[Senate Hearing 109-879]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-879
 
U.S.-INTERNATIONAL CLIMATE CHANGE APPROACH: A CLEAN TECHNOLOGY SOLUTION

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON INTERNATIONAL ECONOMIC
                   POLICY, EXPORT AND TRADE PROMOTION

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 14, 2005

                               __________

       Printed for the use of the Committee on Foreign Relations


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
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                     COMMITTEE ON FOREIGN RELATIONS

                  RICHARD G. LUGAR, Indiana, Chairman

CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia               CHRISTOPHER J. DODD, Connecticut
NORM COLEMAN, Minnesota              JOHN F. KERRY, Massachusetts
GEORGE V. VOINOVICH, Ohio            RUSSELL D. FEINGOLD, Wisconsin
LAMAR ALEXANDER, Tennessee           BARBARA BOXER, California
JOHN E. SUNUNU, New Hampshire        BILL NELSON, Florida
LISA MURKOWSKI, Alaska               BARACK OBAMA, Illinois
MEL MARTINEZ, Florida
                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                 ------                                

    SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY, EXPORT AND TRADE 
                               PROMOTION

                    CHUCK HAGEL, Nebraska, Chairman

LAMAR ALEXANDER, Tennessee           PAUL S. SARBANES, Maryland
LISA MURKOWSKI, Alaska               CHRISTOPHER J. DODD, Connecticut
MEL MARTINEZ, Florida                JOHN F. KERRY, Massachusetts
GEORGE V. VOINOVICH, Ohio            BARACK OBAMA, Illinois
  

                            C O N T E N T S

                              ----------                              
                                                                   Page
Alexander, Hon. Lamar, U.S. Senator from Tennessee...............     3

Claussen, Eileen, President, Pew Center on Global Climate Change.    47

    Prepared statement...........................................    49

Connaughton, Hon. James L., Chairman, White House Council on 
  Environmental Quality..........................................     3

    Prepared statement...........................................    10

Dobriansky, Hon. Paula J., Ph.D., Under Secretary for Democracy 
  and Global Affairs, Department of State........................    11

    Prepared statement...........................................    14

Garman, Hon. David, Under Secretary for Energy, Science and 
  Environment, Department of Energy..............................    19

    Prepared statement...........................................    21

Hagel, Hon. Chuck, U.S. Senator from Nebraska....................     1

                                APPENDIX
              Additional Material Submitted for the Record

Biden, Hon. Joseph R., Jr., prepared statement...................    59

Chevron, prepared statement......................................    60

Friedmann, Dr. S. Julio, prepared statement......................    61

Montgomery, W. David, Ph.D., prepared statement..................    65


                   U.S.-INTERNATIONAL CLIMATE CHANGE
                      APPROACH: A CLEAN TECHNOLOGY
                                SOLUTION

                              ----------                              


                       MONDAY, NOVEMBER 14, 2005

                                       U.S. Senate,
 Subcommittee on International Economic Policy, Export and 
                                           Trade Promotion,
                            Committee on Foreign Relations,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 3:01 p.m. in 
Room SD-419, Dirksen Senate Office Building, Hon. Chuck Hagel 
presiding.
    Present: Senators Hagel [presiding] and Alexander.

                 STATEMENT OF HON. CHUCK HAGEL,
                   U.S. SENATOR FROM NEBRASKA

    Senator Hagel. Good afternoon. This past February the UN 
Global Climate Treaty, known as the Kyoto Protocol, entered 
into force, requiring more than 30 industrialized nations to 
significantly reduce man-made greenhouse gas emissions by 2012. 
As you are all aware, the United States is not a party to that 
agreement. In July 1997 the Senate unanimously passed 
Resolution 98, the Byrd-Hagel Resolution, which called on the 
President not to sign any treaty or agreement in Kyoto unless 
two conditions were met: first, the United States should not be 
party to any legally binding obligations on greenhouse gas 
emissions reductions unless developing country parties are also 
required to meet similar standards; second, the President 
should not sign any treaty that would result in serious harm to 
the economy of the United States. The Kyoto Protocol did not 
meet either of these conditions and President Clinton never 
submitted it to the Senate for ratification.
    Climate change remains a global challenge in need of a 
global response. In February I proposed comprehensive 
bipartisan climate change legislation which I believe will 
contribute to new domestic and international consensus on 
climate change and engage the United States in a leadership 
role on climate change. This summer the Senate passed the 
Energy Policy Act of 2005, has been signed into law by the 
President. The bill included the major provisions of my climate 
change legislation, which included the promotion and adoption 
of technologies that reduce greenhouse gas intensity in the 
U.S. and developing countries.
    We are here today to discuss this new law and 
implementation of these climate changes. Current international 
approaches to global climate change tend to overlook the role 
of developing countries as part of either the problem or the 
solution. This makes little sense if the goal is to reduce 
global emissions. China alone will soon become the world's 
largest emitter of manmade greenhouse gasses. At the same time, 
China and other developing countries still lag behind developed 
countries in living standards and other quality of life 
indicators. It is in the shared interest of the United States 
and all industrialized nations therefore to help developing 
countries maintain their economic growth while leapfrogging 
over the highly polluting stages of development that we have 
already passed through.
    This new law elevates climate policy to a high priority on 
the U.S. foreign policy agenda. It also seeks to promote the 
export of and investment in technologies, practices, and 
knowledge that will reduce greenhouse gas emissions around the 
world. The law lowers trade barriers and supports exchanges, 
training, and demonstration projects. These projects cover 
everything from carbon sequestration and clean coal to low 
emission vehicles and cogeneration.
    The Department of State is designated as the lead agency, 
with significant responsibilities for the U.S. Trade 
Representative, the Department of Energy, USAID, OPIC, and 
international financial institutions.
    Achieving reductions in greenhouse gas emissions worldwide 
is one of the important challenges of our time. America has an 
opportunity and a responsibility for global climate policy 
leadership. But this is a responsibility to be shared by all 
nations.
    I look forward to working with the Bush administration, the 
private sector, public interest groups, as well as America's 
friends and allies in implementing this achievable climate 
change policy. By harnessing our many strengths, we can help 
shape a worthy future for all people and build a better world.
    Today's hearing will examine the framework of the 
administration's approach to implementing international climate 
change policy in the Energy Policy Act of 2005. In addition, we 
are here to learn about the path forward on the Asia-Pacific 
Partnership regarding climate change.
    The first panel of witnesses today will include: Jim 
Connaughton, Chairman of the Council on Environmental Quality; 
Paula Dobriansky, Under Secretary of State for Global Affairs; 
David Garman, Under Secretary of Energy for Energy, Science, 
and Environment. The second panel will be Eileen Claussen, 
President of the Pew Center on Global Climate Change. Ladies 
and gentlemen, we thank you for your time today and we 
appreciate very much your contributions. I would remind each of 
you that your full text will be included in the record, so if 
you care to give the entire text that is okay. If you would 
like to give a summary version, that is acceptable as well.
    We have just been joined by our colleague from the State of 
Tennessee, Senator Alexander. Senator Alexander, do you have 
any comments?

               STATEMENT OF HON. LAMAR ALEXANDER,
                  U.S. SENATOR FROM TENNESSEE

    Senator Alexander. I look forward to the testimony. I 
congratulate Senator Hagel for his leadership on this in 
forcing us to confront more clearly the issues that are 
involved in climate change. My questions, after I hear the 
testimony, will be oriented toward how we as a Congress can 
encourage the innovation in technology that will help us, as 
you have suggested in the legislation that you proposed and I 
co-sponsored, that will help us have a larger amount of our new 
energy from carbon-free or low-carbon, low-carbon sources.
    I want to specifically--I will specifically be referring to 
the work that the National Academy of Sciences has recently 
done at the request of Senator Domenici and Senator Bingaman 
and myself, which is to identify how we keep our advantage in 
science and technology so that we are able to maintain our 
standard of living, so we can keep our jobs and keep America on 
top. As Dr. Chu, one of the panelists of the National Academy 
said, a former Nobel prize-winning physicist, said: The most 
important thing we can do is keep our advantage in science and 
technology and the most important problem to solve is energy.
    I look forward to the testimony and I have some specific 
questions that I want to ask about to what extent the Congress 
is interfering with or how can we better help the country and 
the administration succeed in being more aggressive in seeking 
new sources of clean carbon-free or low-carbon energy.
    Senator Hagel. Senator Alexander, thank you.
    Mr. Connaughton, we will begin with you. Good afternoon. 
Thank you.

 STATEMENT OF HON. JAMES L. CONNAUGHTON, CHAIRMAN, WHITE HOUSE 
                COUNCIL ON ENVIRONMENTAL QUALITY

    Mr. Connaughton. Good afternoon, Mr. Chairman, and thank 
you. I want to thank you and the members of the committee--
Senator Alexander, it is good to see you again--for the 
constructive dialogue we have had over the last several years 
on this important bundle of issues related to clean development 
and climate change.
    I thank you for inviting me to testify today on behalf of 
the Bush administration to describe for you our vision for 
addressing what really are interconnected challenges of 
promoting economic growth and development, eradicating poverty, 
of improving energy security, reducing harmful air pollution, 
and tackling this long-term challenge of climate change.
    In particular, Mr. Chairman, I want to congratulate you, 
Senator Pryor, Senator Alexander, and your bipartisan co-
sponsors for your successful amendment to the Energy Policy Act 
of 2005. The authority that it provides and the direction that 
it gives will help us advance a broad, common ground agenda for 
action domestically and internationally among both 
industrialized and developing nations.
    The key to success of your amendments to the Energy Policy 
Act is a realistic understanding of the needs of the major 
developing countries. Shortly before the G-8 meeting this year 
in Gleneagles, Scotland, President Bush said: ``The best way to 
help nations develop while limiting pollution and improving 
public health is to promote technologies for generating energy 
that are clean, affordable, and secure.'' Some have suggested 
the best solution to environmental challenges and climate 
change is to oppose development and put the world on an energy 
diet. But at this moment about two billion people have no 
access to any form of modern energy. Blocking that access would 
condemn them to permanent poverty, disease, high infant 
mortality, polluted water, and polluted air.
    In the President's words, we are taking a better approach. 
In the last 3 years the United States has launched a series of 
initiatives to help developing countries adopt new energy 
sources, from cleaner use of coal to hydrogen vehicles, to 
solar and wind power, to the production of clean-burning 
methane, and to less polluting power plants. We continue to 
look for more opportunities to deepen our partnerships with 
developing nations. The whole world benefits when developing 
nations have the best and latest energy technologies.
    Over the past 4 years the Bush administration has been 
building the structure of a more constructive, practical, and 
realistic approach to international action on clean development 
and climate change. This strategy is producing real results and 
it is centered around three essential aspects.
    One is technology development, and you will hear a lot 
about that from Under Secretary Garman today. The second is 
about technology deployment, and I think Under Secretary 
Dobriansky will have something to say about that. The third--
and this is the glue--is a better integration of our 
development goals, our integration of our environmental 
improvement goals related to pollution, our climate change 
strategies for reducing greenhouse gasses, and the fundamental 
of energy to promote economic growth.
    At the domestic level the President has set a national goal 
of reducing the greenhouse gas intensity of the U.S. economy by 
18 percent by 2012. To help achieve that goal, we established 
strong partnerships for action with the private sector, 
including major partnerships among the most highly emitting 
sectors in our economy, including programs at DOE as well as 
programs at EPA. We have dozens of mandatory, voluntary, and 
other incentive-based programs under way.
    Importantly, this year's energy bill, nearly every major 
provision of it will help advance and deploy many of the 
President's priorities for cleaner, more efficient, and less 
greenhouse gas-intensive energy systems. The energy bill 
includes over $11 billion in incentives for the production of 
wind, geothermal, and solar power, consumer tax credits for the 
purchase of highly fuel efficient, hybrid and clean diesel 
vehicles, and hopefully in the near future hydrogen vehicles, 
incentives for clean coal technology, a new structure for 
emission-free nuclear power, as well as incentives and 
mandatory requirements related to the use of renewable 
biofuels.
    These new authorities will help us maintain the steady 
progress we have made in recent years toward the President's 
greenhouse gas intensity goal, and this is a good news story. 
If you look at Chart No. 1 to my left, between 2000 and 2003 
the United States managed to hold its net greenhouse gas 
emissions nearly constant while growing our economy by nearly 
$1.5 trillion. That is about the size of the entire economy of 
China. At the same time, we increased our population by more 
than 9.5 million people. That is about the size of the country 
of Sweden.
    This emission trend is the fifth best among major countries 
during these 4 years. Now, if you add to that air pollution, 
air pollution has been reduced in America by nearly 10 percent 
in that same period. So we are on the right trajectory.
    Preliminary estimates of CO2 for 2004 indicate a 
possible increase of about 1.7 percent, though the final data 
for 2004 will likely show offsetting emission reductions in the 
more potent greenhouse gasses, such as methane. The total 
should therefore be well below the 4.3 percent GDP growth that 
we experienced last year. Not only does that put us well on 
track to meeting the President's emission intensity goal, it 
also is a firm example of the kind of approach, Mr. Chairman, 
that you put into your amendment of a focus on intensity as the 
most useful metric for understanding our performance.
    Now let us turn to the international outlook. Data 
collected by the Energy Information Administration reinforces 
the importance of continued partnership among mature and 
emerging economies on energy technology and deployment. Chart 2 
here demonstrates that by 2010 carbon dioxide emissions from 
emerging economies, such as China and India, will surpass those 
from mature market economies like the United States.
    The picture on air pollution is quite similar. Our air 
pollution is declining; in the major emerging economies it is 
increasing.
    Just as we seek to reduce our own emission intensity, other 
fast-growing economies of the world do have significant 
opportunities to substantially reduce their own emission 
intensity, as this next chart demonstrates, also produced by 
the Energy Information Administration. If you look at countries 
such as Russia, China, the Middle East, Eastern Europe, and 
India, this is a projection of the kind of opportunities that 
your legislation can help enable. The international cooperation 
and investment that will come from your amendment to the energy 
bill will help us achieve this kind of a projection of 
progress.
    Let me give you two examples, then, of the partnerships, 
tangible ones, that will help us pull this off. First, last 
year we created the multilateral Methane to Markets 
Partnership, which focuses on the profitable--I underline the 
word ``profitable''--deployment of existing technologies and 
practices for the capture and use of the clean-burning fuel 
methane, which is the main component of natural gas. We are 
going to capture it and use it from landfills, from coal mines, 
from animal waste management systems, and from leaky gas 
production and distribution systems.
    This innovative partnership has a goal of reducing the 
carbon equivalent of 50 million metric tons by 2015. This 
partnership alone would then account for about one-tenth of the 
total emissions that the Kyoto Protocol countries would be 
trying to achieve. At the same time, we would be reducing 
methane, which is a potent air pollutant and also poses a 
safety hazard. So we meet combined objectives through that.
    That is why, with the good impetus of your legislation, 
that we can build on this approach through the more recent and 
much more consequential multilateral initiative, the Asia-
Pacific Partnership for Clean Development and Climate. The six 
major nations in this partnership include Australia, China, 
India, Japan, Korea, and the United States, which together 
account for half of the world's economy, energy use, and 
greenhouse gas emissions.
    In announcing the Asia-Pacific Partnership on July 27, 
2005, President Bush said that: ``This new results-oriented 
partnership will allow our nations to develop and accelerate 
deployment of cleaner, more efficient energy technologies to 
meet our national pollution reduction, energy security, and 
climate change goals in ways that reduce poverty and promote 
economic development.''
    With the chairman's permission, I would like to submit the 
materials that accompanied the President's statement in the 
announcement of that partnership, which includes a vision 
statement that was crafted by all six countries.
    Senator Hagel. It will be included in the record.


    [The information previously referred to follows:]

    [GRAPHIC] [TIFF OMITTED] T3730.001
    
    [GRAPHIC] [TIFF OMITTED] T3730.002
    
    [GRAPHIC] [TIFF OMITTED] T3730.003
    
    Mr. Connaughton. When he signed the Energy Policy Act of 
2005, the President praised the legislative authority that you 
provided for the Asia-Pacific Partnership. As we approach the 
formal launch of the partnership in Australia after the new 
year, we hope to work with you, Mr. Chairman, Senator 
Alexander, and the other members of the committee to ensure 
that your legislation is effectively implemented and 
appropriately funded.
    I thank you for the opportunity to testify and I look 
forward to our exchange.


    [The prepared statement of Mr. Connaughton follows:]

Prepared Statement by Hon. James L. Connaughton, Chairman, White House 
                    Council on Environmental Quality

    Mr. Chairman, I want to thank you and the Members of this committee 
for your leadership on clean development and climate change issues. And 
I thank you for inviting me to testify today on the Bush 
administration's vision for addressing the interconnected challenges of 
economic growth and development, poverty eradication, energy security, 
pollution reduction, and climate change.
    I also want to congratulate you, Mr. Chairman, Senator Pryor, and 
your bipartisan cosponsors, for your successful amendment to the Energy 
Policy Act of 2005. The authority it provides will help us advance a 
broad common ground for action domestically and internationally by both 
industrialized and developing countries.
    Shortly before the G-8 meeting this year in Gleneagles, Scotland, 
President Bush said:

        ``The best way to help nations develop while limiting pollution 
        and improving public health is to promote technologies for 
        generating energy that are clean, affordable and secure. Some 
        have suggested the best solution to environmental challenges 
        and climate change is to oppose development and put the world 
        on an energy diet. But at this moment, about two billion people 
        have no access to any form of modern energy. Blocking that 
        access would condemn them to permanent poverty, disease, high 
        infant mortality, polluted water and polluted air.''

        ``We're taking a better approach. In the last 3 years, the 
        United States has launched a series of initiatives to help 
        developing countries adopt new energy sources, from cleaner use 
        of coal to hydrogen vehicles, to solar and wind power, to the 
        production of clean-burning methane, to less-polluting power 
        plants. And we continue to look for more opportunities to 
        deepen our partnerships with developing nations. The whole 
        world benefits when developing nations have the best and latest 
        energy technologies.''

    Over the past 4 years, the Bush administration has been building 
the structure of a more constructive, practical and realistic approach 
to international action on clean development and climate change. In 
February 2002, the President announced a comprehensive domestic and 
international strategy for addressing the serious, long-term challenge 
of global climate change. This strategy is producing real results.
    The President set a national goal of reducing the greenhouse gas 
intensity of the U.S. economy 18 percent by 2012. We established strong 
partnerships for action with the private sector, including DOE's 
Climate VISION program and EPA's Climate Leaders program. We have taken 
the lead on transformational technology development initiatives such as 
the Hydrogen Fuel Initiative to accelerate the future of an emissions-
free hydrogen transportation system, and FutureGen, which will 
demonstrate the world's first coal-fueled power plant that will produce 
almost no harmful air pollution or greenhouse gases.
    And nearly every major provision of the broader Energy Bill enacted 
this summer will help advance and deploy many of the President's 
priorities for cleaner, more efficient, and less greenhouse gas 
intensive energy systems, including over 11 billion dollars in 
incentives for production of wind, geothermal and solar power, consumer 
tax credits for highly fuel efficient hybrid and clean diesel vehicles, 
clean coal technology, emissions-free nuclear power, and renewable bio-
fuels.
    These new authorities will help us maintain the steady progress we 
have made in recent years toward the President's greenhouse intensity 
goal. [CHART 1], Between 2000 and 2003, the United States managed to 
hold its net greenhouse gas emissions nearly constant, while growing 
our economy by nearly 1.5 trillion dollars--almost the size of the 
entire economy of China--and increasing our population by more than 9.5 
million people--about the size of Sweden. This emission trend is the 
fifth best among major countries during these 4 years. These reductions 
come from desirable improvements in efficiency and deployment of 
advanced energy technologies and practices, and continued structural 
shifts in our economy to lower emitting industries, and an undesirable 
shift of higher-emitting energy intensive industries to other countries 
with significantly lower energy costs.
    Preliminary estimates CO2 for 2004 indicate a possible 
increase of 1.7 percent, though the final data for 2004 will likely 
show offsetting emissions reductions in the more potent greenhouse 
gases such as methane. The total should therefore be well below the 4.3 
percent GDP growth we experienced last year, putting us well on track 
to meeting the President's emission intensity goal.
    As we seek to reduce our own emissions intensity, other fast 
growing economies of the world have significant opportunities to 
substantially reduce their emissions intensity. [CHART 2] The 
international cooperation and investment that Title 16 of the Energy 
Bill authorizes are essential to ongoing progress globally.
    Undersecretary Garman will discuss the administration's leadership 
in launching and revitalizing a series of international technology 
development initiatives on issues ranging from hydrogen, to nuclear 
power, to carbon capture and storage.
    Undersecretary Dobriansky will highlight the bilateral clean energy 
and climate agreements with 15 countries and regional organizations 
accounting for nearly 80 percent of the world's greenhouse gas 
emissions. And last year we created the multilateral Methane to Markets 
Partnership, which focuses on the profitable deployment of existing 
technologies and practices for the capture and use of this clean 
burning fuel--the main component of natural gas--from landfills, coal 
mines, animal waste management systems, and leaky gas production and 
distribution systems. This innovative partnership seeks to reduce the 
carbon equivalent of 50 million metric tons by 2015.
    Data collected by the Energy Information Administration reinforces 
the importance of continued partnership among mature and emerging 
economies on energy technology development and deployment. [CHART 3] By 
2010 carbon dioxide emissions from emerging economies, such as China 
and India, will surpass those from mature market economies like the 
United States.
    That is why, this summer, we introduced our most recent, and even 
more consequential, multilateral initiative, the Asia Pacific 
Partnership for Clean Development and Climate. The six major nations in 
this partnership--Australia, China, India, Japan, Korea, and the United 
States--account for half of the world's economy, energy use, and 
greenhouse gas emissions. In announcing the Asia Pacific Partnership on 
July 27, 2005, President Bush said that:

        ``This new results-oriented partnership will allow our nations 
        to develop and accelerate deployment of cleaner, more efficient 
        energy technologies to meet national pollution reduction, 
        energy security, and climate change concerns in ways that 
        reduce poverty and promote economic development.''

    When he signed the Energy Policy Act of 2005, the President praised 
the legislative authority it provides for the Asia Pacific Partnership. 
As we approach the formal launch of the Partnership in Australia after 
the New Year, we hope to work with you, Mr. Chairman, to ensure that 
your legislation is effectively implemented and appropriately funded.
    I thank you for the opportunity to testify. I look forward to 
responding to any questions you may have.


    Senator Hagel. Mr. Connaughton, thank you.
    Under Secretary Dobriansky, welcome.

 STATEMENT OF HON. PAULA J. DOBRIANSKY, PH.D., UNDER SECRETARY 
     FOR DEMOCRACY AND GLOBAL AFFAIRS, DEPARTMENT OF STATE

    Secretary Dobriansky. Thank you, Mr. Chairman, Senator 
Alexander. I welcome this opportunity to describe some of the 
Bush administration's international activities in the 
development and commercialization of clean and efficient energy 
technologies. I am particularly pleased to discuss Title XVI, 
subtitle B, of the Energy Policy Act of 2005, which, like the 
administration, emphasizes a practical, technology-based focus 
on climate change, and also to outline our new Asia-Pacific 
Partnership on Clean Development and Climate.
    The administration's international engagement on climate 
change centers on five fundamental ideas: First, a successful 
international response to climate change requires developing 
country participation on near-term efforts to slow the growth 
in emissions and longer-term efforts to build capacity for 
future cooperative actions.
    Second, we should view climate change goals as part of a 
broader development agenda--one that improves energy security, 
promotes economic growth and development, reduces air 
pollution, mitigates greenhouse gases, and eradicates poverty. 
This message resonates with developing countries.
    Third, technologies are key to meeting these objectives.
    Fourth, international efforts should be pursued in a spirit 
of collaboration and a sense of partnership.
    Finally, we need to work collaboratively with the private 
sector.
    We are putting these ideas into practice. Since 2001, we 
have established bilateral climate partnerships with 15 
countries and regional organizations that, together with us, 
comprise some 80 percent of global greenhouse gas emissions. 
These partnerships serve as the umbrella for over 400 
collaborative activities on science, technology and policy 
issues.
    We have also initiated and participate in a range of new 
science and technology initiatives designed to meet climate and 
clean development goals. For example, the Group on Earth 
Observations has developed a plan for an intergovernmental, 
comprehensive, coordinated and sustained Earth observation 
system to improve environmental monitoring and forecasts, which 
now has been approved by 58 countries and the European 
Commission. Our international energy research and development 
partnerships include GEN IV (the Generation IV Nuclear 
Partnership), the Carbon Sequestration Leadership Forum, the 
International Partnership for the Hydrogen Economy, and 
International Thermonuclear Experimental Reactor, ITER, which 
lend new international emphasis to strategic technologies that 
can make a large contribution to our efforts to reduce 
greenhouse gas intensity and diversify the global energy 
portfolio.
    The Methane to Markets Partnership focuses on advancing 
cost-effective near-term recovery of methane, a potent 
greenhouse gas, and its use as a clean energy source. As Jim 
indicated, the partnership targets four major areas: methane 
sources, landfills, underground coal mines, natural gas and oil 
systems, and agricultural sources. With 17 partners, it 
represents over 60 percent of global methane emissions.
    In addition, during the 2002 World Summit on Sustainable 
Development, the United States established many public-private 
partnerships, including the Clean Energy Initiative. I want to 
describe what this initiative entails. There are four programs: 
the Global Village Energy Partnership, which is led by the 
United States Agency for International Development, which seeks 
to increase access to modern energy sources in developing 
countries in a manner that enhances economic and social 
development and reduces poverty; the Partnership for Clean 
Indoor Air, led by the Environmental Protection Agency, which 
addresses increased environmental health risks faced by more 
than two billion people in the developing world who burn 
traditional biomass fuel indoors; the Partnership for Clean 
Fuels and Vehicles, also led by the Environmental Protection 
Agency, will help reduce air pollution in developing countries 
by promoting the elimination of lead in gasoline and 
encouraging the adoption of cleaner vehicle technologies. 
Efficient Energy for Sustainable Development, led by the 
Department of Energy, aims to improve the productivity and 
efficiency of energy systems.
    Also at WSSD, the United Kingdom launched the Renewable 
Energy and Energy Efficiency Partnership, which aims to 
accelerate the marketplace for renewable energy and energy 
efficiency. The United States joined this partnership in 2004.
    Our approach puts climate change in the context of broader 
development goals. During July's G-8 meetings, leaders agreed 
to a plan of action on climate change, clean energy, and 
sustainable development. The plan is based on over 50 specific 
practical activities, mostly focused on technology development, 
that put climate change goals in the context of other 
development imperatives, including poverty eradication.
    While building on these practical actions and multiple 
benefit approaches, we announced in July the Asia-Pacific 
Partnership for Clean Development and Climate to promote 
greenhouse gas intensity reduction and other clean development 
goals. The partnership reflects the extent to which we have 
been able to arrive at commonly agreed upon approaches toward 
climate change with a number of key countries. The six 
countries that make up, currently make up this partnership--
Australia, China, India, Japan, Korea, and us--represent 
approximately half of the world's economy, population, and 
greenhouse gas emissions.
    Mr. Chairman, in the spirit of the Hagel-Pryor amendment, 
partners will work to create new investment opportunities, 
build local capacity, and remove barriers to the introduction 
of clean, more efficient technologies. This effort cannot 
succeed without strong private sector involvement and we are 
reaching out to them. The ministerial launch will take place in 
January in Australia.
    Finally, I would like to just discuss the Hagel-Pryor 
amendment to the Energy Policy Act of 2005. The administration 
welcomes this legislation. We believe that reducing greenhouse 
gas intensity is the best metric for measuring progress in 
climate change policy. We are now actively working to fulfill 
the initial requirements of Title XVI, subtitle B, climate 
change technology deployment in developing countries. We expect 
to have a report to you in February that identifies the major 
emitters of greenhouse gasses and provides a range of baseline 
information to the Congress on progress on greenhouse gas 
intensity reduction projects, obstacles to implementation, and 
opportunities for greater advancement, and which will serve as 
a basis for developing our strategy on these issues.
    We have active collaboration already in many of these 
countries, but in many cases that collaboration can be 
considerably strengthened. We will work to ensure that our 
international cooperation in this area is based on the 
practical collaborative approach that we have developed with 
our partners to date.
    We expect the Asia-Pacific Partnership to be one of the key 
means through which we implement our actions under the Energy 
Policy Act. Our partners China, India, and Korea rank first, 
second, and third respectively among fast-growing 
industrializing economies in terms of 2003 carbon dioxide 
emissions from the consumption and flaring of fossil fuels. The 
partnership explicitly references greenhouse gas intensity 
reduction among its clean development goals.
    We also see that a range of existing programs can 
contribute to these efforts and that we can strengthen these 
programs and develop new strategies for achieving the 
objectives of the title.
    In conclusion, meeting the challenge of the expected future 
growth in global energy demand and reducing greenhouse gas 
emissions will require a transformation in the way the world 
produces and consumes energy over the next generation and 
beyond. It will require new ways of collaborating with our 
partners to break through longstanding stalemates. This is why 
we are leading global efforts to develop and deploy 
transformational technologies for both the developed and 
developing world.
    I thank you for this opportunity to testify before the 
subcommittee and look forward to responding to any questions 
you may have. I am submitting a longer version of my testimony 
for the record.
    Thank you.


    [The prepared statement of Dr. Dobriansky follows:]

Prepared Statement of Hon. Paula J. Dobriansky, Ph.D., Under Secretary 
     of State for Democracy and Global Affairs, Department of State

    Mr. Chairman, members of the subcommittee, thank you for the 
opportunity to appear before you today to address the ``U.S.-
International Climate Change Approach: A Clean Technology Solution.'' 
During this afternoon's testimony my colleagues and I will describe the 
numerous activities that the Bush administration is taking to support 
the multiple goals of improving energy security, promoting economic 
growth and development, reducing air pollution, mitigating greenhouse 
gases and eradicating poverty.
    I am particularly pleased to discuss here today Title XVI, Subtitle 
B of the Energy Policy Act of 2005--which is in keeping with the 
administration's practical, technology-based focus to this issue--and 
to outline our new Asia Pacific Partnership on Clean Development and 
Climate.
    In his June 2001 and February 2002 climate change policy speeches 
President Bush highlighted the importance of international cooperation 
in developing an effective and efficient response to the complex and 
long-term challenge of climate change.\1\
---------------------------------------------------------------------------
    \1\http://www.whitehouse.gov / news / releases / 2001 / 06 / 
20010611-2.html and http://www.white house.gov / news / releases / 2002 
/02 / 20020214-5.html
---------------------------------------------------------------------------
    The administration's international engagement on climate change 
issues centers on five key ideas, all of which extend from and build on 
our own experience here in the United States. First, a successful 
international response to climate change requires developing country 
participation, which includes both near-term efforts to slow the growth 
in emissions and longer-term efforts to build capacity for future 
cooperation actions. Absent the participation of all major emitters, 
including developing countries, the goal of stabilizing GHG 
concentrations will remain elusive.
    Second, we will make more progress on this issue over time if we 
recognize that climate change goals fall within a broader development 
agenda--one that promotes economic growth, reduces poverty, provides 
access to modern sanitation and clean water, enhances agricultural 
productivity, provides energy security, reduces pollution, and 
mitigates greenhouse gas emissions. Countries do not look at individual 
development goals in a vacuum, and approaches that effectively 
integrate both near- and longer-term goals will yield more benefits 
over time.
    Third, technology is the glue that can bind these development 
objectives together. By promoting the development and deployment of 
cleaner and more efficient technologies, we can meet a range of diverse 
development and climate objectives simultaneously.
    Fourth, we need to pursue our international efforts in a spirit of 
collaboration, not coercion, and with a true sense of partnership. This 
is especially true in our relations with developing countries, which 
have an imperative to grow their economies and provide for the welfare 
of their citizens. Experience has shown these countries to be quite 
skeptical of climate mitigation approaches that they think will divert 
them from these fundamental goals. It is also true that many of the 
largest greenhouse gas emitters are also among our most significant 
trading partners. They have rapidly advancing--in many cases, world 
class--industries and considerable technical wherewithal. We view 
countries like China and India as responsible partners in our efforts.
    Finally, we need to engage the private sector to be successful. 
While the right kind of government-to-government collaboration can pave 
the way for great progress, we will need to harness the ingenuity, 
resources and vision of the private sector in developing and deploying 
technology.
    We are putting these ideas into practice. Since 2001, we have 
established a range of partnerships that will address key aspects of 
the climate challenge while also advancing other important 
international objectives. We have established bilateral climate 
partnerships with 15 countries and regional organizations that, 
together with us, comprise some 80 percent of global greenhouse gas 
emissions. These partnerships serve as the umbrella for over 400 
collaborative activities undertaken by U.S. agencies and their partners 
on science, technology and policy issues. Through these partnerships, 
U.S. experts are working with Australia and New Zealand to strengthen 
our capacity to monitor climate in the Pacific; with India to promote 
local level pollution and energy solutions that will have greenhouse 
gas intensity benefits; with Brazil to promote effective application of 
renewable energy; with Japan and Korea to promote greater integration 
of climate and energy strategies throughout Asia; and with China to 
enhance technical capacity for climate-related decisionmaking.
    In addition to our bilateral partnerships, we have initiated and 
participate in a range of new technology initiatives designed to meet 
climate and clean development goals. Let me briefly highlight a few of 
the most significant partnerships:

     Group on Earth Observations: \2\ On July 31, 2003, the United 
States hosted 33 nations--including many developing nations--at the 
inaugural Earth Observation Summit (EOS), out of which came a 
commitment to establish an intergovernmental, comprehensive, 
coordinated, and sustained Earth observation system. The climate 
applications of the data collected by the system include the use of the 
data to create better climate models, to improve our knowledge of the 
behavior of carbon dioxide and aerosols in the atmosphere, and to 
develop strategies for carbon sequestration.
---------------------------------------------------------------------------
    \2\ http: / / earthobservations.org / 

    The United States was instrumental in drafting a 10-year 
implementation plan for a Global Earth Observation System of Systems, 
which was approved by 55 nations and the European Commission at the 3rd 
EOS summit in Brussels in February 2005. The United States also 
released its contribution through the Strategic Plan for the U.S. 
Integrated Earth Observing System in April 2005.\3\ The plan will help 
coordinate a wide range of environmental monitoring platforms, 
resources, and networks.
---------------------------------------------------------------------------
    \3\ http: / / iwgeo.ssc.nasa.gov / docs / EOCStrategic_Plan.pdf

     International Energy Research and Development Partnerships: The 
Generation IV Nuclear partnership,\4\ the Carbon Sequestration 
Leadership Forum,\5\ the International Partnership for the Hydrogen 
Economy,\6\ and ITER. \7\ In the last 4 years, the administration has 
engaged in four partnerships that lend new international emphasis to 
strategic technologies that can make a large contribution to our 
efforts to reduce greenhouse gas intensity and diversify the global 
energy portfolio. The State Department is working closely with DOE to 
engage our partners, and all of these partnerships include key 
developing countries as full partners in our efforts to advance these 
important technologies--an important capacity building function that 
will also serve to promote the growth of global markets.
---------------------------------------------------------------------------
    \4\ http: / / www.nei.org / index.asp?catnum=3&catid=1215
    \5\ http: / / www.cslforum.org / 
    \6\ http: / / www.iphe.net / 
    \7\ http: / / www.iter.org / 

     The Methane to Markets Partnership: \8\ This partnership, 
launched in November of last year, focuses on advancing cost-effective, 
near-term methane recovery and use as a clean energy source to enhance 
economic growth, promote energy security, improve the environment, and 
reduce greenhouse gases. At the recent session, the partnership 
welcomed its 17th member, Ecuador, and now represents over 60 percent 
of global methane emissions. This Partnership includes an extensive 
project network comprised of 190 private sector, governmental and non-
governmental organizations. Methane to Markets currently targets four 
major methane sources: landfills, underground coal mines, and natural 
gas and oil systems, and animal waste management. By 2015, the 
Partnership has the potential to deliver annual reductions in methane 
emissions of up to 50 million metric tons of carbon equivalent or 
recovery of 500 billion cubic feet of natural gas.
---------------------------------------------------------------------------
    \8\ http: / / www.epa.gov / methanetomarkets /  and http: / / 
www.methanetomarkets.org / . Founding Methane to Markets member 
governments include the United States, Argentina, Australia, Brazil, 
China, Colombia, India, Italy, Japan, Mexico, Nigeria, Russian 
Federation, Ukraine, and the United Kingdom. The Republic of Korea 
became the 15th member in June, 2005 Canada the 16th member in July 
2005, and Ecuador the 17th member in November 2005.

     World Summit on Sustainable Development Partnerships: \9\ The 
United States has been at the forefront of efforts to move multilateral 
bodies toward a practical, results-focused actions centered around 
partnerships among governments, businesses and other organizations. 
Among over 20 U.S.-initiated partnerships launched at the 2002 World 
Summit on Sustainable Development (WSSD) held in Johannesburg, South 
Africa, the United States established a ``Clean Energy Initiative.'' 
The Initiative consists of four market-oriented, performance-based 
partnerships, including:
---------------------------------------------------------------------------
    \9\ http: / / www.sdp.gov / sdp / initiative / cei / 28304.htm


         the Global Village Energy Partnership (GVEP),\10\ an 
        international partnership with over 700 public and private 
        sector partners with a leading role for the U.S. Agency for 
        International Development;
---------------------------------------------------------------------------
    \10\ http: / / www.sdp.gov / sdp / initiative / cei / 44949.htm

         the Partnership for Clean Indoor Air,\11\ led by the 
        Environmental Protection Agency, addressing the increased 
        environmental health risk faced by more than 2 billion people 
        in the developing world who burn traditional biomass fuels 
        indoors for cooking and heating;
---------------------------------------------------------------------------
    \11\ http: / / www.sdp.gov / sdp / initiative / cei / 29808.htm and 
http: / / www.pciaonline.org / 

         the Partnership for Clean Fuels and Vehicles,\12\ led by the 
        Environmental Protection Agency, which will help to reduce air 
        pollution in developing countries by promoting the elimination 
        of lead in gasoline and encouraging the adoption of cleaner 
        vehicle technologies;
---------------------------------------------------------------------------
    \12\ http: / / www.sdp.gov / sdp / initiative / cei / 29809.htm and 
http: / / www.unep.org / pcfv / main / main.htm

         Efficient Energy for Sustainable Development (EESD),\13\ led 
        by the Department of Energy, which aims to improve the 
        productivity and efficiency of energy systems, while reducing 
        pollution and waste, saving money and improving reliability 
        through less energy intensive products, more energy efficient 
        processes and production modernization.
---------------------------------------------------------------------------
    \13\ http: / / www.sdp.gov / sdp / initiative / cei / 28304.htm


    The United States is actively involved in other international 
technology development and deployment partnerships as well, including 
the Renewable Energy and Energy Efficiency Partnership, a WSSD 
partnership initiated by the United Kingdom. As the world's largest 
producer and consumer of renewable energy, and with more renewable 
energy generation capacity than Germany, Denmark, Sweden, France, 
Italy, and the United Kingdom combined, the United States is one of 17 
partner countries in REEEP.
    The United States continues to participate in the UN Framework 
Convention on Climate Change. The Conference of the Parties (COP) to 
the United Nations Framework Convention on Climate Change will hold its 
11th Session in Montreal from November 28 to December 9, 2005. I will 
head the U.S. delegation to this meeting. As the Kyoto Protocol entered 
into force on February 16 of this year, the Montreal meeting will also 
be the first ``meeting of the Parties'' (MOP) under that instrument, to 
which the United States will be an observer. We will continue to 
highlight the importance of collaborative partnerships developing and 
deploying technologies to meet the long-term challenge of climate 
change.
    I am very pleased that a technology-focused approach that puts 
climate change in the context of broader development goals is finding 
favor in many parts of the world. In July, at the Group of Eight 
Leaders meeting, President Bush and his counterparts agreed to a Plan 
of Action on Climate Change, Clean Energy and Sustainable 
Development.\14\ The Plan is based on over 50 specific, practical 
activities--mostly focused on technology development--that put climate 
change goals in the context of other development imperatives. I had the 
opportunity to attend a follow-up Ministerial Dialogue on November 1 
that included not only Group of Eight ministers, but also ministers 
from 11 other key developing and developed countries. I was struck both 
by the strong participation from ministries responsible for energy--
something that has sometimes been lacking in climate discussions--and 
by the very practical nature of our discussions in this setting.
---------------------------------------------------------------------------
    \14\ http: / / usinfo.state.gov / ei / img / assets / 4756 / 
Post_Gleneagles_Communique.pdf
---------------------------------------------------------------------------
     asia-pacific partnership for clean development and climate\15\
---------------------------------------------------------------------------
    \15\http: / / www.state.gov / s / d / rem / 50326.htm
---------------------------------------------------------------------------
    In keeping with the concept of practical actions and multiple 
benefit approaches, I would like to turn now to the Asia-Pacific 
Partnership for Clean Development and Climate. The Partnership is our 
most recent effort to promote greenhouse gas intensity reduction and 
other clean development goals, and we are quite excited about its 
potential. Deputy Secretary of State Zoellick announced plans to create 
the Asia-Pacific Partnership for Clean Development and Climate in July 
2005. The Partnership will build on and deepen the already strong 
relationships we have with our five Partners: Australia, China, India, 
Japan, and the Republic of Korea. The six countries that currently make 
up this Partnership represent about half of the world's economy, 
population, and greenhouse gas emissions--which gives us a tremendous 
opportunity to find practical approaches to address these issues with 
our partners in a focused setting. We intend to use this opportunity to 
ensure that the Partnership delivers real and significant results in 
energy security, clean development, and greenhouse gas intensity 
reduction.
    The Partnership's vision statement has identified a broad range of 
near- and long-term technologies and practices that are designed to 
improve energy security, reduce pollution and address the long-term 
challenge of climate change. The Partnership will focus on voluntary 
practical measures to create new investment opportunities, build local 
capacity, and remove barriers to the introduction of clean, more 
efficient technologies. It is critically important to build on mutual 
interests and provide incentives to tackle global challenges such as 
climate change effectively.
    We are united with our partners in recognizing that the ingenuity 
and energy of the private sector is crucial to our success in 
addressing these issues over time. This effort cannot succeed without 
strong private sector involvement. Working closely with the Department 
of Commerce and other agencies with export-oriented functions, we are 
actively discussing ways of ensuring that the private sector is engaged 
in a meaningful way in the Partnership at every stage of its work. We 
expect the Ministerial launch to have strong participation from the 
private sector.
Energy Policy Act of 2005
    The administration welcomes the Hagel-Pryor amendment to the Energy 
Policy Act of 2005, which we believe will lend considerable focus and 
force to our efforts to address climate change. This legislation is 
fully in line with the administration's view that reducing greenhouse 
gas intensity is the best metric for measuring progress in climate 
change policy. In 2002, President Bush committed the United States to a 
comprehensive and innovative program of reducing greenhouse gas 
intensity by 18 percent by 2012. It is estimated that meeting this 
commitment will prevent the emission of more than 500 million tons of 
carbon equivalent greenhouse gases.
    The approach embedded in this legislation is that the answer to the 
long-term challenge of climate change lies in promoting, rather than 
impeding, economic growth, which can in turn fuel the kinds of 
technology innovations and capital stock turnovers needed to deploy 
cleaner, more efficient technologies. The legislation identifies the 
need to work with the major developing nations to promote cleaner 
technologies as they continue to work to deliver modern energy services 
to their people.
    We are now actively working to fulfill the initial requirements of 
Title XVI, Subtitle B--Climate Change Technology Deployment in 
Developing Countries. The bill requests that we identify the major 
emitters of greenhouse gases, and provide a range of baseline 
information to the Congress on progress on greenhouse gas intensity 
reduction projects, obstacles to implementation, and opportunities for 
greater advancement. We expect to have this report to you in February, 
and we will use it as a basis for developing our strategy on these 
issues. We have active collaboration already in many of these 
countries, but in many cases that collaboration can be considerably 
strengthened. In implementing the Act we want to ensure that our 
cooperation with countries is based on the practical, collaborative 
approach that we have developed with our partners to date. I look 
forward to working with your staff and that of other interested 
committees to ensure that we are taking a sensible and robust approach 
as we move forward with implementation.
    The bill also requires the Secretary of State to establish an 
interagency working group, chaired by the Secretary, to coordinate 
activities under the Subtitle. We have been actively working with other 
agencies to ensure that this work is undertaken in a manner that 
complements that of other administration efforts, including that of the 
National Security Council's Policy Coordinating Committee and the Trade 
Promotion Coordinating Committee. In addition, we expect to work 
closely with our colleagues at the Department of Energy and other 
agencies in their efforts to fulfill Subtitle A of this title.
    We expect the Asia-Pacific Partnership to be one of the key means 
through which we implement our actions under the Energy Policy Act. In 
his statement at the signing ceremony for the Act, President Bush 
highlighted the Partnership as an innovative program that is authorized 
by the Act. The initiative targets the kind of fast-growing, middle-
income industrializing countries on which the Act asks us to focus. 
China, India and Korea rank first, second, and third respectively among 
fast-growing industrializing economies in 2003 carbon dioxide 
emissions--the latest data available--from the consumption and flaring 
of fossil fuels. In fact, depending on the data set used, these three 
countries alone account for roughly half of the greenhouse gas 
emissions among the 25 countries that we will focus on in implementing 
the Title. The Partnership explicitly references greenhouse gas 
intensity reduction among its clean development goals. We also see that 
a range of existing programs can contribute to these efforts, and that 
we can strengthen these programs and develop new strategies for 
achieving the objectives of the Title.
Concluding Remarks
    Mr. Chairman and Members of the committee, I hope that my testimony 
this afternoon conveys the extent to which the United States is working 
with our partners to reduce greenhouse gas intensity, promote energy 
efficient technologies and advance climate science, while also placing 
primary importance on supporting economic growth and prosperity.
    Meeting the challenge of the expected future growth in global 
energy demand and reducing greenhouse gas emissions will require a 
transformation in the way the world produces and consumes energy over 
the next generation and beyond. It will require new ways of 
collaborating with our partners to break through long-standing 
stalemates. This is why we are leading global efforts to develop and 
deploy breakthrough technologies for both the developed and developing 
world.
    I thank you for this opportunity to testify before this committee. 
I look forward to responding to any questions you may have.
                                 ______
                                 
         Responses by Dr. Paula J. Dobriansky to Questions from
                      Senator Joseph R. Biden, Jr.

    Question. The Canadian government is proposing, and other 
governments' support, a decision by the Conference of the Parties to 
the United Nations Framework Convention on Climate Change (UNFCCC) to 
initiate a process under the UNFCCC to consider possible next steps in 
addressing climate change. I understand the administration opposes 
this.
    Is this true? If so, why? Given the lead time between the Kyoto 
Conference and the first reporting period under the Kyoto Protocol, on 
what grounds would it be premature at this time to discuss a 
replacement or follow-on post-2012 regime?

    Answer. The United States is participating in the UN Climate Change 
Conference, which will be the eleventh session of the Conference of the 
Parties to the UN Framework Convention on Climate Change (COP 11) in 
Montreal, Canada, from November 28 through December 9, 2005, as a Party 
to the Framework Convention. The Conference will also serve as the 
first Meeting of the Parties to the Kyoto Protocol.
    The Conference is an opportunity for the U.S. to advance our 
climate change policies through the Framework Convention. We will also 
seek to protect U.S. interests as Parties to the Kyoto Protocol move 
ahead on their agenda.
    The United States and our partners around the world believe that 
effective actions to meet energy needs, advance clean development and 
address climate change require integrated solutions that achieve 
sustainable development.
    We are moving forward on a multitude of local, regional and global 
energy, clean development and climate change initiatives that support 
the broader goals of promoting economic growth, meeting the need for 
greater energy resources for poverty eradication, enhancing social 
conditions and protecting the environment.
    The U.S. strategy is built around the following five key ideas. 
First, a successful international response to climate change requires 
developing country participation. Second, we believe that climate 
change falls within a broader development agenda--one that promotes 
economic growth, provides energy security and mitigates greenhouse 
emissions. This is a primary objective of the Asia-Pacific Partnership 
for Clean Development and Climate, announced by Deputy Secretary 
Zoellick in July 2005. Third, promoting the development and deployment 
of technology is key. Fourth, we need to pursue our international 
efforts in a spirit of collaboration and a true sense of partnership. 
Over the past 4 years, the Bush administration has pursued a 
constructive, practical and realistic approach to international action 
on clean development and climate change. Fifth, engaging the private 
sector is critical to success. We have established strong partnerships 
for action with the private sector, including the Department of 
Energy's Climate VISION program and the Environmental Protection 
Agency's Climate Leaders program.
    Given the existing wide divergence of views by participating COP 
members, progress would not be achieved through commencement of 
negotiations. One size does not fit all. Developing countries have made 
it clear they will not take on additional commitments to reduce 
emissions while, at the same time, they want developed countries to 
continue with a target-based approach. We are convinced that a post-
2012 process would encompass the same political dynamic that existed in 
1997 during the climate change negotiations in Kyoto, Japan. Under 
these circumstances, we are opposed to entering into negotiations on a 
post-2012 regime.


    Senator Hagel. It will be included for the record. 
Secretary Dobriansky, thank you.
    Under Secretary of Energy Garman.

  STATEMENT OF HON. DAVID GARMAN, UNDER SECRETARY FOR ENERGY, 
         SCIENCE AND ENVIRONMENT, DEPARTMENT OF ENERGY

    Secretary Garman. Thank you, Mr. Chairman. I will summarize 
my testimony as well.
    As a party to the United Nations Framework Convention on 
Climate Change, the United States of course shares with many 
countries its ultimate objective, the stabilization of 
greenhouse gas concentrations in the atmosphere at a level that 
prevents dangerous interference with the climate system. To 
help meet that objective, President Bush has established a 
robust and flexible climate change policy that harnesses the 
power of markets, of technological innovation, maintains 
economic growth, and encourages global participation.
    To meet our ultimate goals while at the same time providing 
energy for a growing world, we are going to have to develop new 
and cost-effective transformational technologies. Of course, 
the administration has been laying a strong technological 
foundation to meet this challenge. Our initiatives, the 
President's initiatives, include the President's Hydrogen Fuel 
Initiative and the Freedom CAR program, carbon sequestration, 
the FutureGen coal-fired zero emission power generation 
project, the next generation nuclear energy program, and 
fusion. Such efforts can put us on a path to ensuring access to 
clean, affordable energy supplies while reducing greenhouse gas 
emissions.
    Complementing these domestic endeavors are a number of 
multilateral collaborations that were initiated by the United 
States: the Carbon Sequestration Leadership Forum, the 
International Partnership for the Hydrogen Economy, the Gen IV 
International Forum on Nuclear Power. All are vehicles for 
international collaboration to advance these technologies. In 
addition, the United States, as has been mentioned, has joined 
the ITER project to help us realize the promise of fusion 
energy. We believe that well-designed multilateral 
collaborations such as these, which focus on achieving 
practical results, can accelerate development and 
commercialization of new technologies.
    Central to meeting the challenge of climate change is the 
participation of developing countries, which the Energy Policy 
Act recognizes. The Energy Information Administration projects 
that between 2015 and 2020 carbon dioxide emissions from 
developing countries could surpass those from industrialized 
countries. Moreover, if forecasts are accurate developing 
countries will account for 69 percent of the total increase in 
global carbon emissions from energy between 2001 to 2025.
    The Bush administration believes that the most effective 
way to engage developing countries is to focus, not solely on 
climate change, but rather on a broader development agenda that 
promotes economic growth, reduces poverty, promotes energy 
security, reduces pollution, and mitigates greenhouse gas 
emissions. Indeed, concern about meeting these fundamental 
needs helps explain the reticence of developing countries to 
take on Kyoto-style emissions caps that would stifle their 
economic development.
    An emissions intensity approach to limiting greenhouse gas 
emissions, such as that endorsed in the Energy Policy Act, can 
lead to greater engagement from the developing countries 
because it encourages reductions without threatening economic 
growth and development. This intensity approach is working well 
here in the United States. In 2002, the President set an 
ambitious goal, a national goal to reduce the greenhouse gas 
intensity of the United States economy by 18 percent by 2012. 
Recent data from the Energy Information Administration detailed 
in my written testimony suggest that we are making substantial 
headway in meeting that goal.
    One of the biggest barriers to economic progress in 
developing countries is the lack of access to affordable modern 
energy services. Through its multi-agency Clean Energy 
Initiative and the United Kingdom-led Renewable Energy and 
Energy Efficient Partnership, the U.S. is working to mobilize 
private sector investment and create self-sustaining markets 
for financing energy efficiency, renewable and infrastructure 
projects in developing countries.
    The administration also believes that the international 
climate change provisions of the Energy Policy Act are broadly 
consistent with the Asia-Pacific Partnership for Clean 
Development and Climate, which was announced in July by the 
United States and five large Asian economies. Through this 
partnership, we hope to create new investment opportunities to 
build local capacity and remove barriers to the introduction of 
clean, more efficient technologies. The APP is also designed to 
help each country improve energy security, reduce pollution, 
and address the long-term challenge of climate change.
    In closing, the President is committed to reducing the 
Nation's greenhouse gas emissions and we are taking action to 
help meet that goal. Further, we believe that cooperation among 
developed and developing countries must combine action on 
greenhouse gasses with action to meet larger and other public 
urgent needs for increased energy resources. We are fully 
engaged internationally and will continue to lead multilateral 
and bilateral climate change science and technology initiatives 
and further cooperate with all Nations.
    Thank you very much, Mr. Chairman. I will be happy to 
answer any questions you have either today or in the future.


    [The prepared statement of Mr. Garman follows:]

Prepared Statement of David Garman, Under Secretary for Energy Science 
                 and Environment, Department of Energy

                              INTRODUCTION

    Mr. Chairman and members of the subcommittee, thank you for the 
opportunity to appear before you today to discuss ways in which the 
administration is working internationally to address the challenge of 
climate change. My testimony today will cover what the administration 
is doing in the climate change technology area both domestically and 
internationally, the international climate change provisions of the 
Energy Policy Act of 2005 (EPAct2005), the importance of engaging 
developing countries, and the Asia-Pacific Partnership for Clean 
Development and Climate.
    As a party to the United Nations Framework Convention on Climate 
Change (UNFCCC), the United States shares with many countries its 
ultimate objective: stabilization of greenhouse gas concentrations in 
the atmosphere at a level that would prevent dangerous anthropogenic 
interference with the climate system. In February 2002, President Bush 
reaffirmed his administration's commitment to this central goal of the 
Framework Convention.
    Meeting the UNFCCC objective will require a sustained, long-term 
commitment by all nations over many generations. To this end, the 
President has established a robust and flexible climate change policy 
that harnesses the power of markets and technological innovation, 
maintains economic growth, and encourages global participation. Major 
elements of this approach include implementing near-term policies and 
measures to slow the growth in greenhouse gas emissions, advancing 
climate change science, accelerating technology development, and 
promoting international collaboration.

     ACCELERATING DEVELOPMENT OF ``TRANSFORMATIONAL'' TECHNOLOGIES

    Looking to the future, it is increasingly apparent that to provide 
the energy necessary for continued economic growth and to reduce 
greenhouse gas emissions, we will have to develop new cost-effective 
``transformational'' technologies that alter fundamentally the way we 
produce and use energy. By 2100, more than half of the world's energy 
may have to come from low- or zero-emission technologies to attain the 
UNFCCC goal.\1\
---------------------------------------------------------------------------
    \1\ See, for example, K. Caldeira, A.K. Jain, and M.I. Hoffert, 
Science, 299, 2052-2054 (2003).
---------------------------------------------------------------------------
    The Bush administration is laying a strong technological foundation 
to develop cost-effective and realistic mitigation options to meet 
clean development and climate objectives. The administration's Climate 
Change Technology Program (CCTP) was created to coordinate and 
prioritize the Federal Government's approximately $3 billion annual 
investment in climate-related technology research, development, 
demonstration, and deployment (RDD&D), including voluntary 
partnerships. We are pleased that EPAct2005 includes an authorization 
for this program, which is the technology counterpart to the Climate 
Change Science Program.
    CCTP is assessing different technology options and their potential 
contributions to reducing greenhouse gas emissions over the short, mid, 
and long term. In August 2005, CCTP released its Vision and Framework 
for Strategy and Planning. This document provides an overall strategy 
to guide and strengthen our technical efforts to reduce emissions. In 
September, CCTP released its draft Strategic Plan for public comment, 
which builds on the guidance in the Vision and Framework. The Plan 
articulates a vision of the role for advanced technology in addressing 
climate change, defines a supporting mission for CCTP, establishes 
strategic direction and guiding principles for Federal R&D agencies to 
use in formulating research and development portfolio, outlines 
approaches to attain CCTP's six strategic goals, and identifies a 
series of next steps toward implementation.
    CCTP's strategic vision has six complementary goals: (1) reducing 
emissions from energy use and infrastructure; (2) reducing emissions 
from energy supply; (3) capturing and sequestering CO2; (4) 
reducing emissions of other greenhouse gases; (5) measuring and 
monitoring emissions; and (6) bolstering the contributions of basic 
science.
    The administration continues strong investment in many strategic 
technology areas. As the President's National Energy Policy requires, 
efforts with respect to energy production and distribution focus on 
ensuring environmental performance, as well as dependability and 
affordability.


     Energy Efficiency and Renewable Energy: Energy efficiency is the 
single largest investment area under CCTP and it provides tremendous 
short-term potential to reduce energy use and greenhouse gas emissions. 
Renewable energy includes a range of different technologies that can 
play an important role in reducing greenhouse gas emissions. The United 
States invests considerable resources in wind, solar photovoltaics, 
geothermal, and biomass technologies. Many of these technologies have 
made considerable progress in price competitiveness, but there remains 
a need to reduce manufacturing, operating, and maintenance costs of 
many of these technologies.

     Hydrogen: In his 2003 State of the Union address, President Bush 
made a commitment to the development of a hydrogen economy, pledging 
$1.2 billion over 5 years for his Hydrogen Fuel Initiative to develop 
hydrogen fuel cell-powered vehicles. The transition to hydrogen as a 
major energy carrier over the next few decades could transform the 
nation's energy system and create opportunities to increase energy 
security by making better use of diverse domestic energy sources for 
hydrogen production and to reduce emissions of air pollutants and 
greenhouse gases.

     Carbon Sequestration: Carbon capture and sequestration is a 
central element of CCTP's strategy because for the foreseeable future, 
fossil fuels will continue to be an important source of energy. One 
realistic approach is to find ways to capture and store the carbon 
dioxide produced when these fuels are used. DOE's core Carbon 
Sequestration Program emphasizes technologies that capture carbon 
dioxide from large point sources and store it in geologic formations. 
In 2003, DOE launched a nationwide network of seven Regional Carbon 
Sequestration Partnerships, involving State agencies, universities, and 
the private sector, to determine the best approaches for sequestration 
in each geographic region represented and to examine regulatory and 
infrastructure needs. Approaches being pursued include carbon capture 
and geologic storage, and carbon sequestration in trees and soils.

     ``FutureGen'' Coal-Fired, Zero-Emissions Power Generation: The 
FutureGen project--a 10-year, $1 billion government-industry cost-
shared effort to design, build, and operate the world's first near-zero 
atmospheric emissions coal-fueled power plant--will employ the latest 
technologies to generate electricity, produce hydrogen, and sequester 
carbon dioxide from coal. Through this research, coal can remain part 
of a diverse, secure energy portfolio well into the future.

     Nuclear Fission and Fusion: The administration also is pursuing 
next-generation nuclear energy as a zero-emissions energy supply 
choice, and DOE's Generation IV Nuclear Energy Systems Initiative is 
working on reactor designs that are safe, economical, secure, and able 
to offer additional capabilities such as reducing nuclear waste and 
producing, such as hydrogen. And though the technical hurdles are high, 
the administration sees great potential in fusion as a future energy 
source.


    These initiatives and other technologies in the CCTP portfolio 
could put us on a path to ensuring access to clean, affordable energy 
supplies while dramatically reducing greenhouse gas emissions.

                 INNOVATIVE INTERNATIONAL PARTNERSHIPS

    In addition to these domestic programs, the administration is 
working internationally with a broad range of partners. We believe that 
well-designed multilateral and bilateral collaborations focused on 
achieving practical results can accelerate development and 
commercialization of new technologies.
    Under President Bush's leadership, the United States has brought 
together key nations to tackle jointly some tough energy challenges we 
face. These collaborations mirror the main strategic thrusts of our 
domestic technology research programs, and they address a number of 
complementary energy concerns, such as energy security, climate change, 
and environmental protection.


     International Partnership for the Hydrogen Economy (IPHE): 
Recognizing the common interest in hydrogen research that many 
countries share, the United States called for an international hydrogen 
partnership in April 2003, and in November 2003, representatives from 
16 governments gathered in Washington, D.C. to launch IPHE.\2\ IPHE 
provides a vehicle to organize, coordinate, and leverage multinational 
hydrogen research programs that advance the transition to a global 
hydrogen economy. It reviews the progress of collaborative projects, 
identifies promising directions for research, and provides technical 
assessments for policy decisions. IPHE also will develop common 
recommendations for internationally recognized standards and safety 
protocols to speed market penetration of hydrogen technologies.
---------------------------------------------------------------------------
    \2\ Founding IPHE member governments include the United States, 
Australia, Brazil, Canada, China, European Commission, France, Germany, 
Iceland, India, Italy, Japan, Norway, Republic of Korea, Russia, and 
the United Kingdom. In January 2005, New Zealand became the 17th 
member.

     Carbon Sequestration Leadership Forum (CSLF): CSLF is a U.S. 
initiative that was established formally at a ministerial meeting held 
in Washington, DC in June 2003.\3\ CSLF is a multilateral initiative 
that provides a framework for international collaboration on 
sequestration technologies. The Forum's main focus is assisting the 
development of technologies to separate, capture, transport, and store 
carbon dioxide safely over the long term, making carbon sequestration 
technologies broadly available internationally, and addressing wider 
issues, such as regulation and policy, relating to carbon capture and 
storage. In addition to these activities, CSLF members are invited to 
participate in the FutureGen clean coal project. There are 22 members 
of the CSLF, including the United States, European Commission, China, 
and India.
---------------------------------------------------------------------------
    \3\ CSLF member governments include the United States, Australia, 
Brazil, Canada, China, Colombia, Denmark, European Commission, France, 
Germany, Greece, India, Italy, Japan, Republic of Korea, Mexico, 
Netherlands, Norway, Russia, Saudi Arabia, South Africa, and the United 
Kingdom.

     Generation IV International Forum (GIF): In 2002, nine countries 
and Euratom joined together with the United States to charter GIF, and 
multilateral collaboration to fulfill the objective of the Generation 
IV Nuclear Energy Systems Initiative.\4\ GIF's goal is to develop a 
fourth generation of advanced, economical, safe, and proliferation-
resistant nuclear systems that can be adopted commercially no later 
than 2030. A technology roadmap developed by the GIF and the Department 
of Energy's Nuclear Energy Research Advisory Committee in 2003 
identified six technologies as candidates for future designs. Based on 
the roadmap, GIF countries are jointly preparing a collaborative 
research program to develop and demonstrate the projects.
---------------------------------------------------------------------------
    \4\ GIF member countries include the United States, Argentina, 
Brazil, Canada, France, Japan, Republic of Korea, South Africa, 
Switzerland, and the United Kingdom.

     ITER: In January 2003, President Bush announced that the U.S. was 
joining the negotiations for the construction and operation of the 
international fusion experiment ITER.\5\ The negotiations are now 
advancing rapidly and we hope to have a near-final agreement for both 
Congress and the administration to review in early 2006.
---------------------------------------------------------------------------
    \5\ ITER member countries include the United States, China, 
European Union, Japan, Russia, and the Republic of Korea.

     Methane to Markets Partnership (M2M): In November of last year, 
the United States and representatives from 13 countries\6\ launched 
M2M, which is led on the U.S. side by EPA. M2M is an international 
initiative that focuses on advancing cost-effective, near-term methane 
recovery and use as a clean energy source to enhance economic growth, 
promote energy security, improve the environment, and reduce greenhouse 
gases. Since the launch, the Partnership has expanded to include 17 
countries, representing over 60 percent of global methane emissions, as 
well as almost 200 representatives from the private sector, financiers, 
and non-governmental organizations. The Partnership now actively 
supports near-term project development in four major methane sources: 
landfills; underground coal mines; natural gas and oil systems; and 
livestock waste management.
---------------------------------------------------------------------------
    \6\ M2M member governments include the United States, Argentina, 
Australia, Brazil, Canada, China, Colombia, Ecuador, India, Italy, 
Japan, Republic of Korea, Mexico, Nigeria, Russia, Ukraine, and the 
United Kingdom.

     Bilateral Activities: Since 2001, the United States has 
established 15 climate partnerships with key countries and regional 
organizations that, together with the United States, account for almost 
80 percent of global greenhouse gas emissions.\7\ These partnerships 
encompass over 400 individual activities, and joint projects have been 
initiated in areas such as climate change research and science, climate 
observation systems, clean and advanced energy technologies, carbon 
capture, storage and sequestration, and policy approaches to reducing 
greenhouse gas emissions.
---------------------------------------------------------------------------
    \7\ Partners include Australia, Brazil, Canada, China, Central 
America (Belize, Costa Rica, El Salvador, Guatemala, Honduras, 
Nicaragua, and Panama), European Union, Germany, India, Italy, Japan, 
Mexico, New Zealand, Republic of Korea, Russian Federation, and South 
Africa.
---------------------------------------------------------------------------
      MARKET DEVELOPMENT FOR COMMERCIALIZATION OF NEW TECHNOLOGIES

    One of the biggest barriers to economic progress in developing 
countries is lack of access to affordable, modern energy services, such 
as electricity. Such services are instrumental to economic growth, 
social development, and alleviation of poverty, and their availability 
can amplify the impact of investments in public health, education, 
sanitation, clean water, agriculture, and others. Nations that develop 
strong, market-based institutions and the rule of law will be in the 
best position to make the sustained investments necessary to provide 
clean energy and adapt to climate change over the long term.
    Therefore, an important objective of U.S. participation in many 
international collaborations is to mobilize private sector investment 
by supporting economic reforms and institutional capacity building in 
the energy sector to strengthen markets and strengthen the rule of law 
while promoting innovative financing that reduces risks and transaction 
costs. These efforts are aimed at developing new policies and business 
models to create self-sustaining markets for financing energy 
efficiency, renewable, and infrastructure projects.
    At the World Summit on Sustainable Development (WSSD) in 
Johannesburg in 2002, the United States launched a Clean Energy 
Initiative (CEI). CEI consists of four market-oriented, performance-
based partnerships: Global Village Energy Partnership, led by the U.S. 
Agency for International Development; Partnership for Clean Indoor Air 
and Partnership for Clean Fuels and Vehicles, led by EPA; and Efficient 
Energy for Sustainable Development, led by DOE. The mission of CEI is 
to bring together governments, international organizations, industry 
and civil society in partnerships to alleviate poverty and spur 
economic growth in the developing world by expanding access to and 
modernizing energy services.
    The United States is also one of 17 countries that participate in 
the Renewable Energy and Energy Efficiency Partnership--REEEP. REEEP 
was initiated by the United Kingdom as a WSSD partnership to assist 
market development of renewable and energy efficiency systems. The 
United States also actively participated in the Renewables 2004 
conference sponsored by the German Government in June 2004 and 
submitted five action items to provide specific technology plans and 
cost targets for renewable energy technologies using solar, biomass, 
wind, and geothermal resources.

             INTERNATIONAL CLIMATE PROVISIONS OF EPACT2005

    The international climate provisions of EPAct2005 recognize the 
importance of developing countries in mitigating climate change. 
Indeed, central to achieving the objective of the UNFCCC will be the 
participation of developing countries.
    In passing unanimously the Byrd-Hagel Resolution in 1997, the 
Senate then made its views quite clear that any approach to climate 
change must involve developing countries. However, under the terms of 
the Kyoto Protocol to the UNFCCC, only industrialized, mature market 
economies are required to reduce emissions. The emerging economies of 
the developing world--including large emitting countries such as China 
and India--can continue business as usual despite their rapidly growing 
emissions.
    Total carbon dioxide emissions from fossil fuel consumption from 
the emerging economies soon will outstrip those from mature market 
economies. Projections in the Energy Information Administration's (EIA) 
International Energy Outlook 2005 suggest that by 2010, carbon dioxide 
emissions from emerging economies could surpass those from the mature 
market economies. According to EIA, in 2002, carbon dioxide emissions 
from mature market economies were 49 percent of the world total while 
emerging economies accounted for 39 percent and the transitional 
economies of Eastern European / former Soviet Union (EE / FSU) 
countries 13 percent. EIA projects that in 2025, mature market 
economies will account for 39 percent of world carbon dioxide 
emissions, emerging economies 50 percent, and the EE / FSU countries 11 
percent. IEO 2005 projections also suggest that the emerging economies 
and EE / FSU countries combined will account for 77 percent of the 
total projected increase in global emissions from 2002 to 2025.
    These EIA projections are consistent with recent projections from 
the International Energy Agency. Its World Energy Outlook 2004 suggests 
that well over two-thirds of the projected increase in energy-related 
carbon dioxide emissions between now and 2030 will be from developing 
countries.
    The Bush administration believes that the most effective way to 
engage developing countries is to focus not solely on climate change, 
but rather on a broader development agenda that promotes economic 
growth, reduces poverty, provides access to modern sanitation, enhances 
agricultural productivity, provides energy security, reduces pollution, 
and mitigates greenhouse gas emissions.
    Developing countries made these needs clear at WSSD, and the 
international community agreed, in the Johannesburg Plan of 
Implementation, on the primacy of the development agenda over an agenda 
exclusively focusing on decarbonizing economies. Given these 
considerations, the reluctance of developing countries to take on 
Kyoto-style emissions caps--which could nuke achieving economic and 
social development goals much more difficult--is well founded.
    An emissions intensity approach to limiting greenhouse gas 
emissions can lead to greater engagement on climate change from 
developing countries because it encourages reductions without 
threatening economic growth and development. This is a clear advantage 
over the Kyoto Protocol approach, which focuses on short-term 
reductions.
    This intensity approach is working here in the United States. In 
2002, President Bush set an ambitious but achievable national goal to 
reduce the greenhouse gas intensity of the U.S. economy by 18 percent 
by 2012, which represents about a 30 percent increase in the rate of 
improvement projected by EIA over this period. The administration 
estimates that this commitment will achieve about 100 million metric 
tons of reduced carbon-equivalent emissions in 2012, with more than 500 
million metric tons of carbon-equivalent emissions in cumulative 
savings over the decade.
    To this end, the administration has developed an array of policy 
measures, including financial incentives and voluntary programs. For 
example, the Department of Energy's (DOE) Climate VISION program and 
the Environmental Protection Agency's (EPA) Climate Leaders and 
SmartWay Transport Partnership programs work in voluntary partnership 
with industry to reduce emissions. The Department of Agriculture is 
using its conservation programs to provide incentives to increase 
carbon sequestration in soils and trees, and to reduce methane and 
nitrous oxide emissions from crop and animal agricultural systems. DOE, 
in partnership with EPA, USDA, and other Federal agencies, also is 
pursuing many energy supply technologies with comparatively low or zero 
carbon dioxide emissions profiles, such as solar, wind, geothermal, 
bioenergy, and combined heat and power. The Bush administration also 
has increased fuel economy standards for new light trucks and sport 
utility vehicles by 1.5 miles per gallon over the next three model 
years.
    We expect these programs will make significant contributions toward 
meeting the President's 18 percent 10-year goal, which represents an 
average annual rate of about 2.0 percent. Recent data show we are 
already making headway. The average annual reduction of greenhouse gas 
emissions intensity from 1990 to 2003 was 1.9 percent. A June 2005 EIA 
flash estimate of energy-related carbon dioxide emissions--which 
account for over four-fifths of total greenhouse gas emissions--
suggests an improvement in carbon dioxide emissions intensity of 2.6 
percent in 2004. This follows on the EIA's Emissions of Greenhouse 
Gases in the United States 2003 report showing that the total U.S. 
greenhouse gas emissions intensity was 2.3 percent lower in 2003 than 
in 2002. Overall, then, the Nation appears to be ahead of schedule in 
meeting the President's goal.
    We believe that certain aspects of the international climate 
provisions authorized under Title XVI Subtitle B of EPAct2005 are 
broadly consistent with the administration's approach. Specifically, 
the provisions call on DOE to lead an effort to identify technology 
options that could reduce greenhouse gas emissions intensity and are 
suitable for transfer to developing countries DOE also is authorized to 
carry out fellowship and exchange programs under which officials from 
developing countries can gain experience and knowledge of best 
practices to reduce greenhouse gas emissions intensity in their 
countries.
    The Department is working with the Department of State and the U.S. 
Agency for International Development on a framework to execute those 
aspects of the international climate change provisions that it can 
readily accomplish. The Department is currently evaluating provisions 
authorizing demonstration projects for cleaner, more efficient 
technologies. Conducting demonstration projects in developing countries 
would likely raise issues and complexities involving legal, regulatory, 
trade, intellectual property, and other questions. Also, without 
complementary economic reforms in partner countries to strengthen 
markets for cleaner technologies, their replication and deployment will 
be inhibited.

       ASIA-PACIFIC PARTNERSHIP FOR CLEAN DEVELOPMENT AND CLIMATE

    The administration believes the international climate change 
provisions of EPAct2005 are also consistent with the Asia-Pacific 
Partnership for Clean Development and Climate, which was announced in 
July by Deputy Secretary of State Robert Zoellick and his counterparts 
representing five large economies--Australia, China, India, Japan, and 
Korea.
    Together, the six nations that make up the Partnership account for 
about half of the world's greenhouse gas emissions and a significant 
amount of total global economic output. So while the partnership 
initially is at a manageable size, it nonetheless can have a 
significant impact. Moreover, it is significant that among the partners 
are countries with targets under the Kyoto Protocol, countries without 
targets under the Kyoto Protocol, countries not party to the Kyoto 
Protocol, and both industrialized and emerging economies.
    The one characteristic all the countries have in common is a 
willingness to take practical measures to address the complementary 
challenges of energy security, clean development, and climate change. 
The Partnership's focus will be activities to create new investment 
opportunities, build local capacity, and remove barriers to the 
introduction of clean, more efficient technologies. It is designed to 
help each country meet nationally designed strategies for improving 
energy security, reducing pollution, and addressing the long-term 
challenge of climate change. The Partnership also will cooperate on 
longer-term ``transformational'' energy technologies that can drive 
economic growth while enabling significant reductions in greenhouse gas 
intensities.

                          CLOSING OBSERVATIONS

    The administration remains committed to the UNFCCC and to the 
mutual goals of sustainable development and economic growth. The 
President has an ambitious near-term goal to reduce the Nation's 
greenhouse gas emissions intensity, and is taking many actions to help 
meet that goal. We are investing billions of dollars on advancing 
climate science and accelerating the development of advanced 
technologies--such as hydrogen, carbon sequestration, advanced nuclear 
reactors, and fusion energy--that have the potential to transform 
energy systems. And we are fully engaged internationally and lead major 
multilateral and bilateral climate change science and technology 
initiatives, and will continue to co-operate with all nations.
    The administration believes that co-operation among developed and 
developing countries must combine action on greenhouse gases with 
action to meet societal needs for increased energy resources to fuel 
economic growth and reduce poverty, and to do so in a way that reduces 
pollution, improves energy security, and avoids greenhouse gas 
emissions.
    Significant portions of the approach outlined in Title XVI Subtitle 
B of EPAct2005 are conceptually in agreement with the approach adopted 
by the administration on climate change, particularly in the emphasis 
on technology, innovation and improving markets to support the 
deployment of improved technologies. The framework set out in the 
legislation avoids many of the very real problems with the emissions 
cap approach of the Kyoto Protocol, and it complements many of the 
administration's ongoing international initiatives described in this 
testimony.
    We appreciate the careful thought that has gone into EPAct2005, and 
we stand ready to work with the Senate and this subcommittee to explore 
these ideas further.
                                 ______
                                 
            Responses by Hon. David Garman to Questions from
                      Senator Joseph R. Biden, Jr.

    Question. In response to a question by Senator Hagel about the 
Asia-Pacific Partnership, Mr. Garman responded: ``We realize that, for 
instance, China or India might not quite be ready for an integrated, 
gasified, combined-cycle coal plant, but updating a 1940s technology or 
fifties technology to a 1970s or eighties technology coal plant would 
be a very good thing and an efficiency boon for them. Those are plants 
that we have a great deal of experience building. Our companies are 
involved in that. And that is, in fact, the type of technology that is 
being employed and deployed today in countries such as that. But we 
want to ratchet that up.''
    Is it the administration's intention to use the Asia-Pacific 
Partnership to subsidize at taxpayer expense or otherwise promote the 
deployment in developing countries of, among other things, out-of-date 
1970s and eighties coal-burning technologies?

    Answer. The point of the example cited above is that existing 
technologies in widespread use in the United States, even those that 
have been around for many years, could nonetheless dramatically improve 
the efficiency of energy systems in India and China, and thus the 
emissions profiles of those countries. The statement also notes that 
``we want to ratchet that up,'' and the Asia-Pacific Partnership on 
Clean Development and Climate aims to promote significant improvements 
in clean energy technologies in these and other partnering countries by 
helping them develop and commercialize even more advanced clean energy 
technologies, such as today's Integrated Gasification Combined Cycle 
(IGCC) technology.

    Question. Are there other examples of out-of-date technologies the 
administration intends to subsidize or otherwise promote through the 
Asia-Pacific Partnership?

    Answer. The intent of the Asia-Pacific Partnership is to promote 
the cleanest energy technologies available that can be readily adopted 
by the economies of Asia-Pacific Partnership countries.

    Question. Is it not true that supporting construction of new 
fluidized bed combustion power plants will irreversibly lock in new 
higher GHG emissions for the life of each such plant, at the expense of 
accelerating deployment of more advanced coal technology, such as IGCC, 
that has higher efficiency and from which the greenhouse gases can 
later be captured and stored underground?

    Answer. Modern fluidized bed combustion power plants would lock in 
higher greenhouse gas emissions only if they were less efficient than 
existing plants, which would not be the case in countries such as China 
and India. There is a great deal that can be done to improve the 
efficiency of existing plants and to promote relatively new coal 
technologies that exhibit far greater efficiency that existing plants. 
Such steps can improve markedly the emissions profile of these two 
countries almost immediately, not years from now. IGCC clearly has many 
attributes that make it attractive vis-a-vis fluidized bed combustion, 
but there are a number technical and market challenges that need to be 
addressed before it can be readily commercialized in China and India, 
not least of which is its cost premium. Nevertheless, we expect that in 
the future IGCC can and will play a significant role. Indeed, IGCC will 
be a key aspect of the Asia-Pacific Partnership's Clean Fossil Task 
Force, one of eight task forces announced at the just completed Asia-
Pacific Partnership ministerial meeting. Through this task force, we 
will be working with our partners on approaches to accelerating IGCC 
penetration into the marketplace.

    Question. I am concerned that by supporting export of equipment for 
the outdated FBC plants, we may miss opportunities for U.S. firms to 
capture lasting market leadership in technologies that have much 
greater revenue potential over the long term. Please comment.

    Answer. While in the short term, modern fluidized bed combustion 
technology may represent a tremendous improvement over existing 
technologies in use in some countries, we agree that over the long 
term, it is important for the U.S. to have leadership in advanced 
technologies, such as IGCC. The Department's Office of Fossil Energy 
supports research, much of it in partnership with the private sector, 
into an array of advanced clean coal technology options. Through this 
kind of research, U.S. firms are and will remain well-poised to take 
advantage of market opportunities in a variety of advanced clean coal 
technologies.

    Question. I am also concerned that, by locking in a baseline with 
those higher emissions, that we will create further barriers to getting 
China, India, and other large emitters ultimately to take on GHG 
reduction commitments. Please comment.

    Answer. It follows that the commercial adoption of technologies 
that demonstrate improved efficiency over technologies currently in use 
in China and India will reduce, not increase, the emissions baselines 
of these countries below what they would have been otherwise. 
Obviously, IGCC technology can have a big impact, and we will be 
working through the Asia-Pacific Partnership on ways to accelerate the 
use of this technology in these and other partnering countries.
    There is a reason China, India, and other developing countries have 
shown no inclination to take on binding emissions reduction 
commitments. As my testimony noted, Kyoto-style emissions caps are 
perceived rightly by many countries, industrialized and developing 
alike, as barriers to economic growth. It is noteworthy, therefore, 
that China, India, and Korea--three countries that have adopted the 
Kyoto Protocol but have no emissions reduction obligations under it--
have joined with the United States, Australia, and Japan--which would 
have obligations under the Kyoto Protocol--in the Asia-Pacific 
Partnership, the purpose of which is to address energy security, 
climate change, and other environmental challenges such as air 
pollution in the context of economic growth. Promoting and maintaining 
economic growth creates market conditions favorable to investing in 
advanced technologies, such as IGCC, that can have even greater impacts 
on greenhouse gas and pollutant emissions over time.

    Question. Sen. Alexander raised the example of Shell's investment 
in Australia in an IGCC / ICCS power plant intended to be in operation 
by 2010. Please provide the market volume and market share by country 
for low carbon energy supply technologies.

    Answer. The Department does not keep a record of market volume and 
market share by country for low carbon energy supply technologies and 
therefore can not provide the committee with such information.

    Question. Are you aware of other examples of investment in major 
climate-friendly technologies occurring in other countries at higher 
levels of investment than in the United States?

    Answer. The Department does not track investments in climate-
friendly technologies occurring in other countries and therefore can 
not provide the committee with this data.

    Question. Please explain why the United States is not in the 
position to prevail in aspect of the race to develop and deploy 
climate-friendly technology.

    Answer. The United States leads the world in the development of 
climate-friendly technologies. The Bush administration is laying a 
strong technological foundation to develop cost-effective and realistic 
mitigation options to meet clean development and climate objectives. 
The United States spends more on climate change technology development 
and deployment than any other country. For Fiscal Year 2005, the 
Federal Government invested nearly $3 billion in such programs. The 
research conducted through the Climate Change Technology Program (CCTP) 
is designed to help provide the marketplace with cost-effective options 
that can reduce greenhouse gas emissions and thereby address long-term 
climate change concerns. We are pleased that EPAct2005 includes an 
authorization for this program.
    In August 2005, DOE released the CCTP Vision and Framework for 
Strategy and Planning and in September it released its draft Strategic 
Plan for public comment, which builds on the guidance in the Vision and 
Framework. These documents articulate a vision of the role for advanced 
technology in addressing climate change, defines a supporting mission 
for the multi-agency CCTP, establishes strategic direction and a 
framework of guiding principles for Federal R&D agencies in formulating 
a CCTP research and development portfolio, outlines approaches to 
attain CCTP's six strategic goals, and identifies a series of next 
steps toward implementation. Our approach recognizes the importance of 
maintaining a broad and balanced R&D portfolio across a range of 
technologies, but it also identifies a process for setting priorities 
in strategic areas with great potential.
    The administration's emphasis on international collaboration is 
another way to accelerate technological progress. The U.S. has 
initiated a number of multilateral technology collaborations, including 
the Carbon Sequestration Leadership Forum, the International 
Partnership for the Hydrogen Economy, the Generation IV International 
Forum, and the Methane to Markets Partnership, and it rejoined the ITER 
fusion project. The administration believes that well-designed 
multilateral collaborations, by avoiding duplication and leveraging 
resources, can accelerate development and commercialization of new 
technologies. The Asia-Pacific Partnership, which was just launched 
formally in Sydney, Australia, will be looking at ways to accelerate 
the commercialization of advanced technologies that can help reduce 
greenhouse gas emissions, contribute to energy security, and promote a 
cleaner environment.
    We believe that these and other efforts will ensure that the United 
States maintains its leadership role in developing and commercializing 
advanced energy technologies.

    Question. What factors make Germany, Japan, and other countries 
more successful than the U.S. in commercializing advanced energy 
technology?

    Answer. These countries are not more successful in commercializing 
advanced energy technologies. However, in some cases, markets in these 
countries experience increased demand for advanced energy technologies 
because of government policies or inherent price differentials. For 
example, generous subsidies (over $0.50 / kWH in the case of Germany) 
and higher electricity prices in Japan and Germany encourage the 
deployment of higher cost renewable energy in those markets. Our 
approach is to lower the cost of these technologies through continued 
research and development so they will be widely adopted in mainstream 
energy markets.


    Senator Hagel. Secretary Garman, thank you.
    Because Senator Alexander has commitments on the floor of 
the Senate shortly, I am going to ask Senator Alexander for 
whatever questions he would like to ask, and take as much time 
as you need.
    Senator Alexander.
    Senator Alexander. Thanks, Mr. Chairman. That is very 
generous of you. I will just ask one or two questions and hope 
I can return.
    First let me thank the administration witnesses for coming. 
I believe that the energy bill that was passed in July 
represented a real change in direction for the United States 
Senate. Its entire focus almost was on shifting our attention 
to the way to produce low-carbon and no-carbon energy in the 
large amounts that we are going to need in the United States. 
That is why it focused on conservation and efficiency. That is 
why it focused on advanced nuclear power. That is why it 
focused on coal gasification and carbon sequestration, the 
other things that you have mentioned.
    My concern is that I would like for it to have been more 
aggressive. I think it is the right model, but I favor more 
aggressive conservation and efficiency, more aggressive support 
for advanced nuclear, more aggressive coal gasification and 
carbon sequestration. That is why I voted along with the 
majority of Senators for Senator Bingaman's resolution, which 
basically recognized that there is a growing scientific 
consensus that human activity is a substantial cause of 
greenhouse gas accumulation on the atmosphere and mandatory 
steps will be required to slow or stop the growth of greenhouse 
gas emissions into the atmosphere.
    In order to get my support and I think that of several 
other Senators, Senator Bingaman took out that the mandatory 
controls would have to be there in this session of Congress. I 
am reluctant to vote for any such mandatory caps until I have a 
clear picture of exactly how they would affect this big complex 
economy of ours, and I do not think we know yet. Secondly, I 
much prefer the Hagel approach, which is to innovate our way 
out of this problem rather than cap our way out of the problem.
    This leads me to my question. Of the several areas that you 
discuss, the one I would like to focus on is coal gasification 
and carbon sequestration. It seems to me that after advanced 
nuclear technology, which exists today and produces 70 percent 
of our carbon-free electricity, that waiting in the wings for 
the next way to produce large amounts of carbon-free or low-
carbon technology is a combination of coal gasification and 
carbon sequestration. It is actually preferred by many of the 
large environmental organizations who are looking at the 
worldwide consequences. They want us to do it early, not just 
for ourselves, but because it would avoid the rest of the world 
building all the conventional coal plants or as many 
conventional coal plants. If they can build coal plants that 
are cleaner, then our chance of having cleaner air and less 
effect from global warming are greater in the United States.
    On November 9th the President of Shell Oil told the Senate 
Energy Committee, on which I serve, that Shell is working with 
the Queensland government in Australia--several of you 
mentioned Australia--on the feasibility of building an IGCC 
power plant, coal gasification plant, with 85 percent of the 
carbon dioxide sequestered underground. The goal is to have it 
in operation by 2010. If I am not mistaken, our U.S. climate 
change technology program has a goal of having commercial 
plants with carbon capture and sequestration by 2015 or later. 
That would give us a few years to work on this.
    I do not want us to get into the position of leasing this 
advanced technology from the rest of the world. I would like 
for us to lead the world in terms of this. I especially wonder 
therefore if we should not be putting more emphasis on coal 
gasification, especially on industrial gasification, given the 
high prices of other energies. There are a great many 
industries around the country who are more interested in that. 
I am looking for a way to break open the market and make coal 
gasification with sequestration more of an option for us as we 
deal with global warming.
    How could we be more aggressive about that and what could 
we in Congress do to encourage you to do that or get out of the 
way of interfering with your doing that?
    Mr. Connaughton. Senator Alexander, I will begin with your 
last part of the question, which is the policy framework, and 
then I will hand it off to Under Secretary Garman to talk to 
you about the technology development aspects of that. I think I 
need to begin, when I came into my job 4 years ago, almost 5 
years ago, coal gasification was a project of the Energy 
Department, not a project of the market. In fact, the best 
indicator that there was not much interest in coal gasification 
is the private market was not putting a lot of their own money 
into it. They were following the good research work that was 
going on at DOE.
    So one of our challenges was how do we create a policy 
environment that creates the incentive for the private sector 
to invest and for our communities to request the use of this 
technology in the marketplace. There were a few impediments. 
First of all, it is really expensive to build a coal 
gasification plant. If your choice is to build a natural gas 
plant or a conventional clean coal plant, they are much less 
costly enterprises. That is just a straight issue that we have 
to confront.
    But secondly, at the time, 5 years ago, there was great 
uncertainty about the future of coal in power production. Most 
of the investment was headed toward natural gas, with the 
consequences that we are seeing today, which is huge natural 
gas prices, in part because the utilities are using natural gas 
when it should be reserved for our manufacturers and for our 
consumers, especially those least able to afford their energy.
    So we sat down and said, how do we create this certainty? 
The phrase I like to use is you cannot have clean coal without 
coal. You need a policy that creates a strong signal to the 
market that we will continue to use coal as an energy source in 
America and we want to use it cleanly. That is issue one and 
that is getting your air pollution rules right.
    Then issue two, you cannot get zero-emission coal without 
clean coal. Your first step is to get the technology that 
cleans up the conventional harmful air pollutants and then you 
want to apply the technology that holds the greatest promise of 
capturing the carbon. Certainly gasification is the leading 
contender for that equation.
    You also cannot scare people away from the technology. I 
think your notion of waiting on carbon mandates is dead on 
because if we put in place a carbon mandate and somebody is 
thinking about spending a lot of money on a coal plant, well, 
if we have not perfected the technology for capturing coal they 
are not going to spend that money. They are going to move to 
something other than coal. It is all about sequencing.
    So that brings us full circle. As a result of the 
President's clear new rules under the clean air interstate 
rule, we have created a platform where we will cut the air 
pollution from coal by about 70 percent. Because that framework 
is based on a market-based framework about performance, we are 
now seeing emerging a number of large technology providers 
talking about going beyond the DOE research proposal and 
building for themselves large conventional integrated 
gasification combined cycle power plants.
    We just had an announcement this summer that Bechtel, GE, 
and one other--who am I leaving out--AEP, thank you. It was 
AEP, Bechtel and GE have announced that they are pulling 
together a commercial scale design for this technology and they 
are going to seek approval. In fact, they are in a competition 
right now for approval among a number of States. Cinergy, now 
subsumed under Duke Power, is pursuing similar authorities, as 
is the Southern Company. So we now have three of our major 
coal-fired utilities who have put this technology that you seek 
back on the table in a commercial setting where we can get 
investment.
    From that standpoint--and then I will turn it over to Under 
Secretary Garman---
    Senator Alexander. Mr. Connaughton, my question is why is 
Shell making a deal in Queensland to have something open by 
2010 and not in the United States? What about our conditions 
here make it more attractive in Australia to do that?
    Mr. Connaughton. I will hand off to Dave and then I will 
pull back and add to that.
    Secretary Garman. I am not precisely sure why Shell is 
moving ahead in Queensland, to move ahead with a sequestration 
project there. As Chairman Connaughton indicated, there are 
several IGCC, integrated gas combined cycle, plants, actually 
two in operation today in the United States and others that are 
coming into being in the near future.
    There is some basic science, though, that we need to do on 
the sequestration side. Gasifying the coal is not the sum total 
of the effort to make sure that the project is going to be a 
success. We have to be sure that we can separate that carbon 
dioxide from the flue stream cost effectively and geologically 
sequester that carbon dioxide and have the confidence of both 
the science community and the public that the carbon dioxide is 
going to stay where we put it.
    There is some fundamental science that has to be done. Now, 
Australia is of course our partner in the Carbon Sequestration 
Leadership Forum to undertake some of this pre-commercial 
scientific research that does need to occur. But I think Jim 
put it very well. The efforts to compete and to market this 
technology are already well under way and I think the consensus 
is that IGCC plants are the way to go, that, as you mentioned, 
coal has to be a player and it will be a player. If we are 
serious about carbon dioxide, we have to recognize the 
developing countries with an extremely large amount of coal are 
going to use coal and we should endeavor to develop those 
technologies that let them do it in a near-zero carbon emission 
framework.
    We have substantially increased funding for carbon 
sequestration work and coal gasification work in our budgets 
and we take it as a very serious research activity that we have 
under way.
    Senator Alexander. I want to thank the witnesses for your 
answers and excuse myself. I have to be on the floor right now. 
I want to thank the chairman for his courtesy in letting me ask 
the first question.
    Senator Hagel. Senator Alexander, thank you.
    Let me start with you, Chairman Connaughton. All three in 
your testimony noted the Asia-Pacific Partnership on Clean 
Development. How did that come about? What was the impetus to 
bring that group together?
    Mr. Connaughton. The partnership actually grew out of a 
long series of international dialogues related not just to 
climate change, but related to the partnerships that we had 
developed, especially in the Asia region, in following up on 
the World Summit on Sustainable Development, which was focused 
on more the classic development issues such as reducing water 
pollution and reducing air pollution and promoting agricultural 
productivity, as well as emerging dialogues about our shared 
concerns about energy security, because we are six countries 
representing 50 percent of the economy, those economies are 
driven by energy and we are competing on the world stage for 
those sources.
    We found ourselves dealing with each of these issues 
individually and yet recognizing that you cannot treat them 
apart. If you want a sensible path forward, we need to link our 
government to government policy dialogues, our private sector 
to private sector dialogues, and then our technology research 
and development dialogues.
    So we had a jam session, if you will, internally within the 
administration to figure out how we could better consolidate 
our efforts and make them more effective. Then we also 
recognized the last 4 years was really about technology 
development and the real imperative then emerged, now let us 
get focused and even more serious about technology deployment.
    Our conclusion internally was it is not enough to do 
projects any more. We have technology development, we have 
USAID and other, the banks, doing projects that prove some of 
these highly efficient technologies, these low pollution 
technologies. But we really need to figure out how to open up 
markets.
    We thought we would start small with a small number of 
countries with a shared economic zone and see if we could 
identify some key priority sectors where we can advance these 
three goals of energy security, air pollution reduction, and 
greenhouse gas reduction in a coherent way. So it was sort of 
evolutionary. We reached out to them over the course of last 
winter.
    I must say, Mr. Chairman, that a lot of our dialogue was 
predicated on the exchange that we had and some of the thinking 
that you and Senator Pryor brought to the table, as well as 
Senator Alexander. We worked hard to incorporate that into our 
discussions internationally, and in fact in record time we 
found common ground on a vision where there had been a struggle 
for that in the years past. I think the time was particularly 
ripe for that.
    Senator Hagel. Thank you.
    Any of the other witnesses want to add? Secretary 
Dobriansky?
    Secretary Dobriansky. Thank you. I would like to add to 
that. Jim mentioned the original discussions, if you will, at 
the World Summit on Sustainable Development. It became I think 
very apparent coming out of those discussions and going to the 
COP meeting in New Delhi there was a declaration that in fact 
was issued which I think in many ways clearly and directly 
enunciated that these issues are integrated and that there is a 
vital need to try to work more closely on the advancement of 
economic growth and on the advancement of energy security and 
in particular the development of clean and efficient energy 
technologies.
    I would start back with the linkage and the discussions 
that took place very broadly at that time among a wide variety 
of countries. Then I would add to that by looking at over the 
years leading up to just this past summer that it really became 
even more apparent how crucial this integration in fact is and 
how it is being very much accepted, not only by the developing 
world and urged by the developing world, but I think even what 
we saw in Gleneagles with the G-8 plan of action it also really 
codified the importance of this integrative approach. In fact, 
we see the Asia-Pacific Partnership, if you will, as linked to 
those discussions.
    Senator Hagel. Thank you.
    What countries outside this partnership in your opinion 
would be potential leapfrog countries to work with and ground 
them with this new concept of technology and partnership?
    Secretary Dobriansky. I will respond from this perspective. 
I would rather not mention specific countries because, quite 
frankly, there are quite a few that actually have expressed an 
interest in the Asia-Pacific Partnership. But one of the things 
that I can say to you is that I think, first of all, the 
interest is very welcome. It comes from both other developing 
and developed countries, those that also would fit in the 
category of large emitters, and then thirdly those that are in 
dire need as well of economic growth and a need for the opening 
of markets.
    But one of the things that we have thought about with the 
launch in January is, in addition to the formal launch, to hold 
a meeting with the diplomatic corps and particularly, not only 
those that have directly and already expressed an interest in 
coming into the partnership, but with others who might want to 
know more, and to see where we go from there.
    I do not know if you want to add further.
    Mr. Connaughton. Yes, I just want to underline the 
fundamental behind the partnership is looking for these 
opportunities on a large scale to open up markets for 
environmental goods and services that will promote efficiency, 
reduce air pollution, and thereby reduce greenhouse gasses as 
well. So when we look at candidate countries for real progress, 
it actually turns on the fundamentals of development, too.
    Clearly, the Millennium Challenge countries have been 
identified by the President under the authority of the Congress 
as countries that are really getting their acts together to get 
the economic foundation and the human capacity foundation to 
create the value chain and the markets for these kinds of 
developments. They are also the more dynamic economies, so they 
are the ones that we expect to see growth and investment at a 
level that is quite substantial.
    We are really talking about the countries where the private 
sector sees a real opportunity to enhance the quality of life, 
and that comes from the fundamentals, the fundamentals of 
investing in people and stable economic institutions. It is 
very difficult to make substantial progress in countries that 
are not establishing those norms.
    So I think we look at our new trading partners. They are 
clearly in the realm of opening up trade, sharing technologies 
and experiences, while protecting intellectual property rights 
and providing a good stable foundation for those investments. 
These are the kinds of countries that make the most sense. Of 
course, you have the large ones, too. You know who they are. I 
put the chart up earlier, and it is pretty clear where the 
opportunities lie in that list that EIA put together for us. 
From that we want to then select the countries where we 
actually think our private sector stands a good chance of 
working their way into their economy, and at the same time 
these are countries that can come and invest here, because this 
country will spend tens, actually into hundreds of billions of 
dollars in the next couple decades on efficiency upgrades and 
pollution reduction upgrades. That is a global market that some 
of these countries can invest in and gain some experience in 
and bring that home, bring that experience home. So it is a 
two-way street is what we are trying to establish.
    Senator Hagel. Thank you.
    Secretary Garman, what key U.S. technologies are available 
today for deployment with not only some of these partnership 
countries, but other countries that may be at that stage that 
Chairman Connaughton was talking about?
    Secretary Garman. The technologies that come to mind is of 
course underpinning the need for large amounts of dispatchable 
baseload electricity for growing economies, and that would 
include nuclear technology, which is important but 
controversial in some realms, but also some of the more 
advanced fossil technologies such as circulating fluidized bed 
coal. We realize that, for instance, China or India might not 
quite be ready for an integrated gasified combined cycle coal 
plant, but updating a 1940s technology or fifties technology to 
a 1970s or eighties technology coal plant would be a very good 
thing and an efficiency boon for them. Those are plants that we 
have a great deal of experience building. Our companies are 
involved in that and that is in fact the type of technology 
that is being employed and deployed today in countries such as 
that. But we want to ratchet that up.
    Senator Hagel. Chairman Connaughton? Thank you.
    Mr. Connaughton. If I could add, we also are seeing a great 
and nice emergence of wind in appropriate settings, although 
around the world there is still a lot of resistance to the 
siting of wind projects and that remains something that we 
should work, dedicate ourselves much more to, because it is a 
plague here in America and it is in other parts of the world as 
well.
    But I would also underline the interests in some of the 
major economies in bio energy systems, that again require a lot 
of work to figure out and make sure you have the total balance 
right. But I did want to underline, I just returned from a 
visit to China and they are now sending a clear, a clearer 
regulatory signal and a clearer market signal toward the 
application of the technologies that Under Secretary Garman 
just described. They in their new plan are dedicating 
themselves to desulfurizing, taking the sulfur out of, 46 
percent of their existing coal-fired power plants. Some of 
these are 40 years old. That is a big deal. They are going to 
retire a couple hundred of small--they have these small, little 
coal plants. They are just going to retire them, so they go to 
a bigger baseload plant on which they can install pollution 
control technology. Nearly every new plant, coal plant, they 
build, they are going to--it is their now set policy that they 
are going to desulfurize it and require the installation of 
burners that have low nitrogen oxide emissions.
    These are conventional technologies that we know how to do 
well in America which, if deployed on the scale the Chinese 
have publicly stated they are going to deploy it, will be 
hugely consequential. How do we help them to implement that, 
accelerate that, is the challenge that is before the 
partnership. But we now have a clear goal.
    I will add that they also want to do it while improving 
their efficiency by 20 percent. They have a goal of a 20 
percent efficiency improvement. Some of these technologies take 
power to use them and so their investment in efficiency becomes 
critical because they do not want running air pollution control 
equipment to take away from the energy available to the people 
they are trying to lift out of poverty.
    It is really an exciting time for this kind of 
international discussion because we are getting clearer goal-
setting by each of our countries.
    Senator Hagel. Thank you.
    Under Secretary Dobriansky, would you like to add anything?
    Secretary Dobriansky. No.
    Senator Hagel. Let me ask you, Madam Secretary, where do 
you think the most cost-effective areas are in the world today 
for implementing some of this technology?
    Secretary Dobriansky. Clearly we are looking at those areas 
where there is a market opportunity, that you do have an 
ability for the private sector to engage and to be able to 
invest. At the same time, I think what also is very crucial in 
this area, and which I think is the underpinning of the Asia-
Pacific Partnership, for example, is the importance of building 
capacity. So we are also looking at that aspect, in other words 
the infrastructure and the capacity to actually be able to go 
in and to help.
    I also think what is crucial to this is relationships and 
the breaking down of barriers as well. Those are some of the 
kinds of criteria, if you will, and factors that we are looking 
at. I think this means not only the engagement of some 
countries that would not necessarily be categorized as 
developing countries in the truest sense of the term, but those 
which have an infrastructure where change is required and there 
are opportunities for actual development and deployment of 
technologies.
    But then you have the other side, which is those countries 
that really are lacking a complete capacity and have the 
willingness to open themselves and to try to change. So there 
is a type of a two-tiered approach. I know that in the process 
of our looking at, for example, the 25 countries we have been 
grappling with that issue in defining specific criteria of what 
we look at, looking at also the question of greenhouse gas 
emissions, CO2 emissions, looking at the factors I 
have just mentioned, and we look very much forward to sitting 
down with you and sharing some of our thoughts after we have 
sifted through that.
    Senator Hagel. Thank you.
    Anyone else want to? Secretary Garman?
    Secretary Garman. I just would not want--we have not 
mentioned a lot about end use technologies and efficiency 
technology and I would not want that to be construed as a 
technological opportunity that we should miss. As an example, 
last week I sat down, speaking of China, with 20 individuals 
from around China from the Ministry of Buildings to talk about 
something as simple and seemingly untechnical as insulation. 
The Chinese built a lot of concrete buildings with no thermal 
breaks or insulation whatsoever, and if we can employ very 
simple, available technologies we can have tremendous impact 
that involves not having them build more power plants, but 
having them build fewer power plants, and that is in 
everybody's interest.
    Senator Hagel. Thank you.
    Secretary Dobriansky, what are we doing through the State 
Department to encourage these countries, developing countries, 
to adopt these standards and invest in technologies and partner 
with us?
    Secretary Dobriansky. We have a range of programs, some of 
which I have mentioned, that really tap into the private 
sector, which we see as very crucial in the implementation of 
these strategies. Public-private sector approaches are 
absolutely crucial.
    Secondly, one of the areas that I think we really need to 
be looking at more closely are what are some of the financial 
incentives that could be provided and what are some of the 
barriers that could be broken down. Those are areas that we are 
exploring and we hope to be able to come forward with some more 
concrete information in those areas as to what we can 
specifically do.
    We think as part of the legislation that you have put forth 
you quite rightly identify those areas as being crucial to move 
forward with these technologies.
    I also would highlight something that you featured and that 
is exchanges. I think that it is not only about the financial 
side, but it is also very much about the personal 
relationships, the expertise that is in fact shared, the 
information that is shared, which is also I think a very 
crucial underpinning and component here in working together, 
the whole importance of joint projects, that this is not just a 
one-way street, it is a two-way street.
    Senator Hagel. Would you say this is a high priority at the 
State Department in achieving this objective?
    Secretary Dobriansky. Absolutely, it is absolutely a high 
priority in trying to achieve this objective. I think the 
framework of your provisions really identify a number of 
crucial areas that we feel underpins, if you will, some of the 
current initiatives that we have, but as I also suggested in my 
testimony, the need for us to go further in a number of areas 
in collaboration with our partners.
    But this is absolutely a priority for us. We think that 
these kinds of steps will make a difference, a fundamental 
difference in impact, not only in terms of economic growth, but 
also in terms of addressing the issue of energy security and 
climate change.
    Senator Hagel. Thank you.
    Anyone wish to comment?
    Mr. Connaughton. Just on the priority point, this has come 
together as we would have liked, but it has come together 
largely because the President has put a lot of his own personal 
initiative into this with the other leaders in the partnership, 
as he did in the context of what was a substantively successful 
G-8 outcome in working very closely with Prime Minister Blair, 
who has been extremely thoughtful on these issues, in trying to 
find that common ground.
    I would also note that Secretary Rice herself is personally 
engaged on a regular basis with respect to this. This actually 
grows out of some of her own efforts and thinking right after 
the last election as we were trying to shape the agenda going 
forward on how, again, how we advance our broader development 
objectives in a way that envelops this initiative.
    The other thing I would add, Senator, is we talk about 
identifying the countries. Perhaps one part of the question 
really needs to be identifying the opportunities. The best 
opportunities still are the ones that make the most money, as 
opposed to cost the most money. I can assure you that as we do 
some of our road mapping in the power generation sector and a 
few other sectors I could think about, there are clear near-
term opportunities with appropriate national policies to be 
sure that investments in efficiency, for example, occur for 
some of the end use opportunities that Under Secretary Garman 
said would occur.
    The second, which is clearly the case in countries like 
India and China, when you ask them their top priorities in the 
environment, they nearly universally say it is reducing water 
pollution and cleaning their air. So if you can quantify public 
health benefits, which we are very good at doing in America, we 
can share that analytical work.
    The addition to GDP by making real improvements in air 
pollution reduction and water pollution reduction are enormous 
in these countries. Just the math is still coming forward.
    Then of course, in a political sense this energy security 
issue is a big motivator for action. So the more we swim with 
the current of these high priorities, the more that we can 
obtain in the area of greenhouse gas reduction as well.


    [Room lights fade out, then return.]


    Senator Hagel. We may have an energy issue here.
    Secretary Dobriansky. In the dark, may I just add?
    Senator Hagel. Secretary Dobriansky, in the dark.
    Secretary Dobriansky. I wanted to underscore the top 
leadership at the State Department, Secretary Rice, sees this 
as a priority. She personally is engaged in it, and also with 
regard to the Asia-Pacific Partnership Deputy Secretary 
Zoellick also has been very engaged. He in fact announced it in 
ASEAN over the summer. So we have a very strong and robust 
support of our top leadership in this.
    Senator Hagel. Thank you.
    You each mentioned this to some extent, but I would like to 
hear from the three of you specifically where you think in your 
particular areas of responsibility with your portfolios are the 
biggest barriers to greater use of these technologies and 
technological solutions with these countries. Start with you, 
Chairman Connaughton.
    Mr. Connaughton. First of all, obstacles to trade. We still 
have very significant tariffs and we still have inconsistent 
rules of the road when it comes to the provision of these goods 
and services, and we still have a huge issue with intellectual 
property rights. These are advanced technologies. They are very 
effective. They can be mass produced. But if there is not a 
protection of the original intellectual property creating these 
technologies the people who have them are not going to be 
deploying them. So this is fundamental.
    The other barrier from my perspective in terms of what I am 
going to be working hard on is what I call the peer-to-peer 
barrier. We have a lot of government-to-government dialogues. A 
subset of our technology vendors talk to each other 
internationally. But what is missing are the CEO level, manager 
level exchanges, because largely where we need to make progress 
are big domestic-based industries, such as power generation. 
There is not a reason for our CEOs to sit down with their 
equivalent counterparts in China and India on a regular basis 
and exchange their own best ideas for financing, for how you 
manage these outcomes, for which range of technologies is 
delivering the goods.
    That kind of exchange we can do a lot more of and actually 
that is a fairly low-cost taxpayer exchange to stand up and the 
dividends could be enormous in terms of inspiring innovation 
and investment opportunity.
    I guess I will stop there and turn it over to Under 
Secretary Garman.
    Senator Hagel. Secretary Garman?
    Secretary Garman. One of the issues that comes up quite 
frequently is an innovative novel technology that looks very 
good on paper, say a cellulosic biorefinery that could turn 
wheat straw and corn stover into fuel, but because one has not 
been built a banker is unlikely to finance that first of a kind 
technology. Sometimes there is a regulatory uncertainty in a 
country. Before the passage of the energy bill, for instance, 
there was new nuclear power--the new regulatory regime that is 
in place by the Nuclear Regulatory Commission has never been 
test driven, as it were, and again people are very apprehensive 
about committing multibillion dollar investments against a rate 
of return that is not going to happen for many years into the 
future when there is uncertainty.
    That financeability issue looms in instances both in this 
country and around the world. Sometimes it is just a simple 
lack of information. I am surprised at the number of times 
where, through the convening power of government, we sometimes 
inadvertently bring together partners that find that they have 
a mutual self-interest, a financial interest, in doing 
something together. This has constantly surprised me. Maybe 
these two have seen it before, but it is one of the things that 
I have learned in my brief tenure, is that government does have 
a convening power and when ministers meet to discuss these 
kinds of opportunities the private sector watches and listens 
and quite often they invest.
    Senator Hagel. Thank you.
    Secretary Dobriansky?
    Secretary Dobriansky. I too would have identified, as Jim 
started off with, from the international standpoint, definitely 
international--intellectual, excuse me, property rights; trade 
barriers. Two others that I think to add to the mix that can 
come into play here are laws, the legal aspects of dealing with 
technologies and having to grapple with that internationally, 
because the laws of one country are different from the laws of 
another country and how you sift through that.
    Then the third area is in some countries, particularly 
those that are very sizable, when you have Federal structures 
versus local structures, and how one also gets through that; 
that certain decisions are made at a Federal level, but how it 
gets translated to the local level, and which you can actually 
develop capacity-building. Those would be some additional ones 
I would add.
    Senator Hagel. Thank you.
    Chairman Connaughton.
    Mr. Connaughton. Let me actually give you two examples to 
make this a little more tangible. In the Methane to Markets 
context, we have identified at least one, probably a couple of 
countries that historically have state-owned coal reserves and 
you can get a lease from the state to take the coal and you 
share the economic profit with the government for taking the 
coal. But the legal regime required you to treat the methane 
from coal mining as a waste to be managed and you could not get 
a legal right to capture the methane and sell it.
    Just a simple, sort of outdated law because they did not--
because the methane used to be thought of as a safety hazard 
and a waste. Just by working with the country to fix that law 
and create the same legal regime for the methane as for the 
coal, all of a sudden can unleash a multi-billion dollar 
capital investment without any further work by the government. 
That is a very tangible one.
    Senator Hagel. Before you go to the next one, how are we 
doing that, working with the government of a foreign country to 
deal with a law like that? Take me through generally the 
process?
    Mr. Connaughton. Well, let us start with the starting 
point. We are doing methane based on 10 years of enormous 
success by the U.S. Environmental Protection Agency of doing 
what Dave described, which is linking people who know how to 
handle methane with the people that are accidentally or 
intentionally releasing it. USEPA created this methane, 
domestic methane partnership to get them to talk to each other 
about the opportunity for capturing the methane.
    Then from that we have a pretty good legal regime in 
America, whether it is on public lands or in privately owned 
lands, where we have an enforceable contract right to get a 
lease and it is enforceable in court so your contract is 
protected. What we would do, for example, with the countries I 
am talking about, we would sit down with them at their 
government-to-government level and say: The private sector has 
identified this as a major legal impediment and if you make a 
relatively simple change in your law--and we sit down and we 
describe it for them, what it would be--then we have capital 
investors who have been looking at this for some time. We show 
them real money sitting on the table.
    That is a good incentive for them to update their legal 
regime, and that is where the government to government piece is 
important. Some of the countries we deal with, our private 
sector has a hard time accessing some of these government 
dialogues, but we can achieve that.
    Then as soon as the change in law occurs, then it is 
important for our Commerce Department to get engaged, for our 
Energy Department to get engaged, and our multilateral 
development financing banks to get engaged and say, hey, a new 
market has just been created, and get that word out, because, 
believe me, sometimes--what I just told you about China, very 
few people in America know even now, the fact that they are 
going to install, spend huge amounts of money installing 
pollution control equipment. Most of our people in America do 
not know that yet. We can help get that word out.
    This is very roll up your sleeve kind of stuff. It is not 
grand work. It is the work in the weeds that can make the 
difference.
    Senator Hagel. Is that your office that would initiate that 
government-to-government conversation as you have just 
described?
    Mr. Connaughton. My office helped pull together the high-
level leaders' commitment to this framework in the Asia-Pacific 
Partnership, for example, that we are going to unfold. We then 
hand that off to State, working with DOE and Commerce, and then 
we are going to have work plans. What happens then is we get 
the leaders to get a better--more clarity on the priorities for 
each of their countries. So I can help facilitate that. Then 
once their agencies and our agencies get a clearer direction of 
where they are going, then my function at that point is to 
monitor that and report to the boss, report to the President, 
as to where we are seeing the best opportunities.
    Our goal is to mass produce the outcome, and especially 
deliver more for the U.S. taxpayer dollar, because again, as I 
indicated, projects are good, demonstration projects are good, 
mass-produced markets are even better. That is where under the 
leadership of Secretary Rice and certainly Secretary Bodman, 
who knows a lot about business--I think it is designing those 
dialogues in a way that is results-oriented, is where our real 
challenge lies. We have not done a lot of that in the years 
past. That is what we need to do a lot more of.
    Senator Hagel. Thank you. Did you have another example that 
you wanted to share with the committee?
    Mr. Connaughton. I think Dave said the information piece 
and let me offer this example. Many of our new opportunities, 
especially in the energy area, are cross-sectoral. It used to 
be you had the energy providers. These are the guys who knew 
how to take a pot of water and light a fire under it and 
produce an electron. It is hundreds years old technology. And 
they rarely talked to their counterparts in the petrochemical 
sector, they rarely talked to their counterparts in the 
agriculture sector.
    Then meanwhile the chemical sector, for example, invested 
gasification and they have been using it for decades on a small 
scale in chemical plants. It is just there was never the cross-
sectoral dialogue to say, hey, we have this chemical sector 
technology that would actually be perfect for a future of coal.
    It is these cross-sectoral pieces that I think the 
government can play a very important role in seeing because we 
operate horizontally, whereas many of these sectors operate 
vertically.
    The same is true on human capacity. We have electrical 
workers who work in power plants. We have a different set of 
workers who train to work in chemical plants. If we want to do 
something like coal gasification we actually need cross-
sectoral training of our work force so that those who work in 
chemical plants can now work in power plants. This is, by the 
way, a great new opportunity for labor, for American labor, but 
it does require a rethinking of the structure of training and 
what we expect of these work forces to provide these cross-
sectoral opportunities.
    So it is the day-to-day worker, it is the manager, and it 
is the finance people that we need to start talking to each 
other across sector. Big challenge, but a huge opportunity.
    Senator Hagel. Thank you.
    Secretary Dobriansky. I was just going to add before, Jim 
mentioned the overall structure as relevant to the Asia-Pacific 
Partnership in terms of the U.S. Government. We have had quite 
a bit of diplomatic engagement with these other partners. They 
have either been in the context of international fora on the 
sidelines or, for that matter, also at the UNGA meeting. We 
have had a number of opportunities at my level.
    We also have a working level, too, with all of the 
countries involved. I would also want to underscore the fact 
that we have, as I mentioned in my testimony, bilaterals with 
some 15 countries and regional organizations. That too has I 
think really afforded a great opportunity, not only to focus on 
a broad range of programs and projects, but many of them are 
linked to and associated with not only Asia Pacific, but many 
of the other initiatives that we have mentioned here: methane 
for example, renewables, energy R and D, climate monitoring, 
and so forth.
    Senator Hagel. Thank you.
    Let me go back to a point that a couple of you made in your 
opening remarks on measurement by gas, greenhouse gas 
intensity, that greenhouse gas intensity approach that not all 
countries have subscribed to. Do you see a movement toward that 
measurement, toward that being incorporated, integrated into 
their climate change policy?
    Let us start with you, Chairman Connaughton.
    Mr. Connaughton. Yes, Mr. Chairman. All the measures are 
important, so let me start there. We need to know our absolute 
emissions. That is fundamental. We need to know our emissions 
per capita because it gives us a good sense of how much each 
individual is using and consuming.
    By the way, when I say emissions I include greenhouse 
gasses, but I am also very personally worried, as others should 
be, about air pollution. We need to know that, too. What the 
intensity metric, though, does is it ensures that your progress 
is mostly based on the kind of desired outcomes you want.
    Let me sort of unpack that a little bit. What intensity--
because it compares your emission per unit of growth, it is a 
clearer signal of investments in efficiency and productivity, 
and those are the kinds of investments we prefer to see. It 
does not credit as much reductions that come, for example, by 
putting people out of work, because you get economic loss 
associated with that and so you do not get rewarded by 
achieving your goals by putting people out of work. It does not 
recognize moving economic activity and polluting or emitting 
activity from your country to another country, because not only 
is that sort of bad economically and therefore it subtracts 
from this metric, but from an environmental perspective if you 
have merely shifted your air pollution or your greenhouse gas 
emission to another country you have not done anything to 
advance the environmental outcome either. So it softens that. 
It is not a complete answer to it, but it softens that as a 
metric.
    It also is a good indicator of a diversifying economy 
because you are getting--if I look at the metric I put up 
before, Mr. Chairman, this flattening of greenhouse gasses that 
we just experienced in the last 4 years, they were the result 
of desirable improvements of efficiency and the deployment of 
advanced energy technologies.
    It is the intensity improvement that I am even more 
interested in than the fact that we are flat, because we have 
this much more efficient and productive economy. Also we have 
continual structural shifts. We are adding new elements to our 
economy that do not use very much energy, and that is good for 
our overall security. Those are the kinds of outcomes that we 
prefer to favor.
    It is interesting because we are now at the point where all 
the Asia-Pacific Partnership countries have embraced intensity. 
Even our counterparts in Europe, Prime Minister Blair and 
others, have included intensity as an important way of looking 
at our progress in understanding where we are making the 
greatest gains.
    I would note the final piece to the advantage of intensity 
is we have a growing population and so we have to account for 
the fact that growing population is carrying an even greater 
economic load as well as creating economic opportunity. There 
are other parts of the world where they are experiencing a 
decline in population. So again, the intensity metric helps 
work some of those out of the equation so we have a clearer 
sense of where we are getting investment, real investment in 
technology and efficiency and productivity.
    Senator Hagel. Madam Secretary?
    Secretary Dobriansky. I would have picked out the fact that 
the Asia-Pacific Partnership, that a fundamental aspect of it 
is embracement of the greenhouse gas intensity approach. 
Secondly, I would cite the fact that many developing countries 
have for quite some time especially expressed interest in it, 
because again it is the desire and the need to advance 
economically and at the same time to be environmentally 
responsible and also to look at ways of providing for it 
citizens and providing opportunities for investment.
    I go back to the discussion in the COP in Delhi in 2002. 
There was a very active discussion about the greenhouse gas 
intensity metric and what it exactly affords for developing 
countries, so starting with that backdrop.
    Senator Hagel. Thank you.
    Secretary Garman, would you care to add anything?
    Secretary Garman. No.
    Senator Hagel. Secretary Garman, let me ask you a couple of 
questions. We covered one of these to some extent, technologies 
that would be available, specifically technologies at our 
national laboratories. Maybe you could give us a little 
inventory of those technologies, where we could actually apply 
those or they are being queued up to apply to these 
partnerships.
    Secretary Garman. I am very excited about future 
opportunities through the work that has been unfolding at the 
Department of Energy national labs. They are quite voluminous. 
In fact, we have a technology opportunity, if you will, book--
it is actually a little thicker than this one [indicating]--
that goes through individual technologies that are out there. 
Let me mention just a few.
    I think we are on the threshold of tremendous advancement 
in solar technology due to the pending commercialization of new 
deposition technologies that make thin film solar an extremely 
attractive option in many, many areas of the world, to make it 
a low-cost player that can fit into the developing world very 
nicely. This is a market opportunity for the United States that 
I think if it pans out would be extremely exciting. That is 
just one example and there are literally hundreds.
    As a consequence, I am often mindful of the fact that we 
have some 800 million vehicles on the road consuming ever-
increasing amounts of oil, compounding the geopolitical problem 
of oil, while at the same time emitting more and more 
greenhouse gasses into the atmosphere--230 million vehicles in 
the United States alone. As a consequence of the President's 
Hydrogen Fuel Initiative, we are bringing down the cost of fuel 
cell technology and increasing the durability substantially, to 
the point where we can envision a much simpler vehicle that 
provides all of the attributes of today's vehicles affordably, 
but with no greenhouse gas emissions and requiring no oil at 
all for fuel. That would be a tremendous breakthrough around 
the world.
    Contrast that with the business as usual approach of 
Beijing adding a thousand new cars per day to its roads and it 
strikes me there are two kinds of people in the world, those 
who have cars and those who want cars. We have to deal with the 
transportation and oil issue, and again because of the 
President's initiative I think we have some exciting times 
ahead on that one as well.
    But if I could provide for the committee the compendium of 
our technologies under our U.S. climate change technology 
program that we are looking at. They are quite expansive, 
several hundred, and it may be too voluminous to include in the 
hearing record, but it is quite impressive.
    Senator Hagel. We would appreciate that list and it would 
be included in the hearing. Thank you.


    [The information previously referred to follows:]

       List Provided by the Climate Change Technology Program\1\
---------------------------------------------------------------------------
     \1\ In September 2005, the Climate Change Technology Program 
(CCTP) issued an updated compendium of technology profiles and ongoing 
research and development at participating Federal agencies. The report, 
entitled Technology Options for the Near and Long Term, is quite 
lengthy. What follows is a list, organized by CCTP strategic goal, of 
technology research areas highlighted in the report. Those interested 
in learning more about these technologies are invited to view the full 
report, which is available on the CCTP website at 
www.climatetechnology.gov.
---------------------------------------------------------------------------
           CCTP TECHNOLOGY OPTIONS FOR THE NEAR AND LONG TERM

Reducing Emissions From Energy End Use and Infrastructure
Transportation

     Light Vehicles--Hybrid, Fuel Cell, and Alternative-Fuel Vehicles

     Heavy Vehicles

     Fuels for Advanced Combustion Engines

     Intelligent Transportation Systems Infrastructure

     Aviation

     Transit Buses--Urban-Duty Cycle, Heavy Vehicles


Buildings

     Building Equipment, Appliances, and Lighting

     Building Envelope (Insulation, Walls, Roof)

     Whole Building Integration

     Urban Heat Island Technologies


Infrastructure

     High-Temperature Superconductivity

     Transmission and Distribution Technologies

     Distributed Generation and Combined Heat and Power

     Energy Storage

     Sensors, Controls, and Communications

     Power Electronics


Industry

     Energy Conversion and Utilization

     Resource Recovery and Utilization

     Industrial Process Efficiency

     Enabling Technologies for Industrial Processes
Reducing Emissions From Energy Supply
Low Emissions Fossil-Based Fuels and Power

     Coproduction / Hydrogen

     Advanced Power Systems

     Distributed Generation / Fuel Cells


Hydrogen

     Hydrogen Production From Nuclear Fission and Fusion

     Hydrogen Systems Technology Validation

     Hydrogen Production and Distribution Using Electricity and Fossil 
/ Alternative Energy

     Hydrogen Storage

     Hydrogen Use

     Hydrogen Infrastructure Safety


Renewable Energy and Fuels

     Wind Energy

     Solar Photovoltaic Power

     Solar Heating and Lighting

     Concentrating Solar Power

     Biochemical Conversion of Biomass

     Thermochemical Conversion of Biomass

     Biomass Residues

     Energy Crops

     Photoconversion

     Advanced Hydropower

     Geothermal Energy


Nuclear Fission

     Research Under the Generation IV Nuclear Energy Systems 
Initiative

     Research on Nuclear Power Plant Technologies for Near-Term 
Deployment

     Advanced Fuel Cycle Initiative


Nuclear Fusion

     Fusion Energy
Capturing and Sequestering Carbon Dioxide
Geologic Sequestration

     CO2 Capture and Separation

     CO2 Storage in Geologic Formations

     Novel Sequestration Systems


Terrestrial Sequestration

     Land Management

     Cropland Management and Precision Agriculture

     Converting Croplands to Reserves and Buffers

     Advanced Forest and Wood Products Management

     Grazing Management

     Restoration of Degraded Rangelands

     Wetland Restoration, Management, and Carbon Sequestration

     Carbon Sequestration on Reclaimed Mined Lands

     Biotechnology

     Biotechnology and Soil Carbon

     Improved Measurement and Monitoring

     Terrestrial Sensors, Measurements, and Modeling

     Measuring and Monitoring Systems for Forests


Ocean Sequestration

     Ocean Sequestration--Direct Injection

     Ocean Sequestration--Iron Fertilization
Reducing Potential for Climate Effects of Non-CO2 Greenhouse 
        Gases
Methane Emissions From Energy and Waste

     Anaerobic and Aerobic Bioreactor Landfills

     Conversion of Landfill Gas to Alternative Uses

     Electricity Generation Technologies for Landfill Gas

     Advances in Coal Mine Ventilation Air Systems

     Advances in Coal Mine Methane Recovery Systems


Measurement and Monitoring Technology for Natural Gas Systems

     Methane and Nitrous Oxide Emissions from Agriculture

     Advanced Agricultural Systems for NO2 Emission 
Reduction

     Methane Reduction Options for Manure Management

     Advanced Agricultural Systems for Enteric Emissions Reduction


Emissions of High Global Warming Potential Gases

     Semiconductor Industry: Abatement Technologies

     Semiconductor Industry: Substitutes for High GWP Gases

     Semiconductors and Magnesium: Recovery and Recycle

     Aluminum Industry: Perfluorocarbon Emissions

     Electric Power Systems and Magnesium: Substitutes for SF 6

     Supermarket Refrigeration: Hydrofluorocarbon Emissions


Nitrous Oxide Emissions From Combustion and Industrial Sources

     Nitrous Oxide Abatement Technologies for Nitric Acid Production

     Nitrous Oxide Abatement Technologies for Transportation


Emissions of Tropospheric Ozone Precursors and Black Carbon

     Abatement Technologies for Emissions of Tropospheric Ozone 
Precursors and Black Carbon
Enhancing Capabilities To Measure and Monitor Emissions

     Hierarchical MM Observation System

     MM for Energy Efficiency

     MM for Geologic Carbon Sequestration

     MM for Terrestrial Carbon Sequestration

     MM for Ocean Carbon Sequestration

     MM for Other GHG


    Senator Hagel. Let me go back to the solar example. Can you 
give us any kind of a time frame on when that is going to be 
relevant to the marketplace?
    Secretary Garman. It is conceivable in the next 5 to 10 
years you could see the first of these products, these new 
products. Basically what they are--it is a thin film product 
that just can be produced similar to today's thin film 
products, but at a much lower cost. That is the key. Thin film 
photovoltaics today cost anywhere from 25 to 30 cents per 
kilowatt hour and that makes it a nonstarter except for in a 
few high electricity cost countries like Japan. But if you can 
make that 10 cent or even 5 cent per kilowatt hour peak flowing 
electricity, that makes it a huge market opportunity all around 
the world.
    Senator Hagel. Thank you.
    Chairman Connaughton, would you like to add anything to 
this?
    Mr. Connaughton. I just want to echo the fact that I think 
we are on the threshold. These things happen every generation 
or so and what I have seen in the last several years has been 
an uptick in this activity. But the most important signal I 
have been looking for has been the private sector venture 
investment, and that is increasing. It was very low 4 years or 
5 years ago.
    I think it was the President's State of the Union on 
hydrogen and then followed by the EU, the President of the EU 
and Prime Minister Koizumi making similar announcements in the 
same basic cycle, that has unleased a whole effort that goes 
beyond hydrogen in terms of interest in the energy sector.
    I think it is also driven by the fact that there is a 
hopeful aspiration for growth around the world. So when you 
have the private sector, especially our venture capitalists, 
the guys who are doing some risk-taking, it is a good sign when 
they are investing because what they are really seeing is, they 
are saying, you know what, there will be greater economic 
growth, more people will be coming out of poverty around the 
world, and we want to be part of that investment. That is a 
very positive sign, too.
    Right now it is going under the radar screen, but just 
watch in the next coming years. These breakthroughs are really 
quite something and they are backed by private sector support.
    Senator Hagel. Thank you.
    Secretary Dobriansky, anything for you?
    Secretary Dobriansky. No.
    Senator Hagel. Well, we have kept you here for an hour and 
a half and that means that you have not been productive for an 
hour and a half to the American taxpayer, and we apologize to 
the taxpayers for this, but we know that you will not go home 
before midnight tonight to catch up. We are grateful for the 
good work that you are doing and your colleagues. Please extend 
our best wishes and thanks to your colleagues.
    I think Secretary Garman's point about being at an exciting 
time, all three of you have noted that we have a long way to 
go, but I think we have broken through here. Like always, it 
will be the private sector and technology and innovation and 
leadership that will drive this. I too am encouraged with not 
just what I heard today, but the kind of progress that we are 
making. So even though we have a long way to go, thank you all 
very much.
    If we have additional questions from any of my colleagues, 
we will keep the record open for a couple of days, if you would 
respond to those questions. And any additional information you 
would want to submit for the record, we would allow that as 
well. Thank you very much.

    [Pause.]

    Senator Hagel. Secretary Claussen, welcome. We are glad 
that you are here. When you say ``Secretary Claussen,'' those 
who are observing this hearing should note that you are not a 
secretary in the current government, but in a past government 
you were Assistant Secretary of State, and we are once again 
very grateful for your willingness to come before the Senate 
Foreign Relations Committee and offer some important thoughts 
in your present capacity as President of the Pew Center on 
Global Climate Change.
    You have been a leader on this issue for many years. You 
know exactly what you are talking about and have very definite 
opinions and perspectives. We are always grateful to receive 
those, and we are pleased again that you have taken the time to 
come before the committee. So please provide your testimony, 
and if you would care to abbreviate it or read it all, either 
way. Then we will have an opportunity to exchange thoughts.
    Ms. Claussen. Thank you.

 STATEMENT OF EILEEN CLAUSSEN, PRESIDENT, PEW CENTER ON GLOBAL 
                         CLIMATE CHANGE

    Ms. Claussen. Thank you very much, Mr. Chairman. If I may, 
I would just like to summarize a few key points from my written 
statement.
    The Hagel climate provisions of the energy bill go to a 
very important issue, how best to develop and deploy climate-
friendly technologies urgently and on a global scale. Standards 
of living and energy demand are expected to rise dramatically 
in the developing world over the next few decades. China 
expects to build 544 gigawatts of new coal capacity over the 
next 25 years and the city of Shanghai--and these are just 
examples--predicts a quadrupling of cars and trucks by 2020.
    If we are going to address the climate change problem, the 
huge growth in energy demand in developing countries must be as 
climate-friendly as possible. We believe the Hagel provisions, 
if implemented properly, can help achieve that outcome. First, 
we would urge that assistance provided to developing countries 
be tailored to their specific needs. Rather than seeing 
climate-friendly technology deployment as an exercise in 
funding demonstration projects or increasing technology 
exports, our goal should be to integrate climate-friendly 
activities into national strategies for economic growth, 
poverty reduction, and sustainable development. This is the 
only way they will make a lasting difference, that is by 
becoming a part of the recipient country's own economic plans 
and programs.
    Second, the Hagel provisions, like the many technology 
initiatives launched before it, can only be effective to the 
extent that they are adequately funded and managed. Time and 
again in the past we have launched initiatives to much fanfare, 
but then provided inadequate funding and failed to manage them 
as a coherent whole. It would be a shame if the same happened 
to the Hagel program.
    More important than any of this, though, is the need to 
establish a fair and effective international framework to 
engage all major emitting countries in the effort against 
climate change. We do not believe that technology initiatives 
in and of themselves will make a significant difference and we 
do not believe that an international framework necessarily 
means putting countries on an energy diet. A greenhouse gas 
emissions diet, yes; an energy diet, no.
    But in order for countries to undertake and sustain 
ambitious efforts to limit or reduce greenhouse gas emissions, 
they need to be confident that other countries, and in 
particular their major trading partners, are also contributing 
their fair share to the overall effort. We need therefore some 
form of mutual assurance and some certainty. This is best 
accomplished in a common framework within which countries can 
take on commitments commensurate with their responsibilities 
and capabilities and appropriate to their national 
circumstances. Technology cooperation should be a part, but 
only one part, of such a global framework.
    Through an initiative called the Climate Dialogue at 
Pocantico, the Pew Center has engaged with policymakers and 
stakeholders from around the world to look at options for 
creating such a framework. Dialogue members who participated in 
their personal capacities included policymakers from Australia, 
Brazil, Canada, China, Germany, Japan, Mexico, the United 
Kingdom, and the U.S. Senate, senior executives from Alcoa, BP, 
Dupont, Eskom of South Africa, Exelon, Rio Tinto, and Toyota, 
and experts from the Pew Center, India's Energy and Resources 
Institute, and the World Economic Forum.
    The final report of the dialogue will be released tomorrow, 
actually in this room, with Senators Lugar and Biden and will 
be presented to government ministers at the upcoming climate 
change negotiations in Montreal.
    We believe we have come up with some ideas for a path 
forward. Now what we need is for the United States to be 
constructively engaged in negotiating a framework, based 
perhaps on some of the ideas we will be suggesting. The climate 
negotiations taking place next month in Montreal would be an 
excellent place to start that engagement and we know that 
nearly every country there would welcome U.S. leadership.
    Unfortunately, we understand that the administration is 
opposing efforts by other countries to initiate a process to 
begin considering next steps under the framework convention. We 
believe it is essential that such a process go forward. So my 
final recommendation would be for the Senate to revisit and 
update the 1997 Byrd-Hagel resolution, advise the executive 
branch to work with other nations both under the framework 
convention and in other international fora with the aim of 
securing U.S. participation in agreements consistent with the 
following four objectives:

    First, to advance and protect the economic and national 
security interests of the United States;
    Second, to establish mitigation commitments by all 
countries that are major emitters of greenhouse gasses;
    Third, to establish flexible international mechanisms to 
minimize the cost of efforts by participating countries;
    And fourth, to achieve a significant long-term reduction in 
global greenhouse gas emissions.

    Doing that, if it leads to constructive U.S. engagement in 
the development of an international climate policy framework, 
is far and away the most important thing the Senate could do to 
create a positive context for implementation of the Hagel 
provisions.
    Thank you very much.


    [The prepared statement of Ms. Claussen follows:]

              Prepared Statement by Hon. Eileen Claussen,
                  Pew Center on Global Climate Change

    Mr. Chairman and members of the subcommittee, thank you for the 
opportunity to testify on climate change technology deployment in 
developing countries, and, in particular, on the implementation of 
Section 1611 of the Energy Policy Act of 2005, authored by the 
chairman. My name is Eileen Claussen, and I am the President of the Pew 
Center on Global Climate Change.
    The Pew Center on Global Climate Change is a non-profit, non-
partisan and independent organization dedicated to providing credible 
information, straight answers and innovative solutions in the effort to 
address global climate change.\1\ Forty-one major companies in the Pew 
Center's Business Environmental Leadership Council (BELC), most 
included in the Fortune 500, work with the Center to educate the public 
on the risks, challenges and solutions to climate change.
---------------------------------------------------------------------------
    \1\ For more on the Pew Center, see www.pewclimate.org.
---------------------------------------------------------------------------
    Global climate change is real and likely caused mostly by human 
activities. While uncertainties remain, they cannot be used as an 
excuse for inaction. To quote the National Academy of Sciences, in a 
statement signed by the academies of 10 other nations, as well: ``The 
scientific understanding of climate change is now sufficiently clear to 
justify nations taking prompt action. It is vital that all nations 
identify cost-effective steps that they can take now, to contribute to 
substantial and long-term reduction in net global greenhouse gas 
emissions.''
    The Pew Center believes there are three things we in the United 
States must do to reduce the real and growing risks posed by global 
climate change: First, we must enact and implement a comprehensive 
national program to progressively and significantly reduce U.S. 
emissions of greenhouse gas emissions in a manner that contributes to 
sustained economic growth. While I am happy to elaborate on this point, 
that is not my intent today. Second, we must strengthen our efforts to 
develop and deploy climate-friendly technologies and to diffuse those 
technologies on a global scale. That is the primary thrust of Section 
1611. And third, the United States must work with other countries to 
establish an international framework that engages all the major 
greenhouse gas-emitting nations in a fair and effective long-term 
effort to protect our global climate. I would like to return to this 
point later in my testimony. First, though, let me discuss the 
specifics of Sen. Hagel's law and its implementation.
    We must strengthen efforts to develop and deploy climate-friendly 
technologies on a global scale, and to do so quickly. Standards of 
living are expected to rise in developing countries over the next few 
decades, and, as they do, energy demand will rise. China, for example, 
expects to build 544 gigawatts of new coal capacity between 2003 and 
2030, far more than current coal capacity in the United States. If 
these plants are not designed and operated to capture their carbon 
dioxide emissions, we could well lock ourselves into a level of climate 
change no one would want. Similarly, Shanghai predicts a quadrupling of 
cars and trucks by 2020, and car sales in Delhi have risen 10 percent 
per year since the mid-1970s. If we are going to address the climate 
change problem, the huge growth in energy demand in developing 
countries has to be as climate-friendly as possible.
    Section 1611 is intended to address that challenge. The provision 
requires the Department of State to identify the top 25 energy users 
among developing countries, describing among other things the 
quantities and types of energy they use, and the greenhouse gas 
intensity of their energy, manufacturing, agricultural and 
transportation sectors. The provision also requires the development of 
a technology strategic plan, and authorizes at least 10 demonstration 
projects to promote the adoption of technologies and practices that 
reduce greenhouse gas intensity in developing countries. Finally, the 
provision requires an identification of potential barriers to the 
export and adoption of climate-friendly technologies. All of these are 
useful activities.
    The State Department is still at the early stages of implementing 
Section 1611. I believe the first deadline they face is production of 
the report on the 25 countries, due in February. Given this early 
stage, I would like to offer a few suggestions.
    First, we should tailor the assistance provided to developing 
countries to their needs. The reality is that the highest priority for 
most developing countries is economic growth and development. Rather 
than viewing climate-friendly technology deployment solely as an 
exercise in increasing exports or funding demonstration projects, our 
objective should be to integrate climate-friendly activities into 
national strategies for economic growth, poverty reduction, and 
sustainable development. For instance, energy policies and plans are 
critical to achieving economic and development objectives. Making 
climate change one of the drivers of energy policy, as the United 
Kingdom has done, will move us toward meeting our goal of a stable 
climate. We should help developing countries build their capacity to 
assess clean energy options and establish policy frameworks that will 
favor such options even after our funding assistance is gone.
    We also should support and promote efforts by the largest 
developing countries to identify specific goals for limiting their 
emissions of greenhouse gases--recognizing that their goals may vary in 
form, content and timing. One way to do that would be to require that 
the largest developing countries, in agreeing to receive assistance 
under this provision, establish goals consistent with their development 
strategies, and periodically report progress toward meeting them.
    Second, we would recommend tracking progress under Section 1611 not 
only in terms of greenhouse gas intensity, but in terms of actual 
greenhouse gas emissions. Measuring intensity is useful in that it 
allows us to distinguish a change in emissions that results from a 
genuine improvement in practices and technology from a change due to 
reduced production. Intensity reduction, however, is not a surrogate 
for emission reduction, and our objective of achieving a stable climate 
must entail actual emission reductions. We therefore should be tracking 
our progress in those terms, as well.
    Third, like the many technology initiatives launched before it, 
Section 1611 can only be effective if it is adequately funded and 
managed, and implemented with some urgency. Section 1611 joins an 
already large crowd of climate-friendly technology initiatives. In 
addition to the programs with a largely international focus--the 
Methane-to-Markets Partnership, the Carbon Sequestration Leadership 
Forum, and the Partnership for a Hydrogen Economy--several other 
programs are intended to advance the climate-friendly technologies we 
would want deployed in developing countries, including: Climate VISION, 
Climate Leaders, Climate Challenge, Clean Cities, the Hydrogen Fuel 
Initiative, SmartWay Transport Partnership, FreedomCAR, Energy STAR, 
Generation IV Nuclear Initiative, Vision 21, 21st Century Truck, 
Nuclear Power 2010, ITER22, FutureGen, Future Fuel Cells, Industries of 
the Future, and Turbines of Tomorrow.
    While it is difficult to tell exactly how much has been budgeted 
for each of these programs, according to the administration's Federal 
Climate Change Expenditures Report to Congress (March 2005), the total 
fiscal year 2005 budget authority for all initiatives that have direct 
relevance to climate, as well as programs that benefit the climate 
indirectly (like grants to help low-income people weatherize their 
homes), amounts to about $5.2 billion.
    Related to this is the challenge of implementing so many 
initiatives on a timely basis. Because it is far easier to explain to 
the press and public the launch of an initiative than to explain the 
boring details of its implementation, the political rewards of 
launching initiatives greatly outweigh those of implementation. The 
tendency of every recent administration has been, accordingly, to 
launch initiatives to much fanfare, but then provide them inadequate 
funding and management attention. Moreover, it would be an enormous 
challenge for any administration to manage such a collection of 
initiatives as a coherent whole or with any real urgency.
    It would be a shame if 3 years from now, in another oversight 
hearing, we learned that Section 1611 had became one of several 
disjointed, underfunded and indifferently implemented initiatives. We 
simply can not afford to lose the time.
    Fourth, an international technology deployment program, such as 
that established under Section 1611, can only be effective if 
complemented by an international framework that engages all major 
emitting countries in the effort against climate change. Therefore, 
most critical of all is the third challenge I identified at the outset: 
establishing a fair and effective international framework to engage all 
major emitting countries in the effort against climate change.
    Through an initiative called the Climate Dialogue at Pocantico,\2\ 
the Pew Center has engaged with policymakers and stakeholders from 
around the world in a wide-ranging examination of specific options for 
advancing the international climate effort. The Pocantico dialogue was 
convened by the Pew Center to provide an opportunity for informal 
discussions among 25 participants from government, business, and civil 
society. Dialogue members, who participated in their personal 
capacities, included policymakers from Argentina, Australia, Brazil, 
Canada, China, Germany, Japan, Malta, Mexico, Tuvalu, the United 
Kingdom, and the United States; senior executives from Alcoa, BP, 
DuPont, Eskom (South Africa), Exelon, Rio Tinto, and Toyota; and 
experts from the Pew Center, The Energy and Resources Institute 
(India), and the World Economic Forum. The final report of the Dialogue 
will be released tomorrow in this hearing room with Senators Lugar and 
Biden, and presented to government Ministers at the upcoming climate 
change negotiations in Montreal.
---------------------------------------------------------------------------
    \2\ The Climate Dialogue at Pocantico is a series of off-line 
discussions among 25 senior policymakers, business leaders, and NGOs 
from 15 countries exploring options for next steps in the international 
climate effort. The dialogue provides an off-line opportunity for 
participants to consider specific options with the objective of 
identifying a set of options to be recommended for consideration by the 
broader policy community. Participants in the dialogue include 
policymakers from Australia, Brazil, Canada, China, Germany, Japan, 
Mexico, the United States and the United Kingdom; senior executives 
from Alcoa, BP, DuPont, Exelon, Rio Tinto, and Toyota; and NGO 
representatives from India and Switzerland. Recommendations from the 
dialogue, which concludes this fall, will be presented at numerous 
international fora. For more on the Dialogue, see http: / / 
www.pewclimate.org / pocantico.cfm.
---------------------------------------------------------------------------
    I would like to share with you some of the insights and 
observations emerging from this ongoing dialogue.
    First, there is no getting around national interest. Climate change 
is a collective challenge. However, the political reality is that 
nations will join in meeting this collective challenge only if they 
perceive it to be in their national interests. A multilateral framework 
must therefore recognize and accommodate the very real and significant 
differences among nations. The key here is flexibility. We need a 
framework flexible enough to allow different countries to undertake the 
different types of strategies best suited to their national 
circumstances. To accommodate different types of strategies, we must 
allow for different types of commitments. For instance, a quantified 
emissions limit may be appropriate for some countries, while for others 
some form of non-quantified policy commitment may be more feasible and 
effective. Also, commitments could apply economy-wide, or they could be 
structured around specific sectors.
    There are many possibilities and the time to begin considering them 
is right now. In its present form, the Kyoto Protocol commitments 
expire after 2012. In Montreal, governments will consider initiating a 
formal process to consider next steps in the international climate 
effort. Under the terms of the Protocol, Kyoto parties must begin 
consideration of new commitments this year. There is broad 
international support for simultaneously initiating a parallel process 
to consider next steps under the Framework Convention, to which the 
United States is a party. Other countries would very much welcome the 
United States' engagement. Most have come to accept that the United 
States will never be a party to the Kyoto Protocol. And they understand 
that a truly effective international approach--one with the full 
engagement of the United States and the major developing countries--
will require moving beyond Kyoto. It is our understanding that the 
administration opposes any decision to consider next steps under the 
Convention, maintaining that it is premature to discuss post-2012 
options. Quite to the contrary, it is essential that we begin now, with 
the United States fully and constructively engaged.
    Toward that end, we believe the most powerful step the Senate could 
take to reestablish U.S. leadership on this vital global issue would be 
to revisit and update the sense of the Senate on the future of the 
international climate effort. As we all know, Senate Resolution 98 of 
the One Hundred Fifth Congress--the Byrd-Hagel resolution--has had a 
profound influence on the climate debate here and abroad. As the 
international climate effort enters a new stage, a new Senate 
resolution can again shape the debate. It can help ensure that the 
United States is at the table and define the terms of U.S. engagement; 
and, in so doing, it can help achieve the best possible outcome.
    As you will recall, the Senate in June approved a resolution 
sponsored by Senator Bingaman recognizing the need for mandatory steps 
to limit and reduce U.S. greenhouse gas emissions. This was an 
important statement. However, we believe it represents only half the 
equation. While meant to encourage comparable efforts by key trading 
partners, the resolution provides no guidance on the terms of an 
equitable climate agreement. Standing on its own, it might even be 
interpreted as supporting unilateral mandatory action by the United 
States.
    Given all this, we would strongly encourage the Foreign Relations 
Committee to consider, and to report to the full Senate, a resolution 
advising the Executive Branch to work with other nations, both under 
the Framework Convention and in other international fora, with the aim 
of securing U.S. participation in agreements consistent with the 
following four objectives:


    First, to advance and protect the economic and national security 
interests of the United States. Potential climate change impacts such 
as chronic drought, famine, mass migration, and abrupt climatic shifts 
may trigger regional instabilities and pose a growing threat to our 
national security interests. Addressing climate change, on the other 
hand, can greatly strengthen U.S. security by reducing our reliance on 
energy imports. Sea-level rise and other climate impacts pose a direct 
economic threat as well, to U.S. communities and to U.S. businesses. On 
the other hand, our response to climate change, if not well conceived, 
could pose a different sort of economic burden. It is imperative that 
we both avoid the economic consequences of climate change, and minimize 
the costs of addressing climate change.

    Second, to establish mitigation commitments by all countries that 
are major emitters of greenhouse gases. Ideally, a global challenge 
such as climate change should be met with a fully global response. What 
is most critical at this stage, however, is getting the largest 
emitters on board. Twenty-five countries account for 83 percent of 
global greenhouse gas emissions. Seventeen of them are also among the 
world's most populous countries, and 22 are among those with the 
highest GDPs. To be truly effective, these major emitters must be part 
of the solution. While we cannot expect all these countries to act in 
the same way, or necessarily in the same timeframe, we believe that all 
must commit to take action.

    Third, to establish flexible international mechanisms to minimize 
the cost of efforts by participating countries. The United States has 
led the world in demonstrating that well-designed market-based 
approaches can achieve the greatest environmental benefit at the lowest 
cost. U.S. negotiators fought rightly and successfully to build market 
mechanisms into the Kyoto architecture. U.S. economic and business 
interests will be best served by an international climate strategy that 
uses emissions trading and other mechanisms to ensure that our efforts 
are as cost-effective as possible.

    And, fourth, to achieve a significant long-term reduction in global 
greenhouse gas emissions. Our initial efforts to address climate 
change, both domestically and internationally, can be at best first 
steps. But in taking these steps, we must remain cognizant of our 
ultimate objective--stabilizing the global climate--and we should craft 
policies and agreements robust enough to drive and sustain the long-
term efforts needed to achieve it.

    We believe these four principles form a solid foundation for 
constructive U.S. engagement and urge that they be incorporated in a 
new Sense of the Senate resolution.


    In closing, the most important thing Sen. Hagel has done in writing 
Section 1611 of the Energy Policy Act of 2005, and that the 
subcommittee has done in holding this hearing, is to join the question 
of how best to address climate change. As Senator Hagel has said, 
``Achieving reductions in greenhouse gas emissions is one of the 
important challenges of our time.'' And: ``We all agree on the need for 
a clean environment and stable climate. The debate is about solutions. 
The question we face is not whether we should take action, but what 
kind of action we should take.''
    I thank and commend Sen. Hagel for placing these issues before you, 
and thank the subcommittee for the opportunity to testify. The Pew 
Center looks forward to working with the committee and Sen. Hagel on 
the implementation of Section 1611 and on the development, enactment 
and implementation of any future climate change legislation.


    Senator Hagel. President Claussen, thank you as always for 
your comments and your entire statement will be included in the 
record.
    I am going to bounce around a little bit on some questions 
based on your testimony and some things that you did not 
specifically mention, but are in your statement, and then also 
based on some of the things that the previous witnesses 
mentioned. First, Kyoto's cap-and-trade system. In your 
opinion, is it working for the European countries?
    Ms. Claussen. Let me put it this way. I think it is much 
harder than most of them thought it would be to actually 
implement the targets they negotiated. But I do think it has 
spurred a lot of activity, a lot of which is really positive in 
terms of reducing greenhouse gas emissions. So has it been 
helpful in educating people and getting them on the right path? 
I think the answer is yes. Is it going to fulfill the dreams of 
many of those that signed? Probably not.
    Senator Hagel. Meaning that many will not meet their 
targets?
    Ms. Claussen. I think many will not meet their targets. Not 
all, but many.
    Senator Hagel. Do you believe a cap-and-trade system is 
necessary to force new technologies onto the market?
    Ms. Claussen. No. I think a cap-and-trade system is one 
approach that can work quite effectively, but I think it is not 
the only approach, and it is certainly my vision that we need 
some different paths forward, of which that could be one, and 
that could be chosen by some countries, but I think we need 
others as well.
    Senator Hagel. You sat and carefully listened, as I noted, 
to the testimony of the first panel, and they referenced some 
of these areas, in particular Secretary Garman. How do you 
respond to what you heard? Do you think that is too far out? Is 
it too much on the periphery? Were you encouraged by what you 
heard? Give me your thoughts on that?
    Ms. Claussen. I think we are at--this is something that Jim 
Connaughton said at the end. I think we are at a point where 
many in the private sector are starting to think very seriously 
about long-term strategies that move us toward climate-friendly 
greenhouse gas technologies. So I think that is right.
    I think what he thinks spurred that development is maybe 
helpful, but I think not what actually did. If I look at what 
has changed in the world that would result in that kind of 
activity, I think it is much more likely to be implementation 
of Kyoto, warts and all, the efforts in California and along 
the West Coast of the United States, the efforts in the 
Northeast and the Mid-Atlantic, where they are developing and 
will soon announce their cap-and-trade system there, lots of 
other activities at the State level, 21 States with renewable 
requirements. I think that activity is really what is spurring 
the change in the private sector, more investment in climate-
friendly technologies.
    But I do think it is happening. I do agree with that. I 
just see different reasons for it.
    Senator Hagel. Would you generally say you agree with what 
you heard as the objectives of this administration from the 
three representatives of the administration?
    Ms. Claussen. On the assumption that what we are all after 
is a world where emissions are reduced pretty substantially in 
the next 50 or so years, I think the answer is yes. I just do 
not think you can get there only by a push. I think you need a 
pull to get the technologies into the market as well, and some 
kind of certainty and some kind of policy that is more than the 
current administration seems to be interested in.
    Senator Hagel. But if we are seeing a significant increase 
in the potential and the technologies coming on line, then what 
additionally would that do, mandates or caps or government 
regulation?
    Ms. Claussen. What it would do? I think it would move the 
technologies much faster in the development stage and much, 
much faster in the deployment and diffusion stage, which is I 
think what we need to do. I think we need to get moving faster 
than just a little bit of push. Again, I think your provisions 
will be very helpful. I just think they need to be complemented 
with something that helps get those technologies into the 
marketplace.
    Senator Hagel. Thank you.
    You mentioned international dialogue and how you think 
maybe something could come out of that. Would you expand on 
that a little bit?
    Ms. Claussen. Well, I do not want to expand too much 
because I do not want to talk about what we are going to 
announce tomorrow. But I will give you a little----
    Senator Hagel. What you can.
    Ms. Claussen [continuing]. A little flavor. In the course 
of this dialogue--and I think the fact that we had such a 
diverse group of people around the table and they actually 
reached a consensus was pretty good. We agreed on a set of 
elements that we think are really important. We talked about 
adaptation and we talked about long-term targets, but when we 
started to focus on mitigation we thought that there were four 
elements that were really important.
    One of them is technology. One of them is targets and 
trading. One of them was sectoral approaches and one of them 
was what we called policy-based approaches. We looked at that 
sort of range of elements because we think some may be more 
appealing to some countries than others, and what we are really 
interested in in the long term is getting everybody on the 
right path. So we are looking at something that is sort of 
maximum flexibility with real results.
    That is why when you asked me about targets and trading, 
yes, I think it is important and I think it is a path that many 
will want to go down, but I think there are other ones as well.
    Senator Hagel. Let me ask you a question I asked Secretary 
Dobriansky, about geographically, regionally in the world, 
areas where you think we have the most significant opportunity 
for cost-effective development of these technologies.
    Ms. Claussen. Let me put it a slightly different way. 
Twenty-five countries are responsible for 83 percent of global 
greenhouse gas emissions. These countries are also among the 
most populous and they are also the countries with the largest 
GDPs. But on the other hand, per capita emissions range by a 
factor of 14 and per capita incomes within that group by a 
factor of 18.
    So while they are the countries that absolutely have to be 
at the table and we feel very strongly that all of that group 
needs to be at the table, we do need to have some kind of a 
flexible approach that allows each of those countries to do 
what is in their national interest, but that is also moving us 
on the right path on greenhouse gas emissions. I would look at 
it in terms of sort of major emitters, major economies, the 
people who have to be at the table.
    Senator Hagel. You mentioned your idea about revisiting the 
Byrd-Hagel amendment, if I understood your point, to 
essentially update it.
    Ms. Claussen. Yes.
    Senator Hagel. And you mentioned four specific areas. Would 
you care to embroider on any of that or expand on that point?
    Ms. Claussen. Yes. Our interest is in doing some of the 
things that you have in the Byrd-Hagel resolution, but instead 
of putting them in sort of a negative context, what you should 
not do, we think they should be put in a positive context of 
what the U.S. Government should do. I think it is really 
important for the U.S. Government to be engaged in this and I 
think it is important for our private sector, too, to see the 
U.S. at the table shaping the solutions.
    I think many, many in the private sector would feel that 
our views, our analysis, the way we look at these things, is 
really important and should be a part of the process if we are 
going to have an outcome with which we can live. I think it is 
really important to urge engagement, and so I would sort of see 
this--I understand the context for the Byrd-Hagel, but I think 
the context is different now and it is really important for the 
U.S. to be at the table, at the table with ideas and at the 
table with solutions.
    Senator Hagel. You do not think what you heard in the last 
hour and a half from three senior administration officials 
talking about at the table, technologies, engagement, not only 
what some of the legislation I sponsored that is now law, but 
even beyond that, you do not feel that is enough?
    Ms. Claussen. I do not, because I think most other 
countries, while they will participate in all of these 
initiatives that the last three witnesses talked about, and I 
think many of them have the potential to be effective, so I am 
not trying to sort of denigrate what contribution they can 
make, I think most countries are interested in a policy 
framework, not just a technology framework.
    As far as I understand--and I may be wrong here, but I do 
not think so--the U.S. has essentially said they do not want to 
participate in discussions about the future in a policy sense. 
I think that is a mistake because I think the world needs both 
mutual assurance and certainty, and I think you have to do that 
in some kind of a policy framework, and I think the U.S. should 
participate.
    Senator Hagel. Thank you.
    Staying with your three colleagues here for a moment, let 
me give you an opportunity to respond to anything that you care 
to respond to that you heard while they were at the table.
    Ms. Claussen. I talk to them all the time and we agree on a 
fair number of things. I think the vision does not go where it 
needs to go if we are really going to address this, because I 
think we have to start with a much greater sense of urgency, 
not to do things that are bad for economic growth. That is not 
our interest at all. But I think we can do things that are good 
for economic growth that also result in much greater, much 
sooner reductions in greenhouse gas emissions.
    It is interesting when you look at the companies that have 
taken on targets, and there are probably 35 or 38 of them. Many 
of them have targets that are much more stringent than, let us 
say, the U.S. Kyoto target. Thirteen of them have already met 
the targets and not one of them has spent money doing it, 
because they found efficiency opportunities that would result 
in reductions in greenhouse gas emissions.
    I do not want not to take those while we can take them, 
while we are developing the technologies that would be good in 
a decade or two decades. I agree with that. We do need some 
long-term technologies, but why would we not take opportunities 
that exist right now to put us on the right path? I just do not 
see the administration sort of moving in that direction. I see 
them focused on the long term. I do not want to see us miss 
opportunities in the short term.
    Senator Hagel. You were here for the exchange, the question 
that Senator Alexander asked the panel about why would Shell 
invest in the Australian project with the time line as it is 
versus a time line here. Do you know anything about that?
    Ms. Claussen. I do not know any of the specifics about 
that, but I do know that the private sector is really 
interested in advancing the technology, and I see them 
marketing a lot of technologies abroad because they feel that 
the policy climate is more certain abroad, whether it is in a 
Kyoto country or a country that is more committed to long-term 
emissions reductions.
    If you talk to the CEO of General Electric, for example, 
who has just started to really focus in a major way on 
greenhouse gas-reducing technology, he views a lot of his 
markets abroad rather than here because he does not think we 
are at the same stage in our policy development and 
implementation. He is very much focused on abroad, and of 
course he wants to sell his technology, but it is interesting 
that he sees the markets there, not here. I think he should be 
seeing them here as well.
    Senator Hagel. But you do not know anything about----
    Ms. Claussen. I do not know the specifics of the Shell.
    Senator Hagel [continuing]. Why they would make that 
decision?
    Ms. Claussen. No, I do not. But I am happy to try to find 
out and maybe answer it for you.
    Senator Hagel. I will tell Senator Alexander that you will 
take that assignment on.
    Ms. Claussen. Absolutely, we will look into it.
    Senator Hagel. He will be very pleased about that. As you 
know, he is very engaged in this overall issue and very 
knowledgeable.
    Ms. Claussen. Yes. Coal is, on a scale, coal and 
transportation are the two things we really need to focus on, 
because we are going to burn a lot of coal and China and India 
and Australia are going to burn a lot of coal and we have to 
find a way to do it with capture and sequestration.
    Senator Hagel. For a long time to come.
    Ms. Claussen. Yes, for a long time to come.
    Senator Hagel. We are going to vote shortly, so I will 
adjourn our committee hearing. But let me also say, as I did to 
the first panel, that we may have additional questions, if that 
is acceptable to you----
    Ms. Claussen. Absolutely.
    Senator Hagel [continuing]. If you would agree to answer 
those. And we will get those to you in the next 2 days if we 
have some members that would require that. If not, your full 
testimony of course will be included in the record. Again, I 
personally appreciate all of the time that we have had over the 
years to exchange views on this issue and your continued 
leadership. Thank you very, very much.
    Ms. Claussen. Thank you very much.
    Senator Hagel. The committee is adjourned.


    [Whereupon, at 4:53 p.m., the subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              

           Prepared Statement by Senator Joseph R. Biden, Jr.

    I am pleased that with this hearing today Senator Hagel, with the 
support of Chairman Lugar, will continue the dialogue on the issue of 
global climate change in the Senate Foreign Relations Committee.
    Since the United States signed the United Nations Framework 
Convention on Climate Change in 1992, the persuasiveness of the 
science, the sophistication of our climate models, and the measurable 
evidence of climate change and its effects have grown every year. Those 
effects mean that this is not just an environmental issue. The 
dislocations caused by climate change will shift growing seasons, water 
resources, habitats, and other fundamental building blocks of economic, 
social, and political arrangements around the world. With those shifts 
will come political conflict, migrating populations, the spread of 
disease--threats to international stability.
    The challenge to find cleaner, more efficient sources of energy 
also offers us one of the great opportunities of this new century. By 
moving us toward greater energy independence, lowering our energy 
costs, and promoting new products and markets, a well-designed climate 
policy can create jobs and enhance economic growth. Senator Hagel's 
legislation--The Climate Change Technology Deployment in Developing 
Countries Act of 2005, incorporated into the Energy Bill and now part 
of our national policy--shows us one way we can employ constructive 
climate policy to promote the goals of economic development abroad and 
innovation here at home.
    Here in the Senate, we have inched closer in recent years to 
recognizing the need for a bipartisan domestic mitigation program, 
marked by the recent adoption of Senator Bingaman's Sense of the Senate 
Resolution calling on the United States to undertake a program of 
binding domestic greenhouse gas emission targets. However, that kind of 
program will make the most sense as part of an international agreement 
that can establish the coordination--and the trust--needed for 
effective, shared commitment to reducing human impact on our climate.
    This is a global challenge, and it will require an international 
response.
    Unfortunately, the United States, the largest current per capita 
source, and the largest historical source of greenhouse gases, has 
retreated to the sidelines of international efforts to meet this global 
problem. We have taken ourselves out of the game.
    The Kyoto Protocol that now guides international climate change 
efforts has major flaws. Most obviously and fatally, it lacks the 
participation of the United States, and of the key emerging industrial 
giants such as China, India, Mexico, and Brazil. But instead of leading 
efforts to make international efforts more comprehensive, more 
realistic, and ultimately more effective, the United States is largely 
absent from the search for a global solution.
    We must begin the debate on a post-Kyoto regime to guide 
international efforts. We must return to the table, and help to lead 
the way toward a post-Kyoto agreement. Time is not on our side. In our 
hearing room tomorrow, Senator Lugar and I will welcome a report by the 
Pew Center on Global Climate Change that can help us begin that debate. 
Eileen Claussen, the President of the Pew Center, is with us today.
    Senator Hagel is right to identify new technology as one of the 
keys to mitigating climate change. His legislation promotes technology 
transfer as a potentially profitable and effective way for us to engage 
with developing countries. But with expanding populations, economic 
growth, and more intense energy use in those developing nations, there 
is much more to be done. Greenhouse gas intensity--the focus of his 
legislation--is a measure of energy efficiency. Our goal, however, must 
be ultimately to affect overall greenhouse gas concentrations in the 
atmosphere. That is our nation's commitment under the Framework 
Convention on Climate Change.
    I hope we can build on Senator Hagel's initiative to fashion a 
robust international strategy to confront the issue of global warming, 
and to the restore the United States to the leadership role in that 
effort that is our duty and our historical responsibility. In recent 
years the Foreign Relations Committee has twice, with its unanimous 
endorsement of Resolutions on climate change negotiations, declared its 
support for renewed U.S. participation and leadership in the search for 
a global solution to this global problem. I hope our committee and the 
full Senate can once again take up a new Resolution, to restate the 
Senate's interest in renewed action on the international front.


                               __________


                     Prepared Statement by Chevron

    Chevron appreciates the opportunity to submit testimony for the 
record supporting the implementation of Title XVI of the Energy Policy 
Act of 2005. This important section of the Energy Policy Act originates 
from S. 883, ``The Climate Change Technology Deployment in Developing 
Countries Act of 2005.''
    Title XVI, specifically Subtitle B, charges the Secretaries of 
State, Energy, and Commerce and the U.S. Trade Representative to carry 
out activities that promote the adoption of technologies to address 
greenhouse gas intensity in developing countries while at the same time 
promoting economic development. The provisions advance projects by the 
appropriate government agencies using bilateral agreements, identifying 
and negotiating removal of trade barriers, developing strategic plans, 
and providing overall coordination to transfer technology to developing 
countries. In addition, it requires that an inventory be developed of 
those technologies which could be transferred and used by developing 
countries as well as establishing demonstration projects.
    Title XVI is consistent with broader policy efforts which recognize 
globalization, and initiatives such as this one are important in our 
interdependent world. Specifically, we believe there are many positive 
provisions that would facilitate the use of technology overseas to 
address climate change concerns as well as help with economic 
development. Private sector resources and ingenuity need to be 
harnessed in a coordinated fashion and implementation of Title XVI 
furthers that effort. However, it should be noted that some 
technologies are currently available while others may be viable longer 
term and that this distinction needs to be made in considering which 
technologies to transfer.
    As one of the leaders in the energy industry in technology 
development and deployment, Chevron believes that technology is key to 
addressing many of the world's problems, including energy and 
environmental issues. We are involved in developing and commercializing 
a whole host of advanced clean energy and fuel technologies, many of 
which address climate change concerns. For example, our subsidiary 
Chevron Energy Solutions (CES) is one of the largest energy service 
companies in the nation. CES works successfully with both the public 
and private sectors to install a range of energy efficiency 
technologies and renewable energy sources (such as solar and biomass) 
as well as stationary fuel cells. For example, CES is working with the 
U.S. Postal Service throughout the Northern California area on several 
projects involving solar systems, energy efficient lighting systems, 
energy management systems and other energy efficiency upgrades that is 
expected to reduce electricity purchases by $1.2 million annually and 
reduce greenhouse gas emissions by about 6,600 tons annually. In early 
2004, CES was awarded contracts from the U.S. Department of Defense and 
the U.S. Department of Energy to engineer and install facility 
improvements at three military bases. The improvements are guaranteed 
to save U.S. taxpayers at least $150 million and expected to reduce 
greenhouse gas emissions by about 1.5 million tons.
    We are also actively involved with numerous international projects 
on carbon sequestration and associated promising technologies. Geologic 
sequestration may be the best option for reliable storage of carbon. 
The Gorgon Project in Western Australia, in which Chevron and its 
partners are developing large natural gas reservoirs, would be the 
largest carbon sequestration project in the world. We are also 
participants in a number of major carbon sequestration projects 
globally, including using CO2 for enhanced oil recovery such 
as in Weyburn, Canada. We are active stakeholders in the international 
Carbon Sequestration Leadership Forum, an initiative developed by the 
State Department and the Department of Energy for carbon sequestration 
technology development. The Forum includes developing country 
participants, such as China and India.
    In terms of longer term technologies, Chevron Technology Ventures 
(CTV) is involved with a host of research and development activities on 
advanced energy technology to address the challenges facing hydrogen as 
a fuel for the future. As part of these efforts, CTV was awarded a 
Department of Energy cost-share contract under the government's 
``Controlled Hydrogen Fleet and Infrastructure Demonstration and 
Validation Project.'' CTV, in collaboration with Hyundai Motor Co. and 
UTC Fuel Cells, intends to build up to six energy demonstration 
stations over the next 5 years.
    At the UN Conference of Parties, organized international meetings 
as part of the UN Framework Convention on Climate Change proceedings to 
negotiate the Kyoto Protocol, developing countries have continually 
asked for assistance with technology transfer from developed countries. 
The U.S. should lead this effort with other developed countries. This 
would help address climate change concerns while promoting economic 
development here and abroad as technology is deployed. We believe that 
Title XVI will facilitate in providing the opportunity to share the 
strength of the U.S. private sector and assist developing countries.
    We appreciate the opportunity to submit testimony for the record, 
and look forward to working with the Congress and the administration to 
implement these important provisions of the Energy Policy Act of 2005.


                               __________


    Prepared Statement of Dr. S. Julio Friedmann, Director, Carbon 
          Management Program, Lawrence Livermore National Lab

          UNDERGROUND COAL GASIFICATION IN THE USA AND ABROAD

1. Technology Overview of Underground Coal Gasification
    Currently, the U.S. faces substantial challenges in providing large 
volume supplies in energy at a reasonable cost. Paired with that 
challenge is the increasing recognition of a human influence on global 
climate and increased concern about large potential risks associated 
with greenhouse gas emissions such as CO2, methane, and 
NOX. Because CO2 has a long residence time in the 
atmosphere, current choices in energy technology in the U.S. and other 
countries will affect future generations in terms of climate change 
risk.
    Underground Coal Gasification (UCG) is a gasification process 
carried on in non-mined and unmineable coal seams. Using injection and 
production wells drilled from the surface, it converts coal in situ 
into product gas (syngas) that can be used for many energy 
applications. The process has produced commercial quantities of gas for 
chemical processes and power generation; at one site in Uzbekistan, UCG 
has produced syngas without interruption for over 46 years.
    During the UCG process, as in conventional gasification methods, 
coal in the ground reacts with an oxidant, and part of the released 
sensible heat is used in coal drying, pyrolysis and the endothermic 
reactions that reduce the combustion products. The resulting mixture is 
UCG gas (syngas). The UCG syngas can be used for power generation in an 
Integrated Gasification Combined Cycle (IGCC) configuration or as a 
supplement and substitute fuel in the existing coal-fired and natural 
gas power plants. The syngas can be also used for chemical syntheses 
resulting in manufacturing of synthetic liquid fuels (diesel and jet 
fuel), synthetic natural gas, ammonia-based fertilizers etc.
    UCG can be applied to coal deposits that are not amenable to 
conventional mining methods. It is estimated that UCG can nearly triple 
coal resources available to conventional mining. It has been 
demonstrated that UCG can be performed with extremely limited 
environmental impacts, much less than conventional mining and 
combustion. The main environmental concern is the possibility of 
contaminating ground water; however, it has been shown in a field 
program in Australia that groundwater can be effectively protected. 
Importantly, UCG has technical advantages that allow for low-cost 
carbon sequestration and decarbonization of emissions, permitting 
substantial reductions in greenhouse gas emissions.
2. Economic Advantages to UCG
    UCG can be applied to coal and lignite deposits across the United 
States. It has been estimated that in the USA, there is 1.6 trillion 
tonnes of unmineable coal that is recoverable by UCG. This technology 
can be readily deployed today to at very competitive costs for a 
variety of reasons:


    1. Reduced capital expense: Unlike traditional surface gasification 
facilities (e.g., Integrated Gasification Combined Cycle plants or 
IGCC's), there is no need to purchase gasifiers or build ash and slag 
management facilities. Due to syngas stream continuity, there is also 
no need for gasifier redundancy.

    2. Reduce operating expense: Unlike conventional plants, there is 
no need to purchase, transport, store, or prepare coal. There is no 
need to re-brick the gasifier linings. Due to syngas stream continuity, 
plans have high capacity factors comparable to pulverized coal or 
natural gas plants, reducing down time.

    3. Reduced environmental management costs: Due to the gasification 
environment underground, UCG facilities produce no SOX or 
NOX. Particulate streams are half of their surface 
equivalents, and there is no production of ash. Roughly \1/2\ of the 
mercury is generated compared to traditional plants. These present 
reductions in operational and capital costs, as well as increased ease 
of regulatory compliance and reduced environmental impacts.

    4. Fuel supply certainty: Because the supply of UCG syngas is local 
and continuous, operators are not faced with risks in terms of changes 
in fuel availability or supply costs. There is no risk of supply 
disruption, providing clear advantages in secure fuel supplies.


    For these reasons, there is renewed interest in this technology, 
with commercial demonstrations proceeding in 6 countries, including the 
U.S. While the local costs will vary, conservative estimates suggest a 
minimum 25 percent cost and price reduction compared to conventional 
coal power, with reasonable expectations of a 50 percent cost reduction 
based on projects in Australia, Canada, and Uzbekistan.
3. UCG for the U.S. Energy Market
    UCG can be technology can be readily deployed today to produce the 
following important high-value energy products and very competitive 
costs:


    1. Synthetic natural gas

    2. High-efficiency electricity through an IGCC configuration

    3. Liquid fuels (e.g., Fischer-Tropsch liquids, diesel fuel, 
methanol)

    4. Hydrogen


    The technology can be deployed to produce synthetic natural gas 
(SNG) in the process similar to the one used at Dakota Gasification 
Company in North Dakota. Ergo Exergy internal estimate of cost of SNG 
produced in North Dakota based on UCG can be in the range of $2.10-
$2.50 / million BTU. This application could be duplicated in the coal 
basins of Illinois, Appalachia, the southeastern U.S., and the central 
and northern Rocky Mountains.
    UCG can be applied to generate electricity in IGCC configuration. A 
wide range of gas turbines can be used for UCG-IGCC applications. The 
power block efficiency reaches 55 percent, while the overall efficiency 
of the UCG-IGCC process can reach 43 percent. A UCG-IGCC power plant 
will generate electricity at a much lower cost than existing or 
proposed fossil fuel power plants (above). Importantly, there is no 
energy penalty for operation at high altitudes (e.g., above 3000'): the 
weight of the rock and water overburden produces a stream of syngas 
that is naturally high in pressure.
    UCG can be used to produce syngas suitable for manufacturing of 
liquid automotive and aviation fuels via Fischer-Tropsch synthesis (a 
gas-to-liquid or GTL technology). The use of UCG technology would 
create an opportunity to deploy GTL plants in the areas where 
conventional mining and traditional GTL technologies are not feasible. 
It has been estimated that UCG-GTL can produce diesel fuel at the cost 
as low as $20.00 / bbl, and a new UCG coal-to-liquids project has begun 
in Australia to provide 24,000 bbl / day of liquid fuel.
    UCG shows the potential for producing hydrogen at a low cost, 
comparable with that targeted by the U.S. DOE ``Hydrogen from Coal'' 
program. The high-pressure of the subterranean stream makes pressure 
swing adsorption and water-gas shift reactions easier and cheaper to 
execute. Based on multiple estimates, it appears that the cost of 
hydrogen from UCG syngas is roughly \2/3\ that of other fossil fuel 
supplies and \1/6\th that of electrolysis. This process has a 
substantial additional advantage; it would create a pure CO2 
stream in an environment conducive to CO2 sequestration.
    Two new commercial projects are under current consideration in the 
U.S. The first is in Wyoming and is based on a resource of 
approximately 14 billion ton held by a private developer in Powder 
River Basin. The likely end products targeted include SNG and synthetic 
diesel fuel suitable for secure military fuel supplies. The other 
project is planned in North Dakota with SNG as proposed end product. 
There are several other UCG projects under consideration in the U.S. at 
the moment. It is worth noting that Ergo Exergy is engaged in these 
efforts as a technology provider, and is currently discussing a formal 
relationship with LLNL.
4. The History of UCG in the USA
    Research and Development in UCG has been conducted since mid-1940s. 
It became especially active during the energy crisis starting in 1973. 
Before winding down in early 1990s, the program had produced 33 field 
trials conducted by DOE, the National Laboratories, and several 
industry entities. The $350 million program has been a technical and 
environmental success but had not reached commercialization, in part 
due to the dramatic drop in oil and natural gas prices in the mid-
1980s.
5. UCG and Carbon Dioxide Management
    In the interest of greenhouse gas emission reduction, 
CO2 sequestration (also called carbon capture and storage) 
has emerged as a key technology pathway. UCG provides inherent 
synergies to CO2 separation and geological sequestration. 
The high-pressure stream of UCG syngas provides extra energy that can 
be used to separate out CO2 at extremely low costs. This 
only partly reduces the CO2 flux, but at a very low cost. In 
an IGCC configuration, CO2 emissions of the plant can be 
reduced to a level 55 percent less than those of a supercritical coal-
fired plant and 25 percent less than the emissions of NG CC. The 
calculated incremental operating and capital cost of CO2 
separation would be small, resulting in a wholesale price for 
electricity below today's levels.
    Underground coal seams are naturally located with saline aquifers 
and depleted oil and gas fields. As such, CO2 can be 
sequestered in the same location as the UCG facility, making 
transportation costs zero and removing the need for new CO2 
pipelines. It also appears that some of the CO2 may be 
stored within the cavity created by the gasification.
    Importantly, partial CO2 removal is necessary for liquid 
fuel and synthetic natural gas applications. By taking advantage of the 
high-pressure streams, this separation can occur nationwide at low 
costs relative to equivalent surface gasification facilities. This 
application can also help the U.S. develop expertise in CO2 
storage that could be used in many industrial and power generation 
sectors, helping place the U.S. on a pathway to substantial greenhouse 
gas reductions. Given the spatial distribution of potential UCG sites 
in the U.S., partial separation of CO2 would be consistent 
with the current DOE goals of the Regional Carbon Sequestration 
Partnerships. Similarly, hydrogen from UCG requires 100 percent 
decarbonization and CO2 separation. The storage of 
CO2 from hydrogen production would be consistent with the 
goals of the DOE's Carbon Sequestration and Hydrogen Production 
programs.
6. Other Environmental Benefits of UCG
    Surface production and combustion of coal can create environmental 
problems. These include atmospheric pollutants such as SOX, 
NOX, and mercury, solid wastes such as fly ash or slags, and 
direct environmental concerns such as surface mining, mountaintop 
removal mining, and acid-mine drainage. UCG faces none of these issues.


    1. No SOX is produced: Sulfur in the coals is converted 
to H2S or COS, which are easily gettered and converted to 
solid form.

    2. No NOX is produced: The gasification reaction takes 
place underground at relatively low temperatures, so no NOX 
is generated.

    3. No ash is produced: All ash remains underground.

    4. Reduced mercury and particulate streams: roughly \1/2\ the 
equivalent flux reaches the surface, and are readily managed there 
using conventional approaches.

    5. Reduced plant footprint: The lack of ash management, coal 
storage, and surface gasifiers reduce plant size and operational 
complexity.

    6. Reduced environmental footprint: The only surface expression of 
syngas production is well heads and connecting pipelines. There is no 
surface mining.


    These advantages provide the opportunities for lower capital cost, 
improved regulatory compliance, substantial emissions reduction of 
criteria pollutants, and reduced surface footprint and legacy.
7. UCG and Environmental Concerns
    Two potential environmental consequences of UCG should be 
considered: groundwater quality, and subsidence. Subsidence of the land 
surface does occur due to production and operation. However, the total 
effect is comparable to or less than the effects of conventional 
underground mining or oil and gas production.
    Groundwater quality concerns are more substantial, but are by no 
means overwhelming. Out of the 33 UCG trials in the U.S., only 2 have 
resulted in environmental issues like groundwater contamination. Both 
trials involved serious operator error that resulted in contamination 
and do not reflect the environmental credentials of the technology 
itself. In addition, those sites were extremely shallow, in fresh water 
aquifers, and interbedded with highly permeable strata; in other words, 
the sites themselves were high-risk locations. It should be said that 
no UCG effort overseas, including the 46-year project in Uzbekistan, 
shows any evidence of environmental contamination.
    To help demonstrate the efficacy and environmental integrity of 
UCG, additional and early due diligence should be considered in future 
deployments. For example, the Chinchilla project in Australia monitored 
groundwater with 19 wells. That effort was led by Australia's EPA and 
executed through a transparent third party. After 4 years of syngas 
production, the groundwater quality had actually improved. Other 
technologies to monitor the burn, monitor water quality, and to 
simulate potential environmental effects could be applied as needed. 
Public-private partnerships may provide a mechanism for such due 
diligence; for example, Lawrence Livermore National Laboratory (LLNL) 
and Ergo Exergy have agreed to co-operate on new UCG projects in the 
U.S. to ensure that the state-of-the-art environmental practices are 
employed. Regardless, the risks of groundwater contamination appear 
limited and manageable through appropriate planning, oversight, and 
technology application.
8. UCG and World Energy Market
    Current energy market can be characterized by the following general 
features:


    1. Rapidly growing energy demand

    2. Depleting resources of natural gas

    3. High prices of oil and natural gas

    4. Growing concerns about global warming

    5. Inability of renewable energy to replace the use of fossil fuel

    6. Relative abundance of coal, especially deep and low grade coal

    7. Continuous suspicion toward environmental credits of coal

    8. Likelihood of expanded coal conversion in developing countries, 
especially China and India


    In that context, there has been expanded and renewed interest in 
this technology worldwide. One company, a Canadian technology company 
(Ergo Exergy) is currently providing UCG ignition and management 
technology to several commercial projects worldwide, namely Australia, 
India, South Africa, New Zealand, Canada. These projects include IGCC 
power generation, conventional natural gas combined cycle electric 
plants, production of liquid transportation fuels, and carbon capture 
and storage (CCS).
    Due to the low cost and environmental benefits, UCG hold particular 
promise for developing countries with large coal reserves, including 
China, India, and Indonesia. In the case of India and China, UCG could 
provide substantial environmental benefit in the form of reduced 
particulate, NOX, and sulfur emissions. It would allow both 
nations to exploit their high-ash coals using advanced conversion 
technologies like IGCC generation. Finally, it would minimize the risk 
of mining deaths, degradation of the surface environment, and provide a 
low-cost option for CO2 sequestration.
9. UCG and Energy Security
    Due to the ability to generate electricity, natural gas 
substitutes, liquid fuels, and hydrogen from coal at low cost, UCG has 
clear benefits regarding secure domestic fuel supplies. Naturally, UCG 
provides on technology pathway to secure production of domestic liquid 
fuels for military supplies, similar to the goals of the TED and JBUFF 
programs within the Dept. of Defense. In addition, the accelerated 
adoption of UCG in developing countries could reduce future demands on 
liquid fuels and extend the current international reserves of oil and 
natural gas. Both could substantially reduce the risks to supply 
disruptions faced by the U.S. while enhancing stability and economic 
growth in rapidly growing nations of interest.

                           RELATED REFERENCES

BHP Billiton (2002) Case Study B20--Electricity production using 
    underground coal gasification, Newcastle, Australia, July 2002.
Blinderman, M.S. (2005) The Exergy Underground Coal Gasification 
    Technology and Its Application in Commercial Clean Coal Projects, 
    Second International Conference on Clean Coal Technologies for our 
    Future, 10-12 May 2005, Castiadas (Cagliari), Sardinia, Italy.
Blinderman, M.S. and Anderson (2004) Underground Coal Gasification: 
    Efficiency and CO2 emissions, Proceedings of ASME POWER 
    2004, Baltimore.
Blinderman, M.S. and Fidler (2003) Groundwater at the Underground Coal 
    Gasification Site at Chinchilla, Australia, Proceedings of the 
    International Conference ``Water and Mining 2003'', Brisbane.
Blinderman, M.S. and Jones, R.M. (2002) The Chinchilla IGCC project to 
    Date: Underground Coal Gasification and Environment, Proceedings of 
    the 2002 Gasification Technology Conference, San Francisco.
Blinderman, M.S. and Maev, S.I. (2003) The Exergy Underground Coal 
    Gasification: Canadian Perspective, proceedings of ``Combustion 
    Canada 2003'', Vancouver.
Blinderman, M.S., et al. (2004) The application of underground coal 
    gasification in South Africa, Proceedings of the 10th South African 
    Conference on Coal Science and Technology, Fossil Fuel Foundation 
    Indaba 2004, Pretoria.
DTI (2005) Review of the Feasibility of Underground Coal Gasification 
    in the UK, Cleaner Fossil Fuels Program, DTI, London.
Green, M., and Sage, P. (2004), Carbon Emission Reduction with High 
    Pressure Underground Coal Gasification, Greenhouse Gas Technology 
    Conference 7, Vancouver.
Hill, V.L. et al., Underground coal gasification: Its potential for 
    long-term supply of SNG, 10th Underground Coal Gasification 
    Symposium, February 1984.
Rant, Z. (1955) Vrednost in Obrasunavanje Energije, Stojniski Vestnik, 
    v. 1, p 4-7.
U.S. DOE (2004) Hydrogen from Coal Program, RD&D Plan.
U.S. DOE (2005) Carbon Sequestration Technology Roadmap, Office of 
    Fossil Energy, Washington, DC, http: / / www.netl.doe.gov / 
    coalpower / sequestration / pubs / SequestrationRoadmap3-13-
    03amfinal.pdf


                               __________


   Prepared Statement of W. David Montgomery, Ph.D., Vice President,
                           CRA International

    Mr. Chairman and members of the subcommittee:
    Thank you for your invitation to submit testimony in today's 
hearing. I am David Montgomery, and I am Vice President of CRA 
International, \1\ where I am co-leader of the global Energy and 
Environment Practice. This testimony is a statement of my own research 
and opinions, and does not represent a position of CRA International.
---------------------------------------------------------------------------
    \1\ On May 6, 2005 the official name of my employer was changed 
from Charles River Associates, Incorporated to CRA International.
---------------------------------------------------------------------------
    I am particularly pleased by this opportunity to submit testimony 
on provisions of the Energy Policy Act of 2005 (EPACT 2005) that deal 
with technology transfer and the role of developing countries in 
climate change. I believe, based on studies that I and others have 
conducted over the past few years, that these provisions represent the 
most important step to advance global climate policy taken by the U.S. 
Congress. It is critical that they be implemented effectively. This 
testimony is organized in three parts. The first section discusses the 
opportunities that exist for cost-effective emission reductions in 
developing countries, and the role of technology transfer and foreign 
direct investment in taking up these opportunities. The second part of 
my testimony provides the reasons why these opportunities exist, and 
the critical importance of a policy designed to attack the root causes 
of both poverty and high CO2 emissions, which in both cases 
are found in economic institutions. Fundamental reform of economic 
institutions is required before any attempts to reduce the greenhouse 
gas intensity of developing economies can succeed, and that reform can 
be expected on its own to stimulate greater foreign investment and 
technology transfer. The final section of my testimony reviews the 
specific provisions of EPACT 2005, and includes both comments on how 
they appropriately address the key opportunities and suggestions on 
possible ways in which they could be made more effective.
    My overall conclusion is that these provisions represent a 
significant step forward, that would enable the United States to take 
the lead in international discussions of what should follow or replace 
the Kyoto Protocol. Although other countries are not willing to admit 
the failure of the Kyoto Protocol publicly, there are very promising 
signs of interest in the ideas embodied in EPACT 2005: the use of 
technology, the role of developing countries, and discussions among 
``large emitters.'' I therefore believe that this is a time when the 
United States can be effective in changing the direction of 
international negotiations away from the cap and trade approach 
embodied in the Kyoto Protocol toward a more technology and growth 
oriented approach to the climate problem. These program provides the 
foundation for that leadership.

                             I. OPPORTUNITY

    I will make three points in regard to the opportunities that exist 
in developing countries.


    1. Globally, the best opportunities for near-term, cost-effective 
reductions in greenhouse gas emissions are in China, India, and other 
developing countries

    2. Developing countries are only interested in approaches to 
reducing their greenhouse gas emissions that will enhance opportunities 
for economic growth

    3. Policies that stimulate greater technology transfer and 
investment in developing countries have the potential to achieve both 
economic growth and climate policy goals.


    Greenhouse gas emissions are driven by population, income and 
technology. This fundamental relationship is described in an equation 
known as the ``Kaya Identity.'' \2\ It states that
---------------------------------------------------------------------------
    \2\ Y. Kaya, ``Impact of Carbon Dioxide Emission Control on GNP 
Growth: Interpretation of Proposed Scenarios.'' Paper presented to the 
IPCC Energy and Industry Subgroup, Response Strategies Working Group, 
Paris, 1990.

[GRAPHIC] [TIFF OMITTED] T3730.004

    The first two terms of this equation show that growth in total 
income comes from population growth and growth in per capita income. 
Technology appears in this equation in the third term, which describes 
CO2 per dollar of income. The legitimate aspiration of poor 
countries is to keep per capita income increasing. Population is a 
separate and divisive issue--and in any event is not likely to be 
responsive to policies in the short run. Since per capita income growth 
and population growth are off the table, this leaves technology--
CO2 / ($)--as the feasible object for change.
    Technology is critically important because emissions per dollar of 
income are far larger in developing countries than in the United States 
or other industrial countries. This is both a challenge and an 
opportunity. It is a challenge because it is the high emissions 
intensity--and relatively slow or non-existent improvement in emissions 
intensity--that is behind the high rate of growth in developing country 
emissions.
    Opportunities exist because the technology of energy use in 
developing countries embodies far higher emissions per dollar of output 
than does technology used in the United States; this is true of new 
investment in countries like China and India as well as their installed 
base (See Figure 1). The technology embodied in the installed base of 
capital equipment in China produces emissions at about 4 times the rate 
of technology in use in the United States. China's emissions intensity 
is improving rapidly, but even so its new investment embodies 
technology with twice the emissions intensity of new investment in the 
United States. India is making almost no improvement in its emissions 
intensity, with the installed base and new investment having very 
similar emissions intensity. India's new investment also embodies 
technology with twice the emissions intensity of new investment in the 
United States.
    The United States is a good benchmark of technology that is 
economic at today's energy prices, without any additional incentives or 
regulations that would lead to adoption of more costly technologies for 
the purpose of reducing greenhouse gas emissions. Japan's emissions 
intensity is about half that of the United States, so that Japanese 
technology provides a benchmark for more aggressive efforts to reduce 
energy use.

[GRAPHIC] [TIFF OMITTED] T3730.005

Priorities for Economic Growth
    Developing countries have made it clear that their highest 
priorities are dealing with poverty, disease, famine, unemployment and 
violent conflict,\3\ and that sustained economic growth is a 
prerequisite for dealing with these problems. Therefore, developing 
countries have also made it clear that they will not accept caps on 
their greenhouse emissions and have no interest in becoming part of a 
global emission trading system--at least on terms acceptable to the 
industrial countries. They see these approaches to climate change 
policy as threatening their ability to grow and deal with their more 
pressing problems. Therefore, only approaches to climate policy that 
combine greater economic growth with reductions in emissions intensity 
have any chance of attracting the interest of developing countries.
---------------------------------------------------------------------------
    \3\ The World Summit on Sustainable Development (WSSD) reaffirms 
the need to have balanced economic development, social development and 
environmental protection. It also reaffirms poverty eradication and 
preservation of the environment as the overarching objectives of 
sustainable development (United Nations 2002).
---------------------------------------------------------------------------
The Importance of Technology Transfer
    Technologies that offer lower CO2 intensity have largely 
been developed in the industrial countries. Therefore technology 
transfer, which occurs largely through foreign direct investment, is 
required to replace carbon-intensive technology.
    Technology transfer and increased investment have the potential for 
achieving large reductions in emissions. The potential from bringing 
the emissions intensity of developing countries up to that currently 
associated with new investment in the United States is comparable to 
what could be achieved by the Kyoto Protocol (See Table 1). These are 
near term opportunities, from changing the nature of current investment 
and accelerating replacement of the existing capital stock. Moreover, 
if achieved through transfer of economic technologies it is possible 
that these emission reductions will be accompanied by economic benefits 
for the countries involved.


     Table 1.--Greenhouse Gas Emission Reductions Achievable Through
              Technology Transfer and Increased Investment
------------------------------------------------------------------------
                                                       To 2012   To 2017
                                                       (MMTCE)   (MMTCE)
------------------------------------------------------------------------
Adopt U.S. technology for new investment in China         2600      5200
 and India..........................................
Adopt U.S. technology with accelerated replacement        4200      7700
 in China and India.................................
Adopt continuously improving technology with              5000      9800
 accelerated replacement in China and India.........
EU under Kyoto Protocol (without hot air)...........       600      1400
All Annex B countries under Kyoto Protocol                2800      7300
 (including U.S. and hot air).......................
------------------------------------------------------------------------


    The potential emission reductions estimated in Table 1 are derived 
from a study my colleagues and I performed using a model of economic 
growth based on the idea of ``embodied technical progress.'' In the 
first case, we assumed that in 2005 new investment in China and India 
immediately moves to the level of technology observed in the United 
States, and calculate the resulting reduction in cumulative carbon 
emissions through 2012 and 2017. This is the technology transfer case. 
In the second case, we assume that policies to stimulate foreign direct 
investment accelerate the replacement of the oldest capital with new 
equipment, giving even larger savings. In the third case, we assume 
that the new technology continues to improve over time, as it will if 
policies to stimulate R&D into less emissions-intensive technologies 
are also put in place. It can be seen that even the least aggressive of 
these policies has potential for emissions reductions as large as 
possible if all countries (including the U.S.) achieved exactly the 
emission reductions required to meet their Kyoto Protocol targets.
    It is also important to note that given the large difference 
between emission intensities of China and India and the U.S., and the 
relatively small remaining distance between the U.S. and Japan, most of 
the emission reductions achievable through technology transfer can be 
achieved be moving from current to U.S. technology. Going beyond this 
in the next decade or so, by pushing developing countries to adopt 
technology not currently economic even in the United States, entails 
rapidly increasing costs and smaller emission reductions.\4\
---------------------------------------------------------------------------
    \4\ The potential for emissions reduction through technology 
transfer is discussed in P. Bernstein, W. David Montgomery and S. D. 
Tuladhar, ``Potential for Reducing Carbon Emissions from Non-Annex B 
Countries Through Changes in Technology.'' Accepted for publication, 
Energy Economics. 2005.
---------------------------------------------------------------------------
     II. CAUSES OF HIGH CARBON INTENSITY AND EFFECTIVE REMEDIES \5\
---------------------------------------------------------------------------
    \5\ This section is based on W. David Montgomery and Roger Bate. 
``Beyond Kyoto: Real Solutions to Greenhouse Emissions from Developing 
Countries.'' AEI Environmental Policy Outlook, July 1, 2004.
---------------------------------------------------------------------------
    In a highly developed economy such as the United States, 
characterized by efficient markets, pricing relatively undistorted by 
government policies or government-owned enterprises, free trade and 
free flows of capital, and strong legal institutions and protection of 
property rights, it is likely that there are few opportunities to 
improve carbon intensity without causing reductions in economic 
performance and income per capita. If technologies offering such 
opportunities exist, market forces and individual economic interest 
will lead to their adoption. This is not the case in many developing 
countries, which have economic systems characterized by a lack of 
incentives for efficient energy use, due to institutional and market 
failures, and an investment climate that discourages foreign investment 
and technology transfer. Remedying these institutional and market 
failures offers the prospect of reconciling economic growth and 
emissions reduction.
Economic Freedom and Emissions Intensity
    The modern literature on economic development emphasizes the role 
of legal, market and governmental institutions in economic development. 
The concept of ``economic freedom'' summarizes a wide variety of 
conditions that are found to be conducive to individual initiative and 
economic growth.\6\ Indices of economic freedom are based on 
comprehensive surveys of conditions around the world. The broad indices 
of economic freedom include specific institutional problems that can 
lead to high carbon intensity:
---------------------------------------------------------------------------
    \6\ Economic Freedom of the World (EFW) index is published by The 
Frasier Institute (http: / / www.freetheworld.com / release.html) and 
measures the degree to which a country is supportive of economic 
freedom. The EFW summary index is constructed from five different 
policy areas: (i) size of government; (ii) legal structure and 
protection of property rights; (iii) access to sound money; (iv) 
international exchange; and (v) regulation. Index of Economic Freedom 
is published by the Heritage Foundation / Wall Street Journal (http: / 
/ www.heritage.org / research / features / index / ) and reports 10 
broad measures of economic freedom for 161 countries.


     Pricing systems that make energy-efficient technologies less 
---------------------------------------------------------------------------
cost-effective

         Distorted internal pricing mechanisms and lack of markets

         Subsidies administered through State-run enterprises

     Internal policies that make markets inhospitable to foreign 
investment with world class technology, including

         Corruption

         Excessive bureaucracy and burdensome regulation

         Weak contract law and protection of property rights

         Lack of protection for intellectual property

         Trade and regulatory policies that protect inefficient 
        domestic firms and industries

     Lack of infrastructure, education and skills required for 
technology


    Lack of these components of economic freedom is clearly associated 
with high levels of energy use per dollar of GDP. Figure 2 plots scores 
on the Economic Freedom of the World Index compiled by the Frasier 
Institute against energy use per dollar of GDP, measured at market 
exchange rates.

[GRAPHIC] [TIFF OMITTED] T3730.006

    Energy intensity is used as a measure because it is directly 
connected to greenhouse gas emissions from energy use. For example, 
three of the countries with the relatively poor scores on economic 
freedom, Russia, China and India, have high energy use and carbon 
emissions per dollar of GDP. At the other end of the scale, countries 
like S. Korea, Singapore and Namibia, with relatively free economies 
have much lower carbon intensities, similar to that of the United 
States.
    The curved line represents the results of a statistical analysis of 
the association, which shows that about one-third of the variation in 
energy intensity is explained by differences in scores on economic 
freedom. This is an unusually clear relationship for this type of 
cross-sectional data. Studies by the developers of the index also show 
the economic freedom index to be very closely associated with per 
capita income and rates of economic growth.
    Figure 2 also reveals that there are other factors at work, and 
examining institutions in more detail reveals that each country has a 
significantly different collection of institutional issues. This 
suggests strongly that effective policies need to be designed through a 
bilateral process, and tailored to remedy the specific institutional 
conditions in each country.
Design of Policies That Can Be Effective and Engage Developing 
        Countries
    Recognizing that high emissions intensity is closely associated 
with fundamental market and institutional failures leads to possible 
solutions that can reconcile developing countries' legitimate desires 
for growth in income with reductions in greenhouse gas emissions 
intensity. To achieve these dual purposes, it is necessary to start 
with market and institutional failures directly.
    The difference in technology that accounts for the difference in 
emissions intensity between developing countries and the U.S. will not 
be eliminated without substantially greater technology transfer. That 
technology transfer occurs largely through the mechanism of foreign 
direct investment, as multinational companies bring with them the 
technology they have developed and use in their current markets. The 
combination of technology transfer and FDI is one of the strongest 
engines of growth. But increasing technology transfer and FDI to 
countries with poor scores on economic freedom requires removing 
current defects in their investment climate.
    Without remedies for the fundamental institutional problems that 
underlie poor scores for economic freedom, the continuation of two 
unfortunate current conditions can be expected:


     A hostile economic environment in developing countries will 
prevent the technology that is introduced through demonstration 
projects from spreading throughout the economy

     Emission caps will remain costly because, without new technology, 
emission reductions will require diverting resources that could 
otherwise be used for growth


    If remedies are found for fundamental institutional problems, two 
kinds of results can be expected:


     There will be much better prospects for demonstration projects 
for economic technologies to lead to spillover effects

     The root causes of both poverty and high carbon intensity will be 
addressed together


    The actions required to create fundamental institutional reform 
must take place within the developing countries themselves, and be 
designed and carried out by their governments, businesses and citizens. 
But there is a role for the United States in helping to identify the 
needed reforms, to provide direct, near-term incentives to carry out 
the reforms that will be in the long-term interest of the target 
country, and to encourage greater flows of investment into developing 
countries that undertake the process of reform. This suggests that the 
four components of an effective policy to help move developing 
countries toward institutions more conducive to economic growth and 
lower carbon emissions are:


    1. identification of critical market imperfections and 
institutional failures

    2. agreement on a plan to address them

    3. actions by the United States

    4. actions by the country involved


    I am impressed by the programs established by EPACT 2005 because 
they provide a framework in which these steps can take place.
The Key Role of Institutional Change Is Widely Recognized
    A focus on economic freedom fundamental institutional reform is 
consistent with the current mainstream in development economics, and is 
supported by analysis from development agencies, the World Bank, and 
even the much-maligned Intergovernmental Panel on Climate Change 
(IPCC).
    The World Bank has placed a high priority on institutional reform. 
For example, a recent survey of the investment climate in India 
sponsored by the bank identified deficiencies in the investment climate 
whose correction was necessary for economic growth. All these 
deficiencies involved aspects of economic freedom. They included


     Corruption, connected to

     Arbitrary and burdensome regulation covering every aspect of 
economic life, administered by a large and unaccountable bureaucracy

     Inadequate infrastructure due to economic policies and failed 
government-owned enterprises


    This World Bank report provides just the kinds of information 
needed to develop the programs and projects authorized by EPACT 2005.
    The U.S. Agency for International Development has also recognized 
the central role of institutional change in achieving economic growth. 
Its policies put high priority on market reform, and the agency has 
commissioned significant work on the nature and possibility of 
institutional change.\8\
---------------------------------------------------------------------------
    \8\ In particular, the AID ``Forum Series on the Role of 
Institutions in Promoting Economic Growth'' has addressed many of the 
issues I have discussed. See ``USAID FORUM Series Problem Statement'' 
by Fred Witthans, USAID, available at http: / / www.usaid.gov / 
our_work / economic_growth_and_trade / eg / forum_series / prob-
statement.pdf. USAID's overall development goal to stimulate economic 
growth, promote democracy, good governance, and social transition is 
based on nine principles rooted in the need for fundamental reform--
Ownership, Capacity-Building, Sustainability, Selectivity, Assessment, 
Results, Partnership, Flexibility, and Accountability (Nine Principles 
of Development and Reconstruction, USAID, February 2005).
---------------------------------------------------------------------------
    The IPCC has also studied the process of technology transfer in 
some detail, and its report is instructive in both its contributions 
and its mistakes.\9\ The IPCC report on technology transfer makes a 
valuable contribution by identifying many of the deficiencies in 
economic freedom and the investment climate as being specific obstacles 
to technology transfer, and recommends policy actions by developing 
countries to remedy them. These actions include:
---------------------------------------------------------------------------
    \9\ IPCC, Methodological and Technological Issues in Technology 
Transfer, A Special Report of Working Group III of the 
Intergovernmental Panel on Climate Change, 1999.


     Deregulation of the investment regime, and free movement of 
---------------------------------------------------------------------------
private capital

     Foreign exchange convertibility and liberalisation of exchange 
restrictions

     Removal of restrictions on repatriation of profits and of capital

     Reduction of risk of expropriation (especially in hidden form 
such as abrogation of power purchase agreements)

     Reduction of the role of the public sector in directly productive 
sectors, through privatisation of state enterprises and overall 
reduction of the share of state enterprises in total investment, by 
opening up the public utility sector and other public monopolies to 
private sector participation and foreign investment

     Provisions for the settlement of disputes ranging from direct 
negotiation among the disputing parties to third party arbitration

     Removal of mandated local ownership requirements

     Promotion of the development of domestic institutional investors 
to assuage public fears about excessive foreign presence and to reduce 
the vulnerability of domestic capital markets to foreign investor 
herding. The presence of domestic institutional investors also 
reassures foreign investors about the host country's respect for 
corporate governance and property rights.

     Reform of opaque regulations that leave much administrative 
discretion and scope for corruption which discourages investment flows.

     Mobilisation of domestic resources through the gradual reduction 
of environmentally damaging subsidies.\10\
---------------------------------------------------------------------------
    \10\ Ibid.


    Unfortunately, the IPCC study buries its frequently wise 
recommendations about fundamental economic reforms in technical 
summaries, while focusing the policy summaries on descriptions of 
advanced technologies and on how to convince developing countries to 
adopt ``environmentally sustainable technologies'' that are so costly 
that even in developed countries they would only be chosen with heavy 
subsidies or strict regulations.
India Provides a Case Study of Problems and Potential Solutions
    I have applied these ideas in a study of the potential for emission 
reduction through fundamental economic reform in India.\11\ This study 
provides the context for some of the comments I will make, and an 
example for how some of the studies and projects might be carried out 
in practice.
---------------------------------------------------------------------------
    \11\ W. David Montgomery and Sugandha D. Tuladhar ``Impact of 
Economic Liberalization on GHG Emission Trends in India.'' Climate 
Policy Center, May 2005.
---------------------------------------------------------------------------
    I mentioned earlier that the World Bank conducted a study of the 
investment climate in India, identifying corruption, arbitrary 
regulation, and lack of infrastructure as the key problems. These 
problems have direct implications for energy use. First, the prevalence 
of corruption and arbitrary regulation, combined with a legal system 
that provides no confidence in enforcement of contracts, leads to a 
lack of technology transfer through FDI. The unreliability of the 
Indian power grid leads a majority of businesses to maintain 
capabilities for on-site generation, a highly inefficient source of 
power. Excessive energy use is also promoted by the fact that 
electricity is free in three states to certain segments of the economy, 
and pilferage of electricity is excessive high in many others. Finally, 
pervasive protection of domestic industries with outmoded technology 
reduces the competitive incentive to adopt new technology or use 
resources efficiently.
    Examples of potential solutions applicable to India may help in 
thinking about how EPACT 2005 could be implemented. Actions that could 
be productive in India include:


     Reform of regulation in key sectors (power, steel)

     Anti-corruption activities

     Legal reform to create confidence that contracts are enforceable

     Creation of competitive power generation market to attract 
foreign investment

     Use of official development assistance to provide income 
supplements to soften opposition to pricing of electricity at market 
levels


                     III. PROVISIONS OF EPACT 2005

    EPACT 2005 amended Title VII of PL 101-240 by adding a new Part C 
dealing with technology deployment in developing countries. Thus the 
new provisions correspond to sections of the amended Act, beginning 
(after definitions) with Section 732.
Sec. 732. Reduction of greenhouse gas intensity
    The Department of State is designated as the lead agency. This 
section tasks the Secretary of State to develop a set of reports and 
co-ordinate projects, and states a focus and priorities for the 
projects. Reports are to be made on the top 25 energy users among 
developing countries, and to include information on their energy use, 
greenhouse gas emissions by sector, progress on greenhouse gas 
reduction projects, potential for projects to reduce greenhouse gas 
intensity, and obstacles to further reductions.
    This is the right place to start, and the right content. First, to 
identify the potential for reductions in greenhouse gas intensity it is 
necessary to compare technology in use in each country to that in use 
in industrial countries, and in particular to compare the technology 
embodied in new investment in the developing country to that embodied 
in new investment in the same industry in industrial countries. This 
provides the starting point for improving the type of calculation I 
have offered of the potential for reducing emissions. This information 
on technology by sector should also be used to establish a baseline, so 
that any technology that offers improved emissions intensity over the 
baseline technologies would be eligible for assistance and support in 
demonstration projects. One minor revision would be to ask for reports 
on the top 25 countries in terms of greenhouse gas emissions, since in 
some developing countries methane emissions from agriculture are 
extremely important and might be missed with an exclusive concentration 
on emissions from energy.
    In order to design effective actions for institutional reform, it 
is also necessary to develop a clear understanding of the types of 
institutional and market failure that apply in each sector, so that the 
removal of these obstacles can be addressed specifically. I am pleased 
to see that EPACT 2005 specifically mentions ``promoting the rule of 
law, property rights, contract protection, and economic freedom,'' and 
``increasing capacity, infrastructure, and training'' as the focus for 
carrying out projects. Reports should also include this type of 
information.
    I strongly recommend that the Secretary of State conduct these 
studies in consultation with the target countries, multilateral lending 
institutions, and business groups. It is very important that the 
developing countries themselves recognize and buy into the diagnosis of 
their key institutional problems, since the critical need is for change 
in those institutions. Independent research and academic institutions 
within developing countries have an important role to play in such 
studies, as well as governments. Multilateral institutions such as the 
World Bank can aid in studies, and a World Bank study of the investment 
climate in India could serve as a model for one of the studies needed 
to identify the most critical reforms.\12\ Finally, multi-national 
corporations operating in each developing country also have important 
information and perspectives that should be included.
---------------------------------------------------------------------------
    \12\ India: Investment Climate Assessment 2004: Improving 
Manufacturing Competitiveness Finance and Private Sector Development 
Unit, South Asia Region, The World Bank
---------------------------------------------------------------------------
    In co-ordination with U.S. AID, the World Bank, and other 
institutions, the Secretary of State is directed to provide assistance 
for projects to reduce emissions intensity, including projects to 
leverage funds through bilateral agreements, to increase private 
investment, and to expedite deployment of technology. Although it makes 
sense to focus efforts on the largest emitters, it would be unfortunate 
if poorer and smaller countries, in which the potential impacts of much 
smaller investments might be dramatic, were excluded from eligibility 
for assistance.
    I believe that bilateral agreements and co-ordination with these 
institutions are the best way to proceed, and recommend that the 
bilateral approach and co-ordination begin at the stage of studies. 
This would facilitate a process of understanding a specific country's 
problems and identifying the most productive uses of official 
development assistance. For example, after bilateral consultations that 
lead to studies of baseline technology and institutional issues in a 
country, the next step could be for the United States and the target 
country to agree on specific targets for change. These could include:


     The critical institutional changes required to facilitate 
technology transfer, foreign investment and correct incentives

     The industries and sectors with greatest problems and 
opportunities

     The beneficiaries of the current system, whose potential 
opposition to reform needs to be addressed


    The next steps could be to identify the most productive uses of 
ODA, including:


     Capacity building projects

     Funding for income supplements or other measures to ameliorate 
opposition to change

     Specific demonstration projects

     Rewards for successful institutional reform


    The final task in bilateral negotiations could be to codify an 
agreement, including:


     Roles for the U.S., multilateral organizations and the developing 
country

     Objectives

     Time scales

     Procedures to review process and provide consequences for 
deviations from the agreement
Sec. 733. Technology Inventory for Developing Countries
    The Secretaries of State and Energy shall conduct an inventory of 
greenhouse gas reducing technologies suitable for transfer, deployment, 
and commercialization. They will produce a report on the technologies 
and obstacles to the deployment of the technologies. Benchmarking 
technologies is a critical step that will provide a bridge from ``what 
is in place'' to ``what should be in place.'' So, I believe it would be 
wise to tie this report more closely to the previous section, on 
country studies, and the subsequent section on projects. First, 
obstacles to technology transfer can possibly be identified 
generically--I certainly have been guilty in this testimony of doing 
so--but they will in fact vary across countries. Therefore, 
identification of obstacles to deployment would logically take place in 
the conduct of country studies as I discussed above.
    To be most useful in guiding other mandated activities, the 
technology inventory should start with the baseline technologies 
identified in the Secretary of State's reports on the 25 largest 
emitters. In discussing Sec. 732 I recommended that the 25 large 
emitters reports should identify the technologies being adopted in new 
investment in the subject country. The technology inventory should 
include any technology that offers better greenhouse gas intensity than 
that of the baseline. Most of the potential reduction in emissions in 
countries that I have studied comes from bringing their baseline 
technology up to the level of technology embodied in new investment in 
the United States. Going further, to more advanced technologies that 
would improve U.S. emissions intensity if adopted here, provides only a 
small additional improvement and entail higher costs.
    In other words, I strongly urge the administration to keep this 
technology inventory from becoming another listing of pie in the sky 
technologies. Too many studies of this type are already on the 
shelf.\13\ Therefore, I also recommend that the technology inventory 
have substantial private sector involvement, to help it to focus on 
technologies that are currently economic as demonstrated by their 
adoption in the US or other countries.
---------------------------------------------------------------------------
    \13\ H.D. Jacoby, ``The Uses and Misuses of Technology Development 
as a Component of Climate Policy.'' Climate Change Policy (1996), pp. 
151-169
---------------------------------------------------------------------------
    Keeping this focus is very important to marry development and 
climate goals. The most cost-effective improvements in energy intensity 
will come from introduction of technologies not now in use in 
developing countries that are nevertheless economic at market-
determined energy prices.
Sec. 734. Trade Related Barriers to Export of Greenhouse Gas Reducing 
        Technologies
    The USTR is required to identify barriers to export of greenhouse 
gas reducing technologies and negotiate for their removal. With my 
revision to the definition of greenhouse gas reducing technologies to 
include any technology with better emissions intensity than the 
established country baseline, I believe this is a potentially effective 
and critical provision. It provides clear and direct instructions to 
trade negotiators, but I would add the suggestion that they need to go 
beyond the types of barriers normally discussed in the context of WTO 
rules. All disincentives to foreign investment and technology transfer 
are relevant if the general purpose of improving technology transfer is 
kept in mind. Thus, the USTR should include intellectual property 
issues, the general burden of regulation and corruption, and protection 
of industries using inefficient techniques as well as tariffs, quotas, 
or preferences for domestic suppliers and fuels.
Sec. 735. Technology Export Initiative
    An interagency working group is established to


     Promote greenhouse gas reducing technology exports

     Identify priority countries to be targets for exports, based on 
Sec. 732 reports

     Identify barriers to those exports

     Learn best practices in export promotion


    This provision fits quite well with the studies and strategy 
outlined in sections 732-734. To my mind, those sections largely 
address issues of how to identify and motivate actions that need to be 
undertaken by the governments of developing countries, who are 
ultimately responsible for making the needed reforms. Section 735 looks 
to what the United States can do, by developing policies to encourage 
from our side greater involvement on the part of multinational 
companies in technology transfer. Again, I repeat the caution that 
greenhouse gas reducing technology should include all technologies that 
improve on the established baseline technology for a given country.
Sec. 736. Technology demonstration projects
    This section states eligibility and selection criteria for 
countries to be provided assistance, and mentions types of projects 
that are eligible for funding.
    This section turns normal project funding on its head, in a very 
appropriate way. It authorizes funding for demonstration projects, 
which is frequently attractive to recipients but rarely produces change 
or growth outside the project itself, in a way that makes the funding a 
carrot to bring about increases in economic freedom. This is a creative 
and highly desirable approach.
    In this regard, eligibility criteria are good, but the use of 
projects as a carrot would be more effective if eligibility were 
focused on those aspects of economic freedom in which change will 
produce the largest benefits in terms of facilitating FDI and 
technology transfer. My case study of India, for example, focuses on 
just two or three of the multiple institutional problems, such as 
removing distortions in incentives to use energy and reducing 
corruption and regulation that discourages foreign investment. This 
suggests using an assessment of economic freedom as part of the 
decision about who will win a demonstration project, rather than as an 
absolute screen for eligibility. This provides a more modulated 
incentive to make appropriate changes.

                         IV. OVERALL ASSESSMENT

    EPACT 2005 provides a very solid foundation for achieving emissions 
reductions in developing countries, and a way forward in international 
negotiations under the Framework Convention on Climate Change. It 
addresses directly the causes of high emissions per dollar of output in 
developing countries, and provides a framework under which the 
necessary bilateral and multilateral negotiations could take place. I 
see the bill as being fully within the spirit of President Bush's 
commitment ``to seek and support the growth of democratic movements and 
institutions in every nation and culture,'' by supporting economic 
freedoms that can improve both material wellbeing and environmental 
performance. It clearly carries out the President's statement at his 
April 28, 2005 press conference that ``we must help growing energy 
consumers overseas, like China and India, apply new technologies to use 
energy more efficiently and reduce global demand of fossil fuels.''
    A continued focus on free markets is critical to making all the 
rest succeed. This approach is consistent with modern development 
economics and thinking within aid agencies, that project funding cannot 
make a permanent difference unless it is accompanied by fundamental 
institutional change.
    I believe that EPACT 2005 can be the basis for a new approach to 
international negotiations on climate change, focusing on involvement 
of developing countries, development and transfer of technology, and 
discussions among the largest emitters. Senior officials from Japan, 
Italy and Australia have all endorsed these ideas as the basis for a 
new approach, and the staff of the International Energy Agency is 
attempting to educate its member states on the subject.\14\ Thus I 
believe that this is a time when the U.S. can be effective in changing 
the direction of international negotiations away from the cap and trade 
approach embodied in the Kyoto Protocol toward a more technology and 
growth oriented approach to the climate problem.
---------------------------------------------------------------------------
    \14\ Corrado Clini, Director, Italian Ministry for the Environment, 
``Energy and Emissions: The Challenge of Climate Change,'' Venice, 
Italy, June 10, 2004; ``Perspectives and Actions to Construct a Future 
Sustainable Framework on Climate Change'', Global Environmental 
Subcommittee, Environmental Committee, Industrial Structure Council 
(METI, Japan) July 2003; Brian Fisher, Kate Wolfenden, Anna Matysek, 
Melanie Ford and Vivek Tulpule, ``Alternatives to the Kyoto Protocol: A 
New Climate Policy Framework?'' Australian Bureau of Agricultural and 
Resource Economics (ABARE) 2005; Fatih Birol, Head, Economics Division, 
International Energy Agency, at the International Energy Workshop, 
Paris June 2004.
---------------------------------------------------------------------------
    Finally, I suggest that the hardest thing in thinking about 
policies addressing global poverty, oppression and environmental 
progress is to avoid making the best the enemy of the good. Technology 
is a critical issue because there is no economic possibility of 
stabilizing greenhouse gas concentrations without R&D to create 
technology not available today. In the long term, this technology is 
required to turn around developing country emissions, just as it is 
required to turn around emissions from the industrial world. In the 
long run, new technology for developing countries is clearly 
critical.\15\ R&D to create this technology is therefore also critical, 
and the technology that is economically successful may be different in 
the global South than in the global North.
---------------------------------------------------------------------------
    \15\ M. I. Hoffert et al., ``Advanced Technology Paths to Global 
Climate Stability: Energy for a Greenhouse Planet'' Science, Vol. 298, 
Nov. 1, 2002, p. 981-7 note that within the next 50 years, the world 
will require 15-30 TW of carbon-free energy to meet stabilization 
targets of 550 to 350 ppm, which is more than double the approximately 
12 TW of energy consumed today (85 percent of which is fossil-fueled).
---------------------------------------------------------------------------
    But right now the huge opportunity is replacing technology now 
being used in the global South with technology now being used in the 
global North. Therefore, I would broaden the definition of greenhouse 
gas reducing technologies to include anything that improves carbon and 
energy intensity over the current baseline for new investment in a 
country.
    It is also important to keep the focus on the most critical market 
reforms needed to accomplish greater technology transfer and 
improvements in carbon intensity. Going against my own preferences for 
promoting all forms of freedom throughout the world, I would focus the 
administration's efforts on reforming those country and sector specific 
aspects of economic freedom that inhibit the adoption of energy-
efficient technologies and practices identified in the process of 
identifying the technology gap. Identification of deficiencies in 
institutions and economic freedom in each country should be a key first 
step, and done in cooperation with multi-lateral institutions, aid 
recipients, cognizant multinational businesses and the U.S. Government.
    In conclusion, it is my opinion that the provisions dealing with 
technology transfer and developing countries in EPACT 2005 provide a 
comprehensive approach to improving the emissions intensity of 
developing countries, by creating a process that starts with 
identification of opportunities and goes on to develop and implement 
effective instruments for bringing about change.
  

                                  
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