and reduce greenhouse gas emissions. I welcome this opportunity 
to examine the work they are doing in this area.
    I gather that there are some concerns about the 
relationship of these programs to the Kyoto Protocol. I have to 
confess, it is difficult for me to understand how programs to 
mitigate the negative impact that developing countries are 
having on climate change could possibly be construed as ``back-
door implementation'' of a treaty. In fact, it is exactly what 
we have said must be done before the Kyoto Protocol is 
submitted for Senate advice and consent to ratification. The 
efforts of developing countries are critical to our own success 
in preventing global warming, which is a problem I think we 
have a responsibility to address. We take a number of measures 
in this country to try to reduce global warming, from mass 
transit programs to even more direct proposals. I cannot 
understand why there is something amiss when we are supportive 
of programs to improve energy efficiency and reduce greenhouse 
gas emissions in developing countries.
    Further, as I discussed at the nomination hearing for David 
Sandalow, who unfortunately is being held up on the Senate 
floor for unrelated reasons, the debate over the Kyoto Protocol 
should not prevent us from undertaking voluntary environmental 
projects that are otherwise in the U.S. interest.
    Actually, we ratified the Framework Convention on Global 
Climate Change, under which the United States has a general 
legal obligation to adopt policies and take other measures to 
mitigate climate change. That is something we adopted and have 
put into place.
    So, I welcome this opportunity to hear from the acting 
Administrator, who will help to clarify any misunderstandings 
or misperceptions that might exist. It seems to me these 
projects are desirable and I see no reason why they should not 
proceed. I look forward to the opportunity to explore that 
matter here this afternoon.
    Senator Hagel. Senator Sarbanes, thank you.
    Again, welcome, Administrator Babbitt. We appreciate your 
being here. Please proceed with your testimony.

 STATEMENT OF HON. HATTIE BABBITT, DEPUTY ADMINISTRATOR, U.S. 
  AGENCY FOR INTERNATIONAL DEVELOPMENT; ACCOMPANIED BY DAVID 
             HALES, DEPUTY ASSISTANT ADMINISTRATOR

    Ms. Babbitt. Thank you very much, Mr. Chairman. I am glad 
to be here today to discuss an issue of great interest to us 
all, and that is global climate change.
    I know we all agree on the importance of protecting and 
preserving the environment. We in the United States take pride 
in our initiatives to limit pollution, improve energy 
efficiency, and preserve the world's resources. We believe that 
from an environmental and economic perspective, global climate 
change is of the utmost importance. It poses profound threats 
to international economic development and ecological balance.
    Although the United States remains the world's leading 
emitter of greenhouse gases, developing countries make up an 
increasingly large share of the global emissions problem. Their 
emissions are expected to surpass those of industrialized 
nations in the next 20 years. As countries like India and China 
bring dozens of new coal-fired plants on line each year, their 
emissions of carbon dioxide will grow greater and greater.
    The predictable impact of global climate change endangers 
our best efforts to build sustainable economic and social 
progress in developing nations. And obviously the threats to 
our own country, in terms of our people's health and our 
national economy, are a most serious concern.
    We believe that climate-related programs are essential to 
our development mission, that they promote our national 
interests and that they are consistent with our national 
obligations under the Framework Convention on Climate Change 
and with Congress' approach to international action on climate 
change. Let me state, Senator, emphatically that USAID's 
climate related activities are fully consistent with the 
administration's pledge not to implement the Kyoto Protocol 
before the Senate has given its advice and consent and it has 
been ratified by the President.
    We are carrying out a climate change strategy that was 
developed and announced before the Kyoto Protocol was 
negotiated. Our programs stand on their own merits, and in our 
view they advance the goals of Byrd-Hagel in that they build 
capacity in developing countries to take further action to 
address global climate change.
    In addition, USAID has been an active participant in the 
interagency policy process and in multilateral activities of 
the Framework Convention on Climate Change, working to 
strengthen the mechanisms under the convention that promote 
wise development and environmental protection.
    Looking back, we see that in 1990 USAID submitted its first 
report to Congress on global climate change and developing 
countries, and the agency was active in support of the 
negotiations of the Framework Convention. Our approach has 
consistently focused on opportunities to advance economic 
development goals while curbing greenhouse gas emissions. More 
efficient use of energy, renewable energy applications, and 
sustainable forestry practices are good examples of this common 
sense approach to climate change and development.
    In 1994, responding to the Framework Convention and to 
congressional requests, we issued our first climate strategy. 
In June 1997, prior to the negotiation of the Kyoto Protocol, 
President Clinton announced to the United Nations General 
Assembly Special Session on the Environment a renewed U.S. 
effort to help developing countries address climate change. 
Called the Developing Country Climate Change Initiative, it is 
a 5-year, $1 billion commitment to work with developing 
countries to encourage climate-friendly energy and natural 
resource management policies and practices in developing 
countries.
    USAID is carrying out this initiative which focuses on 
mitigation of emissions by targeting clean energy applications, 
forest conservation, and support for policy reform and 
privatization. This year the agency is funding approximately 
$150 million in climate related activities in energy and 
forestry in 44 countries.
    Meeting the challenges of climate change and encouraging 
sound energy policy will create significant opportunities for 
U.S. business and vast new markets for U.S. technology 
worldwide. The potential market for climate friendly 
technologies is enormous. The world market for energy efficient 
technologies has been estimated at almost $1.8 trillion over 
the next 40 years. The potential market for renewable energy is 
also vast and incentives for cleaner production will help to 
create new markets overseas in an area where the U.S. is highly 
competitive.
    Mr. Chairman, as you know, we have notified Congress of our 
intent to invest in several important energy programs in India 
which are related to climate change. USAID's global climate 
change program in India targets the development of clean energy 
policies and projects. The program helps encourage India to 
take practical steps to reduce emissions. With our assistance, 
India has made impressive progress in improving the efficiency 
of its power plants, reducing pollution in key industries, and 
expanding the use of renewable energy technologies nationwide. 
These actions have resulted in a 2 million ton reduction of 
annual carbon dioxide emissions by power plants of the National 
Thermal Power Corporation and by the Gujarat Electricity Board.
    Our activities in India are good for U.S. business. The 
program is a decade old and is reaching maturity with regard to 
its results. For example, the recent signing of a new 
partnership agreement between leading Indian and U.S. power 
utilities and regulatory agencies provides a long-term 
mechanism for transfer of U.S. technology and experience. 
Moving forward with the global climate change program will 
enhance U.S. commercial interests in India, as well as 
addressing our concerns about the global environment.
    Thank you very much, Mr. Chairman. I would be happy to 
answer any questions I can.
    [The prepared statement of Ms. Babbitt follows:]

               Prepared Statement of Hon. Harriet Babbitt

    Thank you, Mr. Chairman. I'm glad to be here today to discuss an 
issue of great interest to us all, that of global climate change.
    I know we all agree on the importance of protecting and preserving 
our environment. We in the United States take pride in our initiatives 
to limit pollution, improve energy efficiency and preserve the world's 
resources.
    We believe that from an environmental and economic, global climate 
change is of the utmost importance. It poses profound threats to 
international economic development and ecological balance.
    Although the United States remains the world's leading emitter of 
greenhouse gases, developing countries make up an increasingly large 
share of the global emissions problem. Their emissions are expected to 
surpass those of the industrialized nations in the next twenty years. 
As countries like India and China bring dozens of new coal-fired power 
plants on line each year, their emissions of carbon dioxide will grow 
greater and greater.
    The predictable impact of global climate change endangers our best 
efforts to build sustainable economic and social progress in developing 
nations. And obviously the threats to our own country, in terms of our 
people's health and our national economy, are a most serious concern.
    A worldwide issue of this complexity demands a cooperative 
approach. We at USAID believe that our relationships with Congress, the 
private sector, nongovernmental organizations and the developing 
nations have been open and productive, and we are proud of the support 
we have received in this decade and the successes we have achieved.
    We believe that climate-related programs are essential to our 
development mission, that they promote our national interests, and that 
they are consistent with our national obligations under the Framework 
Convention on Climate Change (or FCCC) and with Congress' approach to 
international action on climate change. Let me state emphatically that 
USAID's climate related activities are fully consistent with the 
administration's pledge not to implement the Kyoto Protocol before the 
Senate has given its advice and consent and it has been ratified by the 
President. We are carrying out a climate-change strategy that was 
developed and announced before the Kyoto Protocol was negotiated. Our 
programs stand on their own merits, and in our view they advance the 
goals of Byrd/Hagel in that they build capacity in developing countries 
to take further action to address global climate change.
    In addition, USAID has been an active participant in the 
interagency policy process, and in multilateral activities of the 
Framework Convention on Climate Change, working to strengthen the 
mechanisms under the Convention that promote wise development and 
environmental protection.
    Looking back, we see that in 1990, USAID submitted its first report 
to Congress on Global Climate Change and Developing Countries, and the 
agency was active in support of the negotiations of the FCCC. Our 
approach has consistently focused on opportunities to advance economic 
development goals while curbing greenhouse gas emissions. More 
efficient use of energy, renewable energy applications and sustainable 
forestry practices are good examples of this common sense approach to 
climate change and development.
    In 1994, responding to the FCCC and to Congressional requests, we 
issued our first climate strategy. In June, 1997, prior to the 
negotiation of the Kyoto Protocol, President Clinton announced to the 
United Nations General Assembly Special Session on Environment a 
renewed U.S. effort to help developing countries address climate 
change. Called the Developing Country Climate Change Initiative, it is 
a five-year, $1 billion commitment to work with developing countries to 
encourage ``climate-friendly'' energy and natural resource management 
policies and practices in developing countries.
    USAID is carrying out this initiative, which focuses on mitigation 
of emissions by targeting clean energy applications, forest 
conservation and support for policy reform and privatization. This 
year, the agency is finding approximately $150 million in climate-
related activities in energy and forestry in 44 countries.
    Our worldwide efforts have met with a great deal of success. For 
example:

   The USAID forest management program in Mexico has reduced 
        the deforestation rate on 3.1 million hectares of protected 
        land by more than 30 percent.
   The agency's Sustainable Forestry Practices Initiative, 
        worldwide, has reduced by 70 percent the damage caused by poor 
        land management on over 3.4 million hectares of forests.
   A rural electrification program in the Philippines has 
        reduced power line losses by three percent and reduced carbon 
        dioxide emissions by 250,000 metric tons.

    Promoting the balancing of economic growth with sound environmental 
practices is central to our mission and serves the U.S. national 
interest. In the long term, economic development will be enhanced, not 
compromised, by efforts to reduce greenhouse gas emissions. Our efforts 
promote a ``win-win'' approach by addressing the impact of climate 
change through long-term partnerships with developing countries that 
engage market forces and produce mutual economic and environmental 
benefits for all involved.
    Meeting the challenges of climate change and encouraging sound 
energy policy will create significant opportunities for U.S. business 
and vast new markets for U.S. technology worldwide. The potential 
market for climate friendly technologies is enormous. The world market 
for energy efficient technologies has been estimated at almost $1.8 
trillion over the next 40 years. The potential market for renewable 
energy is also vast and incentives for cleaner production will help to 
create new markets overseas in an area where the U.S. is highly 
competitive.
    The technology, capital and innovation of the private sector are 
the driving forces that will make a lasting difference in the carbon 
intensity of development in the next century. USAID's role is to help 
enable the private flows of capital and technology by supporting 
appropriate polices, privatization, capacity building measures, and 
efforts to overcome market barriers in the developing world.
    Ours is a practical approach. We promote energy efficiency by 
encouraging integrated resource planning and demand side management, 
creating financing mechanisms for energy efficiency, developing 
standards and codes for efficient buildings and appliances, and 
carrying out pilot and demonstration projects for steam, lighting and 
motor efficiency. We encourage privatization and work to reform 
inefficient state-controlled energy systems. We encourage market-based 
incentives for the application of clean technologies and practices 
(natural gas, energy efficiency, renewable energy, low impact logging) 
to meet the growing demands of industrializing economies. And we 
address foreign legal and policy constraints to cleaner energy 
production and use, and improved natural resource management.
    Mr. Chairman, as you know, we have notified Congress of our intent 
to continue to invest in several important energy programs in India 
which are related to climate change.
    India is the sixth largest and second fastest growing emitter of 
greenhouse gases in the world. India has serious air pollution 
problems; air pollution will cause an estimated 2.5 million premature 
deaths there this year. India's environmental challenges have global 
implications.
    USAID's global climate change program in India targets the 
development of clean energy policies and projects. The program helps 
encourage India to take practical steps to reduce emissions. With our 
assistance, India has made impressive progress in improving the 
efficiency of its power plants, reducing pollution in key industries, 
and expanding the use of renewable energy technologies nationwide. 
These actions have resulted in a two million ton reduction of annual 
carbon dioxide emissions by power plants of the National Thermal Power 
Corporation and by the Gujarat Electricity Board.
    Our activities in India are good for U.S. business. The program is 
a decade old and is reaching maturity with regard to its results. For 
example, the recent signing of a new partnership agreement between 
leading Indian and U.S power utilities and regulatory agencies provides 
a long-term mechanism for the transfer of U.S. technology and 
experience. Moving forward with the global climate change program will 
enhance U.S. commercial interests in India, as well as addressing our 
concerns about the global environment.
    We believe that our efforts, in India and throughout the world, 
directly promote Congressional goals, especially the engagement of 
developing countries in aggressively combating climate change. And, 
finally, we believe that these programs are good, common sense 
development--and that they are effective.
    Thank you. I'll be glad to take your questions.

    Senator Hagel. Madam Administrator, thank you very much.
    Are you in need of more water up there? Senator, she is 
having a little respiratory problem. So, she is not coughing at 
us, she said.
    Ms. Babbitt. I am coughing but not at you.
    Senator Hagel. Yes. Well, it is another global climate 
change ploy that you are using, I know, Administrator Babbitt, 
coughing and blaming it on greenhouse gases.
    What we will do, Senator Sarbanes, if it is agreeable with 
you, with the two of us here, we will do 10-minute rounds and 
go from there. Thank you.
    Madam Administrator, this year--I think it was in June--I 
mentioned it in my earlier statement--AID notified this 
committee of its intent to obligate additional funds for an 
energy efficiency and market reform program begun in 1992. And 
we have, I think, referenced it. The notification indicated 
that the additional resources would be used in Europe and the 
New Independent States for, as I mentioned in my opening 
statement, ``tracking emissions reductions and developing an 
institutional infrastructure that will stipulate emissions 
trading and joint implementation investments.''
    Further, the notification indicated to this committee that 
funds would be used for ``identifying policy changes which are 
necessary to move the climate change agenda forward and 
assisting the countries in adopting and implementing 
appropriate policy measures.''
    Using that as a base, I have a series of questions, Madam 
Administrator, that I would like to ask you about.
    The pilot program funding is part of, my understanding, a 
10-year project that has, I understand, no estimated cost for 
the life of the project. Now, if you have different 
information, I know you will share that with me. What are the 
expected costs? And if you do not know those estimated costs 
now, I know you will provide them for the record. But if you do 
not know those costs or have some sense of it, then maybe you 
could explain why would you engage a project without costing it 
out. But you might have the answers on the numbers, so we will 
allow you to respond. Thank you.
    Ms. Babbitt. Senator, I am unable to tell from your 
question which congressional notification [CN] your question 
refers to.
    Senator Hagel. It was June 30, 1999. You have a copy there.
    Ms. Babbitt. Are you referring to the copies I was given 
right before this?
    Senator Hagel. Yes. Funds for an energy efficiency and 
market reform program. What we can do is let us move on to 
another question, and we will pick that up as we go along when 
you find--she is giving it to you.
    Ms. Babbitt. I believe that the CN to which you refer or 
the issue to which you refer is with reference to our program 
in Ukraine.
    Senator Hagel. And the New Independent States. I said 
generally and Ukraine would be one of them. Yes, that is right.
    Ms. Babbitt. It is the Ukraine program with which I have 
some familiarity.
    Senator Hagel. OK.
    Ms. Babbitt. I am not going to be able to answer your 
question at this time about the----
    Senator Hagel. Costs?
    Ms. Babbitt [continuing]. What funds flow. But I am 
generally familiar with the Ukraine program. I underscore 
generally because we have lots of these programs around the 
world.
    The Ukraine program is designed, as I understand it, to 
deal with institutional reform, that is, the policy reform 
within Ukraine, to assist with the creation of an evaluation 
program within Ukraine nationally to devise a national climate 
change program for Ukraine. I do not know how to say it any 
more elaborately than that.
    It is also designed to bring into the Ukraine discussion 
nongovernmental actors, an important aspect of many of our 
programs in the former Soviet Union, that is, to bring in 
industry and environmental groups and the public. It is 
designed to help administer a national climate change program 
and to establish market mechanisms to reduce greenhouse gas 
emissions domestically within Ukraine. That was really the 
extent of my knowledge about the Ukraine program.
    Senator Hagel. If Mr. Hales would like to add anything, he 
is certainly welcome to do so.
    Mr. Hales. Thank you, Senator. I think that the 
Administrator's response captures it.
    Ukraine, as you know, is an Annex 1 country under the 
Framework Convention on Climate Change. We have been working 
with them for some time to reduce the pollution, both global 
and local, that comes from inefficient energy systems. The 
approach to that essentially involves the strengthening of 
regulatory and policy measures so that subsidies are reduced 
and privatization is encouraged. It involves technology 
transfer which is greatly in our interest because we tend to be 
a major supplier of those technologies.
    And it also involves helping them measure their own 
greenhouse gas emissions and the source of those emissions 
which is an activity absolutely necessary for the eventual 
adoption on their part of the climate action plan.
    Senator Hagel. Do you know, Mr. Hales, what the numbers are 
on projected costs?
    Mr. Hales. I do not, Senator. I apologize. I do not. We 
will provide that answer for you.
    [The following response was received subsequent to the 
hearing.]

Information on TN Submitted to Congress on June 30, 1999--Project #110-
                                  0003

    The TN for Project 110-0003 includes three activities to be 
implemented on a regional basis in the New Independent States, 
including the Ukraine.
    1. The Environment Information Systems and Networking project 
(EISN) addresses environmental information needs and awareness by 
promoting internet-based networks in the region. The Life of Project 
cost for this activity is $1,480,025, of which $996,025 has been 
notified (including $450, 000 in this TN).
    2. The Environmental Partnership Program activity promotes 
environmentally focused partnerships between local governments, 
enterprises and associations in the ENI region and counterpart 
organizations in the United States, and across borders within the 
region. Life of Project cost is $12,466,815, of which $4,462,500 has 
been notified (including $267,700 in this TN).
    3. The Global Climate Change activity includes two components that 
support the Agency's Climate Change Initiative. One component supports 
training and technical assistance in developing policy incentives and 
measures to reduce greenhouse gases. The second component supports the 
development of institutional capability for NIS countries to better 
track greenhouse gases and to take advantage of flexible mechanisms to 
stimulate investment in energy saving and less greenhouse gas intensive 
activities. Total Life of Project cost is $2,084,800. This TN includes 
$796,800 for this activity; this is the only notification to date for 
this activity.

    Senator Hagel. Do you know if the United States is funding 
the creation of an emissions trading system there? Is that part 
of the program?
    Mr. Hales. I cannot answer it directly, Senator, but it 
would seem to me, just looking at the CN, that we probably here 
are looking at a typo in the CN. I would be willing to bet you 
that it says ``stimulate'' not ``stipulate'' in the original 
that came up. But I cannot answer your question. Certainly any 
emissions trading activities that we would be engaging in with 
Ukraine would be under activities implemented jointly which is 
a not-for-credit activity under the Framework Convention for 
Climate Change, not under the Kyoto Protocol, which of course 
is not in effect.
    [The following response was received subsequent to the 
hearing.]

Information on TN Submitted to Congress on June 30, 1999--Project #110-
                                  0003

    Mr. Hales noted a possible error in the TN provided to Congress on 
this project. USAID confirmed that mistake. The description of the 
``Global Climate Change'' activity should read (change in bold):

          Europe and New Independent (ENI) States key countries lack 
        the financial resources and institutional capabilities to 
        address climate change problems on their own. The funds will be 
        used to help ENI countries meet climate change requirements by 
        a) tracking emission reductions and developing an institutional 
        infrastructure that will stimulate emissions trading and joint 
        implementation investments, and b) identifying policy changes 
        which are necessary to move the climate change agenda forward 
        and assisting the countries in adopting and implementing 
        appropriate policy measures.

    Senator Hagel. Has that project changed its focus from its 
original intent? If my understanding is right, the original 
intent you suggested: energy efficiency, market reform. You 
each mentioned that. On notifications that we receive now, 
there is a shift to environmental policy. Is that intentional 
or was that phased in? Was that part of what was envisioned 
over a 10-year period?
    Mr. Hales. I think the focus, Senator, evolves but it 
remains fundamentally the same. It targets the constraints that 
an inefficient energy system has on both a society and an 
economy. I suspect that we have distinctions without 
differences in terms of those words because the fundamental 
focus of this program remains on trying to create a sustainable 
and economically effective energy system within the Ukraine.
    Senator Hagel. The notification that was sent to this 
committee references an AID climate agenda. Can you describe 
AID's climate agenda?
    Senator Sarbanes. Where is that reference, Mr. Chairman? I 
am trying to find it.
    Senator Hagel. You have it right there.
    Senator Sarbanes. Thank you.
    Ms. Babbitt. Senator, I was unable to find the reference in 
the notification, but our climate change initiative, our broad 
climate change agenda, is aimed at reducing greenhouse gases 
either by reducing emissions or conserving forests, conserving 
sinks, that sort of thing, by policy and institutional change 
in developing countries or in countries with whom we work and 
also, to a certain extent, to decreasing the vulnerability of 
developing countries to those climate change implications. That 
is our climate agenda.
    Senator Hagel. It is in here. In fact, what it says--the 
Administrator has this. Right? OK. It is the United States 
Agency for International Development justification for 
technical notification, project 110-0003. Under the global 
climate change, $796,000, down toward the bottom of that 
paragraph, it says which are necessary to move the climate 
change agenda forward in assisting the countries in adopting 
and implementing appropriate policy measures. That is where I 
was getting that, and that is why I asked the question.
    Did you want to add anything to that before we go to 
Senator Sarbanes? Mr. Hales, would you care to?
    Mr. Hales. No, except to say, Senator, that I think the use 
of that wording in that particular paragraph refers to the 
ongoing activities within Ukraine that we have tried to 
describe. And if the Agency has an agenda, it certainly is 
represented in the Agency Climate Change Initiative documents 
which you have and which were announced 2 years ago.
    Senator Hagel. Let me just also for the record and for 
Senator Sarbanes' benefit note my understanding is that the 
committee staff had notified AID of the specific notifications 
that would be the subject of this.
    Ms. Babbitt. I am sorry not to have been prepared to 
discuss this one, but I had not seen this document until just 
when it was handed to me when I arrived.
    Senator Hagel. OK.
    Senator Sarbanes.
    Senator Sarbanes. Mr. Chairman, just to be clear, it was 
our impression that the three notifications that this hearing 
was going to address involved the three programs in India. That 
was what we had been led to understand. I do not know what 
understanding AID had. I would ask AID. What understanding did 
AID have?
    Ms. Babbitt. My understanding was the concern was with the 
three Indian notifications, 312, 313, and 314. I apologize for 
not being more familiar with the one with which the chairman 
began the questioning, but I just had not had a chance to 
review it.
    Senator Hagel. That is all right. Those answers can be 
supplied for the record. Sure. Thank you.
    Senator Sarbanes. The first question I want to put forward 
regards the United Nations Framework Convention on Climate 
Change, which was ratified by the U.S. Senate in 1992 and 
therefore is in effect. Is that correct?
    Ms. Babbitt. Yes, Senator Sarbanes, that is correct.
    Senator Sarbanes. The Framework Convention says that the 
U.S. has an obligation to ``promote and cooperate in the 
development, application, and diffusion, including transfer of 
technologies, practices, and processes, that control, reduce, 
or prevent anthropogenic emissions of greenhouse gases.'' It 
goes on to say that we have an obligation to ``promote and 
cooperate in education, training, and public awareness related 
to climate change and encourage the widest participation in 
this process.''
    The first question I would put forward is whether you 
regard USAID's programs as consistent with our responsibilities 
under the Framework Convention, which was ratified by the U.S. 
Senate.
    Ms. Babbitt. Senator Sarbanes, we do. It is the United 
States' obligation under the Framework Convention to encourage 
the participation of developing countries in meeting the goals 
of the Framework Convention. We believe that our climate change 
activities are part of the U.S. responsibility with respect to 
that obligation.
    We look at our development responsibilities through the 
lens of our overall goal to promote sustainable development and 
look at the obligations under the Framework Convention as one 
of the ways in which we try to mitigate the damage that climate 
change and non-efficient energy use in the developing world 
undermines that basic goal of promoting sustainable development 
in the countries in which we work.
    Senator Sarbanes. Yes. As I look at these three Indian 
programs, even if there were no Framework Convention in effect 
through Senate ratification, all three seem to be desirable 
programs as part of a U.S. effort to help sustainable 
development around the world. It seems to me that energy 
efficiency, for example, is a desirable objective. I have 
difficulty seeing what the problem might be with any of these 
proposals.
    In any event, let me go on. To what extent do USAID's 
projects in India involve the participation and support of U.S. 
businesses and business organizations?
    Ms. Babbitt. Senator, we have had enormous support from 
U.S. business with respect to the programs in India. India, as 
you may know, is one of the major contributors to greenhouse 
gas emissions. It is an enormous country, will be a billion 
people soon, and provides an enormous opportunity for the 
export of U.S. clean technology.
    The bad news is that India gets an enormous percentage of 
its energy from coal, which is not used in an energy efficient 
way. The very good news is that the United States leads the 
world in energy efficient technology, and there is an enormous 
amount of interest by U.S. business in participating in a very 
large, very important Indian market. We have worked with 
General Electric, with Bechtel, with Enron, with American 
Electric Power, with Commonwealth Edison, with BP Amoco, with 
the Chicago Board of Trade, with the Air and Waste Management 
Association, with Duquesne Light, Edison Electric Institute, 
and others with respect to this very large potential market for 
U.S. technology.
    Senator Sarbanes. I went with Secretary Daley, the 
Secretary of Commerce, on a trade mission to India. One of the 
items that was on the agenda and very much sought after by the 
Indians was to develop energy efficient technologies.
    You point out in your statement that there is a very 
serious air pollution problem in India. I can certainly testify 
to that from personal experience. You go on to say that, ``air 
pollution will cause an estimated 2.5 million premature deaths 
there this year.'' It is obviously a pressing problem.
    I was struck when you reference in your statement that 
``the world market for energy efficient technologies has been 
estimated at almost 1.8 trillion over the next 40 years.'' 
Earlier you pointed out that there were significant 
opportunities for U.S. business and large new markets for U.S. 
technology worldwide.
    It is my understanding that the other advanced industrial 
countries are aware of the possibilities of the so-called green 
technology. This would include Japan, Germany, the UK, France, 
and others. They recognize the potential there. I saw these AID 
programs as an opening beach head for U.S. business to develop 
that market for green technologies. I gather that the U.S. 
businesses you have been working with see it the same way. Is 
that correct?
    Ms. Babbitt. They do, Senator. We have engaged them in some 
of the programs thus far in terms of providing technical 
assistance and in terms of interchanges. But obviously it is 
this potential, very large market that is of enormous interest 
to them.
    Senator Sarbanes. One of the major concerns in the Senate, 
a concern that I shared, along with most of my colleagues was 
the fact that key developing countries were not encompassed 
within the regime of meaningful participation in the Kyoto 
Protocol.
    Leaving the protocol aside, it seems to me that many 
Members are concerned about the contribution to the problem 
made by a number of these major developing countries?
    One of the major developing countries is India. It is the 
second most populous nation and is projected to be the most 
populous nation, on the basis of current trends, by about 2025. 
Any measures designed to help India achieve energy efficiency 
and apply some modern technologies to their energy use are 
highly desirable. I do not see why we would have any reason to 
not support that development. Aside from whether there will be 
a Kyoto Protocol, these are the sort of environmental measures 
we should support absent the protocol especially in an 
environment absent the Framework legislation.
    Is that not the way AID sees this matter?
    Ms. Babbitt. Senator, you are exactly right. The India 
energy efficiency program predates the conventions or the 
protocols, all of the documents in question, and fits directly 
into the issue of energy efficiency, that is, the pollution 
which results from the lack of energy efficient combustion in 
the old-time, old-fashioned Indian facilities and the danger to 
health, as you mentioned, with respect to the impact on 
children's health, but also with respect to greenhouse gas 
emissions.
    We have had some real success fairly recently in working 
with India and particularly with the National Thermal Power 
Corp., which is the largest electrical provider in India, in an 
energy efficiency program which has worked for them, which 
allows them to burn less fuel, which is efficient for them, and 
saves them money, which produces fewer pollutants, which helps 
with respect to both greenhouse gases and the health issues 
arising from particulates in the air, and which has the 
benefits associated with--and is sustainable because of--the 
economic efficiency that goes along with fuel efficiency. So, 
this is an ongoing relationship which is bearing some very 
important fruit.
    Senator Sarbanes. I see my time is up. I gather these 
programs are very much sought out on the Indian side. It is my 
understanding that they really want these programs. I take it 
they are also sought by American business.
    Ms. Babbitt. Yes. We have been provided a little bit of a 
matchmaking facility but they are eager participants. We have 
not had to work to create interest on either side once the 
elements of the benefits were evident, and they certainly are 
to both American industry that senses the market and an 
opportunity to do the right thing in terms of the global 
climate issues and also with respect to the Indian industry 
which sees the opportunity to compete better because of the 
more efficient fuel use and help with their respective health 
issues as well.
    Senator Sarbanes. Thank you.
    Senator Hagel. Senator, thank you.
    Staying on point, Madam Administrator, with the Indian 
projects, as you know, May 27 of this year the committee 
received notification from AID regarding three climate change 
projects in India. According to that notification, the trade in 
environmental services and technology test project is designed 
to support pilot projects in industry sectors. According to 
AID's further description of the project, the test project will 
examine the cost effectiveness of voluntary pilot carbon 
emissions trading within India in targeted industrial sectors. 
The program is intended to use market based instruments as a 
tool for improving the energy efficiency production.
    Now, with that as a base, I would like to ask a couple of 
questions. Actually going back for a moment to what Senator 
Sarbanes was referencing, regarding the protocol, self-interest 
of nations, most specifically nations that you mentioned, China 
and India being the two which will soon be in the largest 
manmade greenhouse gas emitters category, has India, to your 
knowledge, demonstrated any intention of taking on binding 
obligations which obviously, as you know, is prescribed in the 
Kyoto Protocol and the main reason, as Senator Sarbanes 
referenced, the Senate passed 95 to 0 the Byrd-Hagel resolution 
which said that the United States would not bind itself to a 
treaty or a protocol unless all nations, but in particular 
India, for example, would do that? Have you sensed any change 
of heart with India that they are rushing forward to bind 
themselves to Kyoto standards?
    Ms. Babbitt. Senator, I have not been involved directly 
with the negotiations, but I have heard nothing that would 
indicate that India was moving forward with respect to 
voluntarily assuming a binding commitment.
    Senator Hagel. Mr. Hales, is there anything that you want 
to add to that?
    Mr. Hales. No.
    Senator Hagel. That is rather discouraging, would you not 
say?
    Ms. Babbitt. Senator, this protocol is a work in progress. 
We feel that the work we do is very much in the nature of 
promoting the goals of Byrd-Hagel, that is, in promoting the 
greater participation of developing countries in this clearly 
worldwide global issue. The mechanisms under Kyoto were left 
undefined and unelaborated. We believe that some of our work 
contributes to the further elaboration and strengthening of 
Kyoto, but it is a work in progress certainly.
    Senator Hagel. Do you believe that we could ever go forward 
realistically with the Kyoto Protocol unless you get India and 
China, for example, to bind themselves to those protocols and 
those commitments?
    Ms. Babbitt. Those kinds of decisions are certainly above 
my pay grade, but I would certainly recognize the sense of the 
Senator's question which is that India is currently the world's 
sixth largest emitter of greenhouse gases and the second 
fastest growing emitter. The solution to the greenhouse gas 
emissions issue is one that would need to include the large 
contributors to the problem.
    Senator Hagel. You see, part of the concern that many of us 
have up here has nothing to do, first of all, with whether we 
support AID. In any case, you know I am a strong supporter of 
your organization. I think most of us up here are strong 
supporters of environmental efforts, energy efficiencies.
    But as we frame this up in the real world, we step back and 
we look at the commitment that the United States would have to 
take on, moving 7 percent below 1990 levels, when in fact the 
rest of these nations would be essentially held harmless, and 
then we are paying for their progress on different programs 
like what you are doing, what other organizations are doing. It 
gets to a point where it certainly goes beyond a cost-benefit 
analysis for the United States. Are we in fact undermining our 
own competitiveness in the world? And in the end, India, China, 
other nations probably will not take on mandatory binding 
obligations.
    So, if you are not aware of some of the sense up here, 
Administrator Babbitt, I wanted to kind of frame that up as to 
why many of us are concerned about this. I know you have other 
things to do, as I do, so this is not just an exercise in ``let 
us have another hearing'' when we ask you to come up and talk 
about these things. You know these are serious things and I 
wanted you to understand a little bit of the perspective on 
where some of us come from on this.
    Staying with the subject, focus on this May 27 notification 
and tying a little bit back to what Senator Sarbanes said, what 
you have said, and I think the general consensus up here that 
AID is a very important organization, AID, and rightfully so I 
believe, continually notes its concern regarding the reductions 
in the development assistance account of AID. But when I asked 
for your budget the other day to review it again, I noted--and 
you can correct me here, obviously as you will if I am wrong--
in your fiscal year 2000 request that the development 
assistance account--you have a request for $780 million versus 
$1.19 billion that you had in fiscal year 1999. My 
understanding is that some of these programs that we are 
talking about today are being funded through or money taken 
away from the development assistance account.
    Could you clarify that? Is that not true, or maybe to start 
with, why is that development assistance account less, what you 
are asking for in fiscal year 2000?
    Ms. Babbitt. Senator, that is I believe a function of the 
account having been divided into one account for child survival 
and disease and two other development assistance [DA] accounts.
    Senator Hagel. So, no environmental programs are being 
funded out of development assistance.
    Ms. Babbitt. Oh, no, they are. They are. I am sorry. I 
misunderstood your question. I thought your question was why 
has the request gone down so much from 1999 to the year 2000. 
My answer, if that were the question, would have been it has 
not. In 1999 there are two DA accounts, but FY 2000 is now 
broken up into one child survival account and two DA accounts, 
and the total is slightly larger, I believe, for fiscal year 
2000.
    Senator Hagel. For the child survival. Well, actually it is 
a little less in the account that I am looking at.
    But let me ask it a different way then. Are the numbers 
that are coming out of the development assistance account 
dramatically different for fiscal year 2000 in using moneys out 
of that account for these environmental programs versus what 
you had been doing?
    Ms. Babbitt. I do not believe so, sir. I believe that the 
environmental levels are roughly $270 million both years. Now, 
I would have to look at the figures to be able to verify them 
exactly, but I believe it is roughly $270 million each year.
    Senator Hagel. We have the exact account here, and if there 
is any change to that, you can supply that for the record.
    [The following response was received subsequent to the 
hearing.]

       USAID FY 1999 and FY 2000 Development Assistance Accounts

    In FY 1999, USAID has two development assistance program accounts: 
the Development Programs account with a level of $1.194 billion, as 
Senator Hagel has noted, and the Child Survival and Disease Programs 
account at $595 million (including $50 million of emergency 
supplemental funds and excluding $105 million directed for UNICEF). 
These two accounts total $1.789 billion.
    The FY 2000 request includes three development assistance accounts. 
The Development Programs account at $780.4 million and the Development 
Fund for Africa at $512.6 million total $1.293 billion; this is the 
equivalent of the FY 1999 level of $1.194 billion--that is, in FY 1999 
African development programs are being funded out of the regular 
Development Programs account. The Child Survival and Disease Programs 
account, originally requested at $555 million, was recently adjusted to 
$600 million as part of the President's new AIDS Initiative. Adding in 
the Child Survival request brings the total requested for the three 
accounts to $1.893 billion that compares to the FY 1999 appropriated 
total of $1.789 billion.
    Finally, to clarify the record with regard to funding for 
environment programs, USAID will allocate approximately $255 million in 
FY 1999, and intends to provide $290 million for environment programs 
in FY 2000, from development assistance accounts (no funding for these 
programs comes from the Child Survival and Disease account).

    Senator Hagel. Another program on India that AID notified 
the committee of its intent to fund is the Energy Conservation 
and Commercialization program, I think referred to as ECCO. 
That program, which also uses development assistance funds will 
provide technical assistance for an electric vehicle program 
for two or three-wheelers. Are you kind of with me on this?
    Ms. Babbitt. Yes.
    Senator Hagel. OK. A couple questions on that. I suspect, 
as you know, electric vehicles have had a difficult time with 
their development, even in the sophisticated U.S. market 
because of high cost, limited range, long recharging times, and 
other difficulties. In contrast, most automotive manufacturers 
believe now that fuel cells have the most significant potential 
to offer a zero emission vehicle without most of the 
limitations of electric vehicles.
    Now, if you accept that--and I do--why is AID concentrating 
on electric vehicle research in this proposed grant?
    Ms. Babbitt. I am the one who you called to testify, so I 
am going to give you as much information as I can on this, and 
then if David has some more, ask him to fill in the blanks.
    My understanding, both from spending too much time in 
traffic on the streets of New Delhi and from some of the 
information I have received from our folks, is that a large 
percentage of the traffic in the metropolitan and the urban 
areas in India are these two-stroke vehicles, which are 
notoriously fuel inefficient. They also represent vehicles that 
only go short distances in an urban environment. So, that 
particular configuration makes electrical vehicles more 
applicable than they would be in a rural environment or if they 
were replacing already energy efficient vehicles.
    There is a great incentive, which is relatively new in 
India, to upgrade or to decrease the polluting aspects of these 
vehicles. There are new regulations in place, new laws in 
place, and a rising consciousness in the Indian public about 
the dangers of the pollution from these two-stroke vehicles 
which may combine to make the electrical vehicle in this 
context a winning combination.
    David is just back from India and I think is more 
personally familiar with this project. So, if it would be all 
right----
    Senator Hagel. Sure, Mr. Hales.
    Ms. Babbitt [continuing]. I would like for him to expand on 
that.
    Mr. Hales. Thank you, Chairman.
    Hattie I think has captured the essential differences 
between a market for electric vehicles in India, say, and a 
market for electric vehicles in Chicago or Miami. Essentially 
what we are looking at there is a situation where almost 70 
percent of the pollution that we are dealing with in major 
urban areas comes from those two-stroke vehicles. They are used 
for very short hauls. They are used at a very low speed. So, 
they are, both in terms of range and in terms of power, within 
the capacity of existing storage batteries.
    In addition, there is another substantial advantage for 
India in that the actual recharge of those batteries provides 
them with an additional use, a very effective use for off-peak 
power. So, there are a number of technical issues or contextual 
issues which makes this worth taking a close look at in India.
    In addition, as the Administrator pointed out, there is a 
very strong growing awareness, including on the part of the 
manufacturer who dominates the market for two- and three-
wheeled vehicles in India, of a social responsibility to take 
part in reducing local health impacts that are associated with 
this. In many ways, it is the leadership from Bajaj Motors that 
is driving this project.
    Our role with it is simply--Bajaj is funding all of their 
activities. We are not subsidizing an Indian motor company, but 
what we are trying to do is help U.S. technology suppliers be 
engaged in the research and development that Bajaj is using to 
try to move to an electric vehicle that would meet India's 
needs.
    Senator Hagel. Well, I just say I think those are very 
credible explanations. Most of the manufacturers who are going 
to, obviously, have much to say about the future of this, as 
you know, have moved rather significantly to fuel cell 
technology. I am not aware of any who are now really focused on 
the electric piece of this partly because the cost still cannot 
get down into a range that is usable essentially and achievable 
for what we need to do with them, and India being a good area 
to test these things and your answers are exactly right. Their 
world is a little different, obviously. But still it is the 
cost and it is where the new technology is going, and it is not 
going in the area of the electric car.
    We have been joined by our colleague, Senator Kerry. 
Senator Kerry, welcome.
    Senator Kerry. Mr. Chairman, thank you.
    You have already had----
    Senator Sarbanes. I already had a round.
    Senator Kerry. I know that the chairman, whom I respect and 
is a good friend of mine, has great qualms about global warming 
and Kyoto and the protocol, and seems to be the most vigilant 
Member of the Senate in trying to make certain that we are not 
implementing it somehow surreptitiously or otherwise. I look 
forward to the day that we have persuaded him of the efficiency 
of emissions trading and of the importance of people's concerns 
about this on a global basis, and I really do look forward to 
his participation in the long run in what I think is an 
important effort.
    But let me just say for the record here I just this year 
chaired, in concert with the World Bank--and I thank Jim 
Wolfensohn for his vision on this--a conference in Vietnam with 
many of the donor countries in Asia regarding environmental 
development practices. All of these countries have enormous 
choices in front of them. Guangdong Province in China has two 
water treatment facilities for the entire province, one of the 
fastest growing regions in all of China. They are in desperate 
need of technological assistance. Anyone who has traveled 
abroad--and I know my colleague has--you can see the pollution 
rising from the streets of Bangkok and Shanghai and various 
places. It is hard to breathe. Most of us who have been there 
have been happy to leave not because we do not like the place, 
but because it is a relief for our systems just to be able to 
get out and breathe again.
    The problems of development in these countries undergoing 
fast economic development are just enormous. As a country that 
turned the corner on leaded gas and turned the corner on 
emissions controls and are still fighting with our own SUV 
standards and other issues--the United States should be sharing 
this information and these technologies with these countries so 
they do not repeat the mistakes we have made, so they do not 
contribute to bad air, bad water, bad forestry practices, and a 
host of other things is just incomprehensible to me. I think we 
have got to be really careful, Mr. Chairman, that we do not 
have a chilling effect on the willingness and capacity of our 
agencies to engage in salutary, proactive efforts to try to 
help other nations resolve these problems.
    Moreover, let me just say, as the ranking member of the 
Small Business Committee, there is a $280 billion market for 
environmental tehnologies out there and we only have 6 percent 
of it.
    In 1980 when President Reagan came in, the immediate 
impulse was to pull away from some of the environmental 
research in the country. So, they took away what President 
Carter had created in the Energy Institute out in Colorado, 
which had then transferred professors who had been tenured at 
various colleges and universities who had gone out there, given 
up their tenure to become part of the great research effort for 
new energy in America. We were the world's leader in 
photovoltaics and renewables, and they completely cut the guts 
out from that Federally supported research.
    What happened is, in the ensuing years the Japanese and the 
Germans replaced us as the leaders in those technologies. And 
when the former Communist bloc countries fell, you could go to 
places like Prague or other places in the Czech Republic, or in 
Hungary where there were no living bushes within 50 miles of 
the energy plants that they had there because of their 
emissions. You could feel ash on the ground and so forth; the 
Danube River, completely polluted, dead. And they were seeking 
to undo the effects of the 70 years of Communist rule, and 
where did they go for the technologies? They went to Japan and 
they went to Germany, not the United States anymore because we 
were no longer the leader. So, we lost a lot of business.
    I think we have to think about this in a very proactive and 
intelligent way, and I beg my colleagues on the other side of 
the aisle to review some of the evidence. They may not like the 
methodologies chosen, and they may not like the protocol for 
various and sundry reasons, but that does not mean that we 
should turn our back on the realities of the science and 
certainly practices that we ourselves have learned are 
inefficient.
    Yesterday we had a debate on the Senate floor about the 
cleanup impact of mining, which has left us with $32 to $72 
billion worth of cleanup, some 59 Superfund sites, some 12,000 
rivers and streams destroyed. So here we are still struggling 
in our own country with development practices.
    I think what the Administrator is doing, what AID is doing 
is completely consistent with the Framework Convention that was 
passed by the U.S. Senate in 1992, which calls on us to share 
technology and information with other countries. And it is 
completely inconsistent in my judgment with the notion 
underlying the chairman's joint resolution with Senator Byrd, 
which I was very involved in as the manager on the other side 
on the Senate floor, not to be reaching out to the less 
developed countries to bring them into a broad, global 
participatory effort on the environment and development. I 
think we have everything to gain and nothing to lose.
    I share with the chairman the notion that it is 
inconsistent to have some kind of an international effort that 
does not require participation by less developed countries. 
Clearly, the more advanced developing countries, Mexico, Korea, 
China, India, et cetera, are at a threshold level where if they 
are left outside of participation, they will undo everything we 
do. We understand that. So, we must have their participation.
    But I wish we were working in a concerted effort to try to 
make it happen rather than this halting, somewhat suspicious 
and divided effort that seems to not reach to the best 
interests of the country and I think in the long run our global 
interests.
    I am not going to ask any questions. I assume the record 
would stay open. But I did want to make a statement. I did want 
to stop by because I think it is terribly important for us to 
be approaching this thoughtfully. And I thank the chair.
    Senator Hagel. Senator Kerry, thank you.
    Senator Sarbanes.
    Senator Sarbanes. I want to make one clarification. Some of 
the previous questioning seemed to suggest that the money 
committed for these various energy conservation and 
commercialization programs was being taken away from 
development assistance. My understanding is that these energy 
efficient programs have always been a part of development 
assistance. In other words, it has been treated by AID 
historically and traditionally as part of the development 
assistance package. You made reference earlier to sustainable 
development.
    I also have information which suggests that the ratio being 
committed to the environmental area within the development 
assistance program has not changed in any marked degree. Is 
that correct?
    Ms. Babbitt. Senator, we have long viewed the climate 
change and environment aspect of our portfolio, of our 
objectives as part and parcel of the sustainable development 
mandate that we have. If I can----
    Senator Sarbanes. You listed on your report that funding 
for these programs comes out of the appropriation category for 
development assistance. It's my understanding that it always 
comes out of this category because it has always been part and 
parcel of development assistance. Is that not correct?
    Ms. Babbitt. Yes, sir. If I can give you an example with 
respect to that. We have a forestry program in the Congo. The 
forestry program in the Congo touches a variety of different 
goals. On one level, the economic development level, it 
provides for sustainable timber production. On another level, 
it is watershed management, and on a third climate related 
level, it provides for sequestration with respect to the 
climate change agenda. So, it would always be our intention 
that our climate change related programs fit within the broad 
development mandate which is the essence of what we do.
    Senator Sarbanes. I am going to harken back to the trip I 
made with Daley. This trip had an impact on my thinking, 
because it was the first time I had been to India. At this 
time, several American companies were interested in entering 
the Indian power sector. They have a tremendous need for power. 
In many of the urban areas, there are frequent brownouts and 
electricity is put on a rolling basis. They are quite anxious 
to have our involvement, and we are quite anxious to be 
involved. But, there are problems.
    I want to read one paragraph out of a summary the Energy 
Conservation and Commercialization program:

    State Level Electricity Regulatory Commissions: At the 
state policy level, reforms will provide an opportunity to 
incorporate market-based incentives into newly restructured 
electric utilities and in the policies of the independent 
commissions that will regulate them. Creation of electricity 
regulatory commissions throughout the country presents USAID 
with the opportunity to support and train a new cadre of 
regulators in market oriented electricity regulation and 
incorporation of energy efficiency policies. These regulatory 
commissions will be crucial steps in helping to assure a ``fair 
playing field'' and commercial rule of law for U.S. and other 
private investments in the Indian power sector.

    Every American company that was with us on that trade 
mission--a number of which were interested in the power 
sector--underscored how important it was to establish a fair 
playing field and to have a commercial rule of law that 
governed American investment and other private investment. They 
were interested in exploring the Indian power sector. The 
Indians were interested in bringing them in but American 
companies asked if some preconditions or basic requirements 
such as commercial rule of law could be established.
    This seems to me to be an extraordinarily worthwhile effort 
that you are undertaking. I want to commend you. I think this 
is a terrific activity, and think it will serve well your 
sustainable development goals abroad. It will certainly serve 
well the American industry interested in participating in this 
effort, whereas making a contribution on the one hand to 
sustainable development, while gaining an economic benefit on 
the other.
    I am not asking a question. I am really making a statement. 
My sense in reading over these Indian programs is that they 
have been well thought through and arrived at carefully. I must 
say I am solidified in that view by the response you both gave 
to the chairman's question about the automobiles and the fuel 
cells. When I first heard him ask the question, I wondered to 
myself, why are they doing that? When I heard your response, 
which I thought was forthcoming and dealt directly with the 
concerns that the chairman put forward, it seemed to me your 
reasoning was more than an adequate. You are dealing with a 
situation that is affecting people's judgments.
    Whether in the end these measures will prove successful, I 
do not know. It certainly seems to make sense that you explore 
these possibilities. The circumstances of the situation in 
India lend themselves to going down the path with that 
technology. In any event, it seemed to me rather clear that you 
have not made a half-baked judgment without careful analysis.
    I have the same reaction to the proposals we have been 
looking at today. So, I just wanted to make that point.
    Senator Hagel. Thank you, Senator.
    Could I ask a couple of procedural questions? At AID who 
determines the appropriate technologies as you develop these 
programs, to advance the appropriate technologies through these 
projects? Do you get that expertise inside? Do you go outside? 
How is it done?
    Ms. Babbitt. If I can address it in a general way, we do 
both. We have some very talented folks within the Agency, but 
we do not have the depth in every single issue that we cover, 
of course. So, we often rely on assistance from without the 
Agency to determine that.
    Mr. Hales. I would add to that, Senator, only that we also 
have a great deal of help from our partners in developing 
countries. In India, for example, there is a very, very 
sophisticated scientific community, academic community, and a 
very sophisticated corporate leadership in India, and it is in 
close partnership with them, with folks inside the Agency, and 
with other areas of expertise, various universities in the 
United States, think tanks, and our own corporations that we 
try to evaluate which technologies would be the most 
appropriate in a given situation.
    Senator Hagel. Yes. Do you want to add something further?
    Ms. Babbitt. I did not want to add to that. I did want to 
go back to the fuel cells issue, when it is appropriate.
    Senator Hagel. Yes. Go right ahead.
    Ms. Babbitt. Part of this back and forth has been for me to 
satisfy myself that the examination of the new technology with 
respect to fuel cells is already part of the plan with respect 
to the congressional notification.
    Senator Hagel. Part of your plan within AID working with 
electric car technology.
    Ms. Babbitt. Yes. I did not want to represent that it was 
already part of the plan, but we do recognize the fuel cell as 
an important clean energy technology. And we will help Indian 
agencies assess the applicability of fuel cells as well. My 
point is that, although we feel for the reasons both David and 
I have testified that the electrical vehicle is potentially a 
viable one potentially because of the short distances and the 
slow speeds at which the two-stroke vehicles travel, that is 
not to discard fuel cells as a possibly useful technology, and 
that is part of the plan under the CN which we have already 
submitted to the Congress.
    Senator Hagel. Thank you.
    In response to a question I had submitted earlier--actually 
it was the second hearing when we had David Sandalow here--he 
stated in response to that question that EPA had provided 
$500,000 to Argentina's Department of National Resources and 
Sustainable Development with a commitment for an additional 
$200,000 in connection with Argentina's commitment to announce 
an emissions target at the fifth meeting of the U.N. Climate 
Change Convention Conference of the Parties. Would that be 
something that you would work with or did work with Sandalow 
and his agency on in coordinating that outside money, program?
    Ms. Babbitt. I am not familiar with what EPA did, but we do 
not have a mission in Argentina and I do not believe we are 
involved in anything related to Argentina with respect to that 
meeting. Well, in Argentina, but with respect to the issue that 
you raise.
    Senator Hagel. OK. So, you were not consulted on the EPA 
grant to Argentina. This is not a trick question, by the way.
    Ms. Babbitt. What does ``consulted'' mean?
    Senator Hagel. But if you find out differently, supply that 
as well, if you would, Mr. Hales.
    Mr. Hales. If I might, Senator. The interagency team that 
works on all of the climate change issues is pretty generally 
aware of what each of the agencies are doing, and in that sense 
I think we are all consulted about what all of the other 
agencies are doing. But Argentina is not a USAID country and we 
have neither direct technical expertise nor funding in that 
program.
    Senator Hagel. Another India project that I do not believe 
has come up specifically yet today. It includes an ongoing 
$193,400 grant to the Tata Energy Resource Institute which 
supports 70 percent of the time of a visiting fellow in India 
from November 1998 to January 2000. Are you familiar with that 
grant, generally with that project?
    Ms. Babbitt. I am familiar. I believe this is the Katie 
McGinty issue.
    Senator Hagel. Yes.
    Ms. Babbitt. I understand that Katie and her husband Carl 
are working in India on global climate change issues. I was one 
of the participants along with many other U.S. Government and 
U.S. business participants in a conference that she helped 
organize in May, but I frankly am not familiar with her exact 
relationship with USAID in that so that I would need to get 
back to you on any details with respect to the relationship.
    Senator Hagel. Well, that is exactly my question. What does 
she do? What activities are involved with that grant?
    Ms. Babbitt. I can address the activities with which I am 
familiar which focus on the U.S.-Indo business dialog in May. I 
believe she was instrumental in setting that dialog up. It 
occurred in Washington. A number of us spoke, Larry Summers, 
Frank Loy, a number of the members of the administration, and a 
number of the members of the Indian business community.
    Senator Hagel. Would this be a one-time kind of grant? For 
example, is there any history? In 1998 would this kind of a 
grant have been used?
    Ms. Babbitt. It is my understanding that Katie's engagement 
in this is from some time during the end of 1998 through the 
end of 1999. I am confident that her engagement is broader than 
simply this one U.S.-Indo dialog, but I am not able to detail 
what her activities are.
    Mr. Hales. Just to say, Senator, that the relationship with 
the Tata Institute is a longstanding one, and it has a number 
of facets to it. Certainly those kinds of activities and that 
engagement have taken place. I cannot tell you exactly how 
long. We could certainly give you a history of that engagement.
    The broad purpose of the kinds of activities we are dealing 
with here are to help make it very clear that activities which 
reduce greenhouse gas emissions are not always uneconomic 
activities. In fact, there can be substantial economic benefit 
from that. Many developing countries are quite afraid that if 
they take actions to reduce greenhouse gases, that that will 
somehow cause an adverse economic effect, and there is 
substantial conviction in the Indian scientific community and 
among the Indian business leadership that in fact there are 
opportunities present in the efforts to reduce greenhouse gas 
emissions, as well as local pollution. The work with Tata helps 
to try to demonstrate that in a wide range of ways, but we 
could certainly provide you with detail of the history of that 
if you would like.
    Senator Hagel. Well, that would be helpful. I appreciate 
it. Also, if you could include in that answer what it is that 
Ms. McGinty is doing on this project, what her activities are 
as well.
    Ms. Babbitt. Certainly.
    Senator Hagel. I appreciate that.
    [The following response was received subsequent to the 
hearing.]

    USAID's Relationship With Tata Energy Research Institute (TERI)

    The Tata Energy Research Institute (TERI) is an autonomous, not-
for-profit research institute established in 1974 with core funding 
from an endowment from private sources. TERI conducts scientific and 
policy research in energy, environment, biotechnology, forestry and 
related sustainable development issues. TERI has a strong record in 
India as an independent policy research organization in energy and has 
been able to mobilize attention to environmental issues among Indian 
decision-makers. TERI also has a branch office in Washington, D.C., 
TERI North America.
    USAID has a long history of collaboration with TERI as a grantee 
and partner. For the past decade, USAID and TERI have worked together 
on several activities, including the following:

   Under USAID/India's Program for Acceleration of Commercial 
        Energy Research (PACER), TERI conducted studies from February 
        1989 to October 1990 in order to identify possible technologies 
        and private or public sector sponsors in India eligible for 
        funding under the PACER Project.
   From January to June 1993, USAID/W provided funding to TERI 
        for establishment of the Asian Center for Energy Efficiency and 
        Demand-Side Management (ASCEND) for the purpose of promoting 
        greater investments in energy efficiency and demand side 
        management.
   In June 1994, USAID/W funded a TERI workshop on the concepts 
        of Integrated Resource Planning and Demand Side Management as 
        an alternative to increasing power generation capacity. Indian 
        power sector policy makers, financial institutions, state 
        electricity board otficials, and the private sector attended 
        the workshop.
   In July 1996, USAID partially funded a TERI Program on 
        Energy, Environment, Resources and Sustainability (PEERS) that 
        identified probable future public and private sector leaders, 
        and trained them on sustainable environmental issues.
   TERI has been surveying industrial environmental management 
        as part of a USAID/India program on clean technology; the 
        survey concluded in September 1999.
   Several staff members of TERI have received USAID-funded 
        training in the U.S. on various energy and environmental 
        issues, most recently training of two TERI researchers in the 
        use of state-of-the-art climate change policy models.
   USAID provided funding to TERI in November 1998 to cosponsor 
        an international symposium on renewable energy in association 
        with the International Society for Renewable Energy Education.
   USAID provided support from March 1998 to February 1999 for 
        TERI to write a manual on solar photovoltaic technology.
   From FY 1995 to FY 1997, USAID funded a cooperative program 
        with TERI. The U.S. Department of Energy collaborated in the 
        program. The program promoted and supported policy and strategy 
        development related to energy efficiency and environmental 
        improvement, and fostered technology relationships between the 
        U.S. Electric Power Research Institute (EPRI) and related 
        energy and environmental organizations in Asia. EPRI also 
        established an industrial technology transfer program in India.
   For the last five years, the U.S.-Asia Environmental 
        Partnership (US-AEP) has periodically funded joint activities 
        with TERI. US-AEP contributed funding to the program described 
        above, and supports a current relationship with the 
        International City Managers Association (ICMA) to provide 
        consultant services for activities of mutual interest. Joint 
        activities of US-AEP and TERI have included environmental 
        policy analysis and conferences promoting improved urban and 
        industrial environmental management.
   In FY 1999, USAID/India awarded a grant to TERI North 
        Anerica to support 70% of the time of a Visiting Senior Fellow, 
        Ms. Katie McGinty, in India from November 1998 until January 
        2000. Ms. McGinty is a former chair of the President's Council 
        on Environmental Quality. This grant came from USAID's 
        Greenhouse Gas Pollution Prevention Project, as part of the 
        Outreach and Awareness activity. The objective of the grant is 
        to increase awareness among the Indian public and private 
        sectors on global climate change issues facing India and the 
        world, and to identify opportunities for addressing processes 
        that result in environmental degradation or enhancement. As 
        part of this objective, the grant is also helping build 
        partnerships between U.S. and Indian businesses and industries 
        to examine opportunities and challenges arising from global 
        climate change mitigation.
                                 ______
                                 

                  Katie McGinty's Activities in India

    Ms. Katie McGinty, a former chair of the President's Council on 
Environmental Quality (1993-1997), is currently a Senior Visiting 
Fellow at TERI under a partially USAID-funded fellowship (70%). Her 
role at TERI is to increase awareness among the Indian government, NGOs 
and businesses on the linkages between greenhouse gas emissions 
reduction and sustainable development. The objective is to help 
increase their participation in reducing India's greenhouse gas 
emissions. Ms. McGinty has carried out the following work:

   Organized a series of meetings with the Indian power sector, 
        Indian businesses, and Indian government officials to explore 
        their understanding of the linkages between environmental 
        issues such as climate change and local development. She found 
        that the Indian business community had the most interest in 
        reducing emissions via access to U.S. technologies and 
        financing that could benefit from the use of market-based 
        mechanisms.
   Participated in a series of workshops conducted by the 
        Confederation of Indian Industry (CII) on greenhouse gas 
        emissions. CII is one of the USAID local partners under 
        ``Climate Change Outreach and Awareness'' activity of the 
        Greenhouse Gas Pollution Prevention Project.
   Participated in U.S. Information Service (USIS) events on 
        climate change, including a lecture series involving U.S. 
        representatives from Enron and Dupont discussing cost-effective 
        approaches to achieving highest levels of efficiency in 
        reducing greenhouse gases. She will participate in similar USIS 
        events this fall.
   Helped the Confederation of Indian Industry (CII) coordinate 
        and plan a dialogue with U.S. businesses in Washington D.C. in 
        May 1999 to discuss the possibility of Indian and U.S. 
        businesses working collaboratively on climate change 
        opportunities and challenges.

    Senator Hagel. Let me get back to a point I made earlier in 
my opening remarks about emissions trading projects. There is 
an awful lot of confusion about what they are and what they 
would do and the value and in fact would they work without the 
Kyoto Protocol, what is the value for an American company. My 
friend, John Kerry, talked a little bit about technology, and I 
share those concerns, although I do not think America is about 
ready to run out of leadership ability and quantity and quality 
in this business if we do not do something in regard to the 
Kyoto Protocol. I have a little difference of opinion with my 
colleague on the issue of voluntary versus mandatory, and that 
is where the difference really resides, not that we both do not 
accept responsibility for each of us and our country to deal 
with the environmental issues worldwide. That is not the issue, 
never has been. It is about how we do it.
    But emissions trading systems only work in a global context 
if you have enough emission grants to go around. I would be 
interested in--take any dynamic of this you wish, Madam 
Administrator--your evaluation and perspective on emissions 
trading systems. We talked about Ukraine, for example. How do 
they work in your opinion if you do not complete the Kyoto 
Protocol? What is the value to an American company if they do 
not have something to trade, if there is no value? If Russia 
does not participate, for example, or China does not 
participate, then where do you get enough of those credits to 
make it worthwhile for an American company?
    And then I guess the other part of that would be can or 
should emissions trading systems work without a mandatory type 
of a protocol called for like in the Kyoto Protocol? And take 
any piece of that you wish.
    Ms. Babbitt. Well, I am not sure I am going to answer this 
in the most important aspect first, but let me just take pieces 
of it.
    The administration--and I do not want to state this too 
many times--has made it clear to those of us in the 
administration that it has no intention of submitting this 
treaty for ratification before there is participation by the 
developing countries and that we see this Kyoto Protocol as 
very much a work in progress.
    The efforts which we make with respect to these emission 
trading systems with developing countries, which is USAID's 
niche in this larger issue, is to try to strengthen and 
elaborate on the Kyoto mechanisms in a way to make sure that, 
as this work in progress progresses, the mechanisms are 
elaborated upon and strengthened in a way which best suits 
United States business interests, environmental interests, and 
governmental interests.
    The Clean Air Act in the United States is an emissions 
trading system with respect to SO2. We have that kind of 
experience in the United States with an emissions trading 
system that works. It is still very complicated stuff. There 
are still a lot of people, including me, who do not understand 
it particularly well. But we have a basis upon which to 
understand how a system like this might work.
    The breadth and depth of understanding of a potential 
emissions trading system and how Kyoto mechanisms might work in 
developing countries is much less well defined and understood. 
It is our intention, to the extent that our programs address 
this band of issues, to help with the understanding in 
developing countries of how these mechanisms could work to 
their benefit. And when I say work to their benefit, I mean not 
just in the emissions trading narrow sense, but in the sense 
that if a system like this were developed to fruition, it would 
provide an opportunity for new resources for developing 
countries. That is to say, developed countries could, under 
some later agreed upon set of mechanisms, provide resources to 
developing countries for energy efficient projects. By 
resources I mean money. And it could also provide technical 
capacity that they do not have. So, the development benefits of 
a developed emissions trading system like the Clean Development 
Mechanism could be an enormous boost to developing countries 
both from a resource standpoint and from a technology 
standpoint.
    Now, as David pointed out a little bit earlier, most--I 
think ``most'' is the right way to characterize this--
developing countries are fearful of this whole subject because 
their instinct is to see it as a sort of developed versus 
developing country kind of phenomenon. We do not believe that 
is the case. We believe that, properly developed, these trading 
systems, the Clean Development Mechanism, for example, could be 
an enormous source of resources and technology for developing 
countries.
    It cannot be, as you have pointed out in both your opening 
statement and since then, a system which we can join unless 
developing countries participate. So, there is a lot of 
incentive to work toward elaborating and refining these 
systems, these mechanisms under Kyoto in a way which is 
supportive of U.S. interests. We are not there yet, but the 
potential benefit is an enormous one and a worthy one we 
believe.
    Senator Hagel. Do you believe that is part of the AID 
mission statement?
    Ms. Babbitt. We believe that the sustainable development 
mission statement of USAID includes trying to minimize those 
aspects of climate change which undermine the economic 
development mission statement that we have. Senator Sarbanes' 
example demonstrates, at least as clearly as any I can think 
of, the pollution aspects of inefficient energy use, and the 
damage to health clearly undermines our sustainable development 
goals.
    Or in the Congo example I used earlier, the failure to 
manage forestry resources undermines sustainable timber 
development. It also undermines watershed management, and it 
also gets rid of what could be a potential sink for greenhouse 
gases. So, we really believe very firmly that these issues are 
united.
    Senator Hagel. Thank you.
    Senator Sarbanes.
    Senator Sarbanes. I have nothing further.
    Senator Hagel. Well, again thank you, Madam Administrator, 
for coming up this afternoon. We will keep the record open. Our 
colleagues may have questions, and we will get those to you by 
the end of the week if there are further questions to be 
answered for the record. Again, I appreciate what you are 
doing, and thank you for coming up.
    Ms. Babbitt. Senator, I very much appreciate the 
opportunity to be here. I appreciate your permitting David to 
fill in the blanks. I have a very large portfolio. This 
environment one is his, and I knew he would have details that 
would be helpful. Thank you.
    Senator Hagel. Well, I think you did just fine, but we are 
always pleased to see Mr. Hales. He adds a very exciting 
dynamic to the hearings.
    Thank you.
    [Whereupon, at 3:32 p.m., the subcommittee was adjourned.]
                              ----------                              


           Additional Questions and Responses for the Record

    Responses of Deputy Administrator Hattie Babbitt to Additional 
                  Questions Submitted by Senator Hagel

    Question 1a. As was discussed during the hearing last week, in 
USAID notification of climate projects, there were references to the 
USAID climate agenda. Please provide the following:

  --Documentation describing this agenda and all programs and 
        initiatives related to it, including descriptions and 
        justifications for funding consistent with the Government 
        Performance and Results Act.

    Answer. Since 1994, USAID has consistently assisted developing 
countries to address climate change through energy efficiency, 
renewable energy, forestry, and urban sector activities. Key elements 
of the Agency's climate change strategy have been to promote policy 
reform and privatization, build indigenous capacity to address climate 
change concerns, demonstrate proven U.S. technologies that reduce 
greenhouse gases, and encourage climate-friendly investment. These 
activities have generally endorsed the successful U.S. approach of 
using market mechanisms to promote environmental protection.
    In 1997, prior to the Fourth Conference of the Parties in Kyoto, 
Japan, the Agency launched its $1 billion, 5-year Climate Change 
Initiative. The Initiative proposed to build upon the successes of 
previous climate-related assistance, with special emphasis on twelve 
key countries and regions. Guided by the goals of the UN Framework 
Convention on Climate Change (FCCC), the Initiative is focused on three 
primary objectives:

   Decreasing the rate of growth in net greenhouse gas 
        emissions;
   Increasing developing and transition country participation 
        in the goals of the Convention; and
   Decreasing vulnerability to threats posed by climate change. 
        A copy of the Climate Change Initiative (1998-2002) is attached 
        for your reference.

    Monitoring and measuring the results achieved through its programs 
is among the Agency's highest priorities. Under the Initiative, the 
Agency makes a concerted effort to measure the impact of programs, 
assess the most effective strategies for combating the threat of 
climate change, and continue to improve and focus the Agency's 
approach.
    The Agency established performance indicators to track progress 
across a range of sectors and activities. Also attached are results 
reported for FY 1998 under the Climate Change Initiative. These were 
reported in the climate change annexes to the Results Review and 
Resource Request (R4) submissions. The R4s provide the basis for the 
Agency's Annual Performance Report and the Congressional Presentation, 
which fulfill USAID's reporting requirements under the Government 
Performance and Results Act.
    Attachments: \1\ USAID's Climate Change Initiative, 1998-2002. FY 
1998 R4 Submissions: Climate Change Annexes.
---------------------------------------------------------------------------
    \1\ Committee Note: Attachments referred to throughout are in the 
committee's files.

    Question 1b. As was discussed during the hearing last week, in AID 
notification of climate projects, there were references to the USAID 
---------------------------------------------------------------------------
``climate agenda.'' Please provide the following:

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

    Answer. Speaking at the United Nations (UN) General Assembly 
Special Session on Environment in June 1997, President Clinton 
announced that the United States would provide $1 billion over five 
years to collaborate with developing nations and countries in 
transition in reducing the threat of climate change. USAID was charged 
with implementation of the President's commitment to these countries. 
The Agency proposed to meet this commitment with a minimum of $750 
million in grant assistance and up to $250 million in climate-friendly 
investments stimulated through the use of credit instruments during FYs 
1998-2002.
    USAID's climate change strategy, drafted in 1994 in response to 
Congressional request and revised in 1997 to target twelve key 
countries and regions, implements a ``no-regrets'' approach to climate-
related intervention.\2\ ``No regrets'' refers to activities that 
provide climate change benefits in addition to their primary objectives 
of increased energy efficiency, cleaner energy production, more 
effective natural resource management and reduced urban pollution. This 
focus has been the mainstay of USAID's climate change program since its 
inception. By addressing climate change in conjunction with sector-
specific and economic development goals, USAID leverages existing 
resources and assures a greater level of sustainability.
---------------------------------------------------------------------------
    \2\ Key countries/regions are: Brazil, Central Africa, Central 
America, Central Asia, India, Indonesia, Mexico, Philippines, Poland, 
Russia, South Africa, and Ukraine.
---------------------------------------------------------------------------
    USAID grant assistance for climate-related activities from fiscal 
year 1997 through proposed 2000 has remained steady at an average of 
just over $150 million a year. The annual breakdown of climate related 
funding for the past several years follows:

          FY 1993: $199.1 million (actual)
          FY 1994: $172.1 million (actual)
          FY 1995: $191.7 million (actual)
          FY 1996: $174.2 million (actual)
          FY 1997: $147 million (actual)
          FY 1998: $163 million (actual)
          FY 1999: $150 million (estimate)
          FY 2000: $150 million (proposed)

    Question 1c. As was discussed during the hearing last week, in AID 
notification of climate projects, there were references to the USAID 
``climate agenda.'' Please provide the following:

  --An annotated copy of President Clinton's April 20, 1999 submittal 
        to Congress in accordance with Section 573 of the Foreign 
        Operations, Export Financing, and Related Programs 
        Appropriations Act, 1999 (P.L. 105-227) that indicates where 
        your ``Climate Agenda'' is discussed.

    Answer. A copy of the Report to Congress on Federal Climate Change 
Expenditures is attached. This report, compiled by the Office of 
Management and Budget (OMB), details actual and proposed funding levels 
for USAID's climate change activities, provides a brief overview of the 
Agency's climate-related activities, and gives examples of intended 
results. Text relating to USAID programs is flagged.
    Attachment: Report to Congress on Federal Climate Change 
Expenditures. Office of Management and Budget (OMB).

    Question 2a. During the hearing, you testified that India was the 
sixth largest emitter of greenhouse gas and was the second fastest 
growing emitter. Please provide the following information:

  --The list of the top ten developing countries ranked by emissions. 
        Also, please provide the most current actual emissions, the 
        projected rate of growth, and the projected emissions for the 
        years 2010, 2015, and 2020.

    Answer. Under the Climate Change Initiative, USAID sponsors climate 
related activities in forty-four countries. However, the Agency 
concentrates resources on 12 priority countries and regions, selected 
because of their current and predicted contribution to net global 
greenhouse gas emissions and/or their governments' receptivity to 
taking concrete action. Of the ten largest greenhouse gas emitters 
among developing countries and countries with economies in transition, 
seven are USAID key countries. Three are countries in which USAID does 
not have a presence: People's Republic of China, Republic of Korea, and 
Saudi Arabia. The following table indicates the top ten developing 
country greenhouse gas emitters, according to the International Energy 
Association (IEA). India, the sixth largest emitter of greenhouse gases 
overall, is the third largest emitter among these countries.
    With respect to projected rates of growth and projected emissions 
for the years 2010, 2015, and 2020 for these top emitters, standardized 
projections are not currently available through the UN Framework 
Convention on Climate Change (FCCC) Secretariat. Some organizations 
attempt to project future emissions for various countries, but these 
estimates are speculative. The attached table from the IEA contains 
emissions projections for some countries for the year 2010.
    Attachment: National CO2 Emissions: 1996, International 
Energy Association Report ``CO2 Emissions from Fuel 
Combustion, 1971-1996.''

    Ranking of developing countries and countries with economies in 
transition by 1996 total emissions from fossil-fuel burning, cement 
production, and gas flaring.

                    Ranking Among Non-OECD Countries
            (Million metric tons of carbon equivalent (mtc))
------------------------------------------------------------------------
                                                                Carbon
                      Rank and Country                        equivalent
                                                                (mtc)
------------------------------------------------------------------------
 1  China*.................................................          867
 2  Russia.................................................          414
 3  India..................................................          235
 4  Republic of Korea*.....................................          112
 5  Ukraine................................................          106
 6  Poland.................................................          100
 7  Mexico.................................................           93
 8  South Africa...........................................           87
 9  Brazil.................................................           78
10  Saudi Arabia*..........................................           68
------------------------------------------------------------------------
 *Not a USAID assisted country.
 Source: International Energy Association.


    Question 2b. During the hearing, you testified that India was the 
sixth largest emitter of greenhouse gas and was the second fastest 
growing emitter. Please provide the following information:

  --For these countries indicate the USAID projects funded in fiscal 
        years 1997, 1998, 1999, and proposed 2000.

    Answer. USAID funds climate-related activities in seven of the top 
ten developing and transition countries. Ranked by greenhouse gas 
emissions, these are Russia, India, Ukraine, Poland, Mexico, South 
Africa, and Brazil. All are considered key or priority countries under 
USAID's Climate Change Initiative, begun in fiscal year 1998 and 
continuing through 2002.
    The following table lists projects funded or proposed in these 
countries under the Climate Change Initiative.

  USAID Climate-related Projects in Developing and Transition Countries
                      (In millions of U.S. dollars)
------------------------------------------------------------------------
                Country                    FY 98      FY 99      FY 00
------------------------------------------------------------------------
RUSSIA:                                  .........  .........  .........
  Power Restructuring & Pricing and              1      0.055          0
   Regulatory Reform...................
  Energy Efficiency through NGO               0.25        0.3        0.5
   Programs with Municipalities and
   Industry............................
  CFC Initiative.......................          1          1        1.5
  Forestry Management..................          1          1        0.7
  Forestry and NTFP Business                     1      0.648        0.7
   Development.........................
  Emissions Trading....................          0      0.006          0
  Business Development & Small Grants..          0      1.148          1

INDIA:                                   .........  .........  .........
  Increased Env. Protection in Energy,           0       5.00       8.00
   Industry & Cities...................

UKRAINE:                                 .........  .........  .........
  Power Restructuring and Financial              5        4.9        4.9
   Improvement of the Power System.....
  Energy Efficiency in the Municipal           0.5        0.7        0.7
   Sector..............................
  Global Climate Change Policy &                 0        1.4          2
   Sustainable Development Work Group..

POLAND:                                  .........  .........  .........
  Local Government Administration &              3        2.5          0
   Energy Efficiency...................
  Electricity Pricing and Regulatory           1.5        0.6          0
   Reform..............................
  GCC..................................          0          5          0

MEXICO:                                  .........  .........  .........
  Protecting Tropical Forests and             1.96       3.12       2.25
   Mangroves in Mexico's Parks.........
  Renewable Energy, Energy Efficiency,        2.23      2.043       2.65
   Improved Environmental Management
   Systems for Industry (Mexico
   Environmental Management Project)...

SOUTH AFRICA:                            .........  .........  .........
  Improved Access to EnvIronmentally-          2.8          3        3.5
   Sustainable Shelter and Urban
   Services for the Historically
   Disadvantaged Population............

BRAZIL:                                  .........  .........  .........
  Sustainable Forestry, Park                  4.98       5.32        5.2
   Protection, and Sustainable
   Alternatives to Deforest in the
   Amazon and Atlantic Coastal Rain
   Forest..............................
  Renewable Energy and Energy                 0.42      0.797        0.8
   Efficiency (Integrated Environmental
   Management Project).................
  Directed Research Component of the G-          2          2          2
   7 Pilot Program to Conserve the
   Brazilian Rain Forest...............
------------------------------------------------------------------------
 Source: USAID Management and Regional Bureaus.


    Question 3. In your testimony, you mentioned ``nothing indicates 
India is prepared to accept binding commitments'' as called for in the 
Byrd-Hagel resolution. For each of the top ten developing countries 
identified in the previous question, please discuss any public 
announcements by the governments of these countries to accept binding 
commitments consistent with the Byrd-Hagel resolution.

    Answer. Of the top ten developing and transition countries 
identified in the previous question, Russia, Ukraine, and Poland have 
each agreed to greenhouse gas target levels under the Kyoto Protocol to 
the UN Framework Convention on Climate Change. To the best of our 
knowledge, none of the remaining seven governments (China, India, 
Mexico, South Africa, Brazil, and Saudi Arabia) has to date made public 
announcements accepting binding commitments to reduce or limit 
greenhouse gas emissions.

    Question 4. For each of your projects in developing countries, 
please identify the businesses involved and non-governmental 
organizations involved. Also, indicate the extent to which taxpayer 
funds have been provided to these organizations for these programs for 
the fiscal years 1997, 1998, 1999, and proposed 2000.
    [Note: Inquiry clarified that this request pertains to information 
on energy and environment programs in USAID-assisted developing and 
transition countries.]

    Answer. USAID summarizes activities and results, including 
principal contractors, in its annual submissions to Congress. In 
addition, each Congressional Notification on new projects and 
activities lists the key U.S. implementing organizations, if known. 
Also, the Agency tracks USG funding for climate change activities in 
forty-four countries, by activity (See response to question 2b).
    Each USAID Mission keeps records on its activities, including 
partners and funding. The Agency does not require Missions to identify 
to Headquarters each private sector or NGO partner involved in each 
activity, or funding provided to each partner.

    Question 5. For each of your projects, in both developing and 
developed (Annex I) countries, please describe all projects which 
contain activities related to the Kyoto Mechanisms, including emissions 
trading, joint implementation and the Clean Development Mechanism.

    Answer. As the international development assistance arm of the U.S. 
government, USAID has a critical role to play in working with 
developing nations to reduce the rate of growth in emissions of 
greenhouse gases and decrease the threat climate change poses to 
sustainable development. USAID's climate change strategy, drafted in 
1994 in response to Congressional request and revised in 1997 (prior to 
Kyoto) to target twelve key countries and regions, implements a ``no-
regrets'' approach to climate-related intervention. ``No regrets'' 
refers to activities that provide climate change benefits in addition 
to their primary objectives of increased energy efficiency, cleaner 
energy production, more effective natural resource management and 
reduced urban pollution. This focus has been the mainstay of USAID's 
climate change program since its inception.
    Providing countries with the training and tools required to 
mitigate climate change and reduce greenhouse gas emissions in a cost-
effective manner is also central to USAID's Climate Change Initiative. 
USAID has funded, and continues to fund workshops and technical 
training sessions for developing countries on flexible, market-based 
mechanisms.
    In FY 1998 and FY 1999, USAID sponsored capacity building and 
educational training events on such flexible, market-based mechanisms. 
These events are related at least in part to elements of the UN 
Framework Convention on Climate Change (FCCC) and to market-based 
mechanisms of the type described in the Kyoto Protocol.
    With these workshops and training sessions, we were able to 
strongly emphasize the necessity of market approaches to environmental 
management, to stress the importance of broader-based participation in 
pursuing the goals of the FCCC, and to elaborate and strengthen the 
market-based mechanisms and other elements, long supported by the 
United States and included in the Kyoto Protocol, in ways that protect 
and promote U.S. interests.
    The attached summary describes activities USAID has sponsored in 
this regard.
    Attachment: USAID Activities Related to the FCCC and the Kyoto 
Protocol.

    Question 6. During your testimony you mentioned that you were not 
jointly funding any international climate related activities. You also 
mentioned that as a participant in the ``interagency team'' USAID was 
aware of all other federal climate programs. Please provide the 
planning document that sets out USAID funding by country in relation to 
activities by other agencies, including in Argentina and Russia.

    Answer. We were unable to find a statement in the transcript that 
USAID does not jointly fund international climate-related activities. 
For the record, it would be incorrect to say that USAID does not 
jointly fund any international climate-related activities. On the 
contrary, USAID works closely with other U.S. agencies, particularly 
DOE, EPA, USDA and the U.S. Forest Service, on climate-related 
activities that increase the use of renewable energy and energy 
efficiency measures, disseminate clean energy technologies, improve 
natural resource management, and reduce urban and industrial pollution 
and inefficiencies. These collaborations allow USAID to draw on 
external expertise as need arises.
    In addition to public sector collaboration, USAID is very proud of 
its private sector partnerships, in which we jointly fund climate-
related activities with private sector partners from the United States 
and developing countries. These partnerships allow the Agency to 
leverage its investment in training and capacity building into 
sustainable long-term solutions that reduce greenhouse gases in 
economically viable ways.
    In his testimony, Mr. David Hales said that the interagency team 
that works on climate change issues is aware of what each of the 
agencies are doing. This interagency team is composed of 
representatives from all of the U.S. agencies addressing climate 
change. The team meets frequently to discuss and develop policy and to 
assure that the various agencies are coordinating their activities, 
where applicable, to allow the United States to best meet its foreign 
and domestic policy goals.
    While there is no formal planning document that sets out USAID 
funding by country in relation to activities by other agencies, the OMB 
Report to Congress on Federal Climate Change Expenditures details 
funding by agency for climate change (see attachment to question 1c).

    Question 7. During last week's hearing you testified that USAID has 
an internal and an external process for determining which technologies 
are suitable for inclusion in AID funded programs. Please provide these 
studies and indicate: 1) the non-governmental organizations that have 
supplied the analysis, and 2) any peer review done on these documents. 
Also, please provide documentation on which governmental staff and 
organizations participated in these evaluations.

    Answer. In response to Sen. Hagel's question as to how USAID 
determines appropriate technologies for our energy programs and whether 
that expertise comes from inside or outside the Agency, I noted that 
USAID does both. As I said during the hearing, USAID has very talented 
folks within the Agency, and that we also often rely on experts from 
outside the Agency to help us determine appropriate technologies.
    USAID uses a variety of methods for determining which technology is 
appropriate for demonstration or application in developing countries, 
including using recommendations from experienced USAID field and 
technical staff, existing literature and case studies, and 
commissioning feasibility studies and field assessments. USAID often 
relies on U.S. agencies such as Department of Energy laboratories or 
the U.S. Forest Service to assist in or to undertake assessments. In 
addition, USAID works closely with indigenous institutions in recipient 
countries to assess and recommend appropriate technologies.
    Attached are representative samples of documents and organizations 
USAID uses in technology assessments for the energy, natural resource, 
and urban sectors. A complete compilation of technology assessments for 
each activity under USAID's Climate Change Initiative, with details on 
level of NGO involvement, peer review and a listing of participants 
involved in the analysis, would require a substantial effort by mission 
staff not required under existing reporting requirements. We are, 
however, happy to provide technology assessments for specific 
activities upon request.

    Question 8. For technologies approved for your programs please 
provide documentation on current costs to deploy these technologies, 
current use of these technologies in the United States, and required 
taxpayer subsidies for deployment of these technologies in the United 
States.

    Answer. USAID considers the deployment of economically viable 
technologies to be a key element of its sustainable development 
strategy. Technology scoping exercises for field application routinely 
cite the costs and benefits associated with deployment. A consideration 
of the cost-effectiveness of technology options is essential for 
attracting private sector investment and assuring long-term 
sustainability.
    An exhaustive assessment of costs to deploy each technology and 
their current use in the United States would require a substantial 
effort by USAID Mission staff not required under existing reporting 
requirements. However, in the technology assessments provided in 
response to question 7, we have flagged the cost estimates for 
deployment.
    USAID does not have information on U.S. levels of taxpayer subsidy 
for domestic deployment of these technologies.

    Question 9. For technologies deployed through AID programs, please 
provide estimates of the full cost of greenhouse gas emissions 
reduction in dollars per metric ton carbon equivalent using such 
technologies.

    Answer. Estimates for greenhouse gas emissions reductions in 
dollars per metric ton of carbon equivalent vary widely depending upon 
the technology and specific application. Factors such as fuel type and 
quality, estimation of quantity of fuel replaced or saved, the 
efficiency of the technology, and various other factors combine to make 
estimation difficult.
    Under its Climate Change Initiative, USAID tracks agency-wide 
climate change funding by activity. It also measures quantitative 
results for all climate-related activities using thirteen indicators. 
These indicators measure policy and regulatory advances, training and 
capacity building, dollars leveraged and greenhouse gas emissions 
avoided through USAID climate-related activities. However, since most 
climate-friendly technology deployment is coupled with policies or 
programs that have other objectives than just greenhouse gas emissions 
reductions--such as power sector reform or sustainable forest 
management--it would be misleading to assess the cost per metric ton of 
greenhouse gas emissions reductions by simply relating funding for an 
activity with the greenhouse gas emissions avoided by that activity.

    Question 10. During the hearing last week you testified that all 
AID activities are consistent with the voluntary commitments of the UN 
Convention on Climate Change. However, I am unaware of any provision in 
that treaty that provides for the trading of greenhouse gas emissions. 
If you believe that there is such a provision, please identify the 
provision, and explain how it would or could authorize AID to fund 
emissions trading activities.

    Answer. The UN Framework Convention on Climate Change, to which the 
United States is a party, provides that the United States is obligated 
to ``promote and cooperate in the development, application, and 
diffusion, including transfer, of technologies, practices and processes 
that control, reduce or prevent anthropogenic emissions of greenhouse 
gases . . .'' It adds that parties have additional obligations to 
``promote and cooperate in education, training and public awareness 
related to climate change and encourage the widest participation in 
this process . . .''.
    USAID programs are part of the Administration's efforts to engage 
developing countries in activities that help them to build capacity and 
understand how these mechanisms might work to reduce global greenhouse 
gas emissions in cost-effective ways, while promoting sustainable 
development and supporting U.S. interests. USAID believes emissions 
trading to be one of the potential tools for meeting all three 
objectives.

    Question 11. Please provide the Committee with any written legal 
opinion or decision and all reports, memoranda, or notes concerning any 
oral or written communications regarding AID's ability to fund emission 
trading programs.

    Answer. To the best of my knowledge, USAID has neither requested, 
drafted, nor received legal opinions, decisions, reports, memoranda, or 
notes concerning any oral or written communications regarding the 
Agency's ability to fund emissions trading programs.

                                   - 
