[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                     EXAMINING THE ADMINISTRATION'S 
                        PROPOSAL TO ESTABLISH A 
                   MULTILATERAL CLEAN TECHNOLOGY FUND 

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON

                       DOMESTIC AND INTERNATIONAL

                 MONETARY POLICY, TRADE, AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 5, 2008

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-117

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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            DEBORAH PRYCE, Ohio
CAROLYN B. MALONEY, New York         MICHAEL N. CASTLE, Delaware
LUIS V. GUTIERREZ, Illinois          PETER T. KING, New York
NYDIA M. VELAZQUEZ, New York         EDWARD R. ROYCE, California
MELVIN L. WATT, North Carolina       FRANK D. LUCAS, Oklahoma
GARY L. ACKERMAN, New York           RON PAUL, Texas
BRAD SHERMAN, California             STEVEN C. LaTOURETTE, Ohio
GREGORY W. MEEKS, New York           DONALD A. MANZULLO, Illinois
DENNIS MOORE, Kansas                 WALTER B. JONES, Jr., North 
MICHAEL E. CAPUANO, Massachusetts        Carolina
RUBEN HINOJOSA, Texas                JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri              CHRISTOPHER SHAYS, Connecticut
CAROLYN McCARTHY, New York           GARY G. MILLER, California
JOE BACA, California                 SHELLEY MOORE CAPITO, West 
STEPHEN F. LYNCH, Massachusetts          Virginia
BRAD MILLER, North Carolina          TOM FEENEY, Florida
DAVID SCOTT, Georgia                 JEB HENSARLING, Texas
AL GREEN, Texas                      SCOTT GARRETT, New Jersey
EMANUEL CLEAVER, Missouri            GINNY BROWN-WAITE, Florida
MELISSA L. BEAN, Illinois            J. GRESHAM BARRETT, South Carolina
GWEN MOORE, Wisconsin,               JIM GERLACH, Pennsylvania
LINCOLN DAVIS, Tennessee             STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire         RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota             TOM PRICE, Georgia
RON KLEIN, Florida                   GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida                 PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio              JOHN CAMPBELL, California
ED PERLMUTTER, Colorado              ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut   MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana                PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida               KENNY MARCHANT, Texas
JIM MARSHALL, Georgia                THADDEUS G. McCOTTER, Michigan
DAN BOREN, Oklahoma                  KEVIN McCARTHY, California
BILL FOSTER, Illinois                DEAN HELLER, Nevada
ANDRE CARSON, Indiana

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Domestic and International Monetary Policy, Trade, and 
                               Technology

                 LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York         RON PAUL, Texas
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
PAUL E. KANJORSKI, Pennsylvania      FRANK D. LUCAS, Oklahoma
BRAD SHERMAN, California             DONALD A. MANZULLO, Illinois
GWEN MOORE, Wisconsin                WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JEB HENSARLING, Texas
WM. LACY CLAY, Missouri              TOM PRICE, Georgia
KEITH ELLISON, Minnesota             PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio              MICHELE BACHMANN, Minnesota
ROBERT WEXLER, Florida               PETER J. ROSKAM, Illinois
JIM MARSHALL, Georgia                KENNY MARCHANT, Texas
DAN BOREN, Oklahoma                  DEAN HELLER, Nevada










































                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 5, 2008.................................................     1
Appendix:
    June 5, 2008.................................................    23

                               WITNESSES
                         Thursday, June 5, 2008

Blackwelder, Brent, President, Friends of the Earth US...........    12
Deutz, Dr. Andrew, Director of International Institutions, The 
  Nature Conservancy.............................................    18
McCormick, Hon. David H., Under Secretary for International 
  Affairs, U.S. Department of the Treasury.......................     3
Werksman, Jacob, Program Director, Institutions and Governance 
  Program, World Resources Institute.............................    16
Wheeler, David, Senior Fellow, Center for Global Development.....    14

                                APPENDIX

Prepared statements:
    Gutierrez, Hon. Luis V.......................................    24
    Carson, Hon. Andre...........................................    32
    Blackwelder, Brent...........................................    33
    Deutz, Dr. Andrew............................................    40
    McCormick, Hon. David H......................................    47
    Werksman, Jacob..............................................    51
    Wheeler, David...............................................    60

              Additional Material Submitted for the Record

Blackwelder, Brent:
    ``Global Civil Society Statement on World Bank Climate 
      Investment Funds,'' signed by over 100 international 
      organizations..............................................    75


                     EXAMINING THE ADMINISTRATION'S
                        PROPOSAL TO ESTABLISH A
                   MULTILATERAL CLEAN TECHNOLOGY FUND

                              ----------                              


                         Thursday, June 5, 2008

             U.S. House of Representatives,
                       Subcommittee on Domestic and
                     International Monetary Policy,
                             Trade, and Technology,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 1:40 p.m., in 
room 2128, Rayburn House Office Building, Hon. Luis V. 
Gutierrez [chairman of the subcommittee] presiding.
    Members present: Representatives Gutierrez, Moore of 
Wisconsin, Clay; and Paul.
    Ex officio present: Representative Frank.
    Chairman Gutierrez. This hearing of the Subcommittee on 
Domestic and International Monetary Policy, Trade, and 
Technology will come to order. Good afternoon and thank you to 
all of the witnesses for agreeing to appear before the 
subcommittee today.
    Today's hearing will focus on the Bush Administration's 
proposal to establish and provide funding for a multilateral 
Clean Technology Fund. We will hear more detail from Mr. 
McCormick today, but the Administration has indicated that the 
purpose of the Clean Technology Fund will be to ``help fund 
deployment of clean technology to reduce greenhouse gas 
emissions in major developing economies.''
    As envisioned by the Administration, the multilateral Fund 
would exceed $10 billion in total funding and would be 
administered by the World Bank. President Bush is seeking 
authorization from Congress for a U.S. contribution of $2 
billion over 3 years, starting with a $400 million 
appropriation in Fiscal Year 2009.
    With our jurisdiction over international financial 
institutions, including the World Bank, the subcommittee and 
the full Committee on Financial Services will be responsible 
for any funding authorization.
    Testifying on our first panel today, we have David 
McCormick, Under Secretary for International Affairs at the 
U.S. Department of the Treasury. Our second panel is made up of 
representatives of several international environmental 
organizations, whom I will introduce later in the proceedings.
    We will be limiting opening statements to 10 minutes per 
side, but without objection, the record will be held open for 
all members' opening statements to be made a part of the 
record.
    I understand that Under Secretary McCormick is under some 
time constraints, so in order to expedite this process, I will 
submit my opening statement for the record and recognize Mr. 
Frank, the chairman of the full Financial Services Committee.
    The Chairman. Thank you, Mr. Chairman.
    I appreciate this. I am not going to be able to stay for 
the whole hearing, so I do want to make my statement now.
    First, I think it is a sign of progress that everyone 
should welcome that this proposal comes to the Administration. 
We progress at different rates, but progress still should be 
noted.
    The fact that we have here a proposal from this 
Administration to put funding behind clean technology is, of 
course, based on the recognition that climate change is a 
serious issue and that significant improvement in environmental 
impacts are a very, very high priority.
    There are some concerns that have been expressed that we 
need to address. To begin with, we should be clear that part of 
the problem here is that we don't come free of history. 
Historically, the World Bank has not been seen as an 
institution which is friendly to environmental concerns.
    Now, I think progress has been made here as well, and there 
have been substantial improvements. In some cases, this 
committee has played a role in that, for example, in our 
insistence on the establishment of inspection panels, which 
have contributed.
    But part of the problem that remains is the concern about 
the World Bank being the most suitable entity to do this.
    People want to see some movement forward here, but we can't 
always get what we want. The choice may be, given the reality 
between the World Bank and nothing, there may be some argument 
for doing it elsewhere. But then there is a second set of 
issues which is, if it is going to be the World Bank, under 
what conditions, and subject to what rules?
    I do think, if this is going to work, it is going to be 
incumbent upon the Administration and the Bank to allay fears 
that are well-grounded in history, that are not paranoia, and I 
think there is the burden of proof to be shown that the Bank 
will take this mandate and do it in a way that significantly 
improves the situation.
    Another concern is that we don't really do enough in this 
world, and this country does not do nearly enough, to alleviate 
poverty. There are far too many malnourished children in this 
world, proportionately more in Africa than elsewhere, but an 
awful lot, for any of us to feel good about it.
    Any suggestion that these funds would be diverted from 
public remediation and economic development in general will 
also be a severe obstacle. So we are going to need some very 
strong commitments that this will be wholly additive.
    I say that because we are in a situation where, when we 
draft our budget, we are sometimes told--I guess, by 
``sometimes,'' I mean once every year--by the Administration 
that here is an absolute dollar limit above which we cannot go.
    We say, if these funds are going to come out of an already 
too constrained budget for development purposes, then there is 
an obstacle to that. Unless we can get an agreement that these 
will be additive and will not come at the expense of other 
issues, again, I think, this does not go forward.
    There are some more fundamental issues about what types of 
technology would be dealt with, but assuming it is going to go 
to the World Bank--and that is obviously by no means 
guaranteed--those two are absolutely minimum conditions. 
Assurances that this will be done well and a guarantee that 
there is no diversion, and I would say that finally, one way in 
which you do that is to shorten the period in which it is 
allowed to go forward.
    So, at this point, I think the shorter the authorization 
period, the more we may feel that we will be able to see 
whether or not this works.
    Obviously, you do have, at some point--you need a longer 
term to get projects going. But that wouldn't be an argument in 
the first year because you are not going to be making huge 
commitments in the first year. So I think there is going to be 
an argument strongly that many of us will feel that, given the 
sort of experimental nature of this, we should not have a very, 
very long time in which it is authorized, because whatever 
assurances we get now on the two points I mentioned, they are 
only assurances, and we can't take them literally to the Bank, 
even if we get them from the Bank.
    So, what I think people may look forward to is a testing 
period of a year or so in which the two points that I mentioned 
will have to be established if this is to go further.
    I thank you, Mr. Chairman.
    Chairman Gutierrez. Thank you, Mr. Chairman.
    Our first panel consists of only one witness, Mr. David 
McCormick. Mr. McCormick is the Under Secretary for 
International Affairs for the U.S. Department of the Treasury. 
We welcome him and ask him to please proceed.

STATEMENT OF THE HONORABLE DAVID H. McCORMICK, UNDER SECRETARY 
   FOR INTERNATIONAL AFFAIRS, U.S. DEPARTMENT OF THE TREASURY

    Mr. McCormick. Thank you, Chairman Gutierrez, Congressman 
Paul, and members of the committee. Thank you for the 
opportunity to discuss an issue of global importance with you 
today, and that is the Clean Technology Fund, also referred to 
as the CTF.
    The CTF is a new multilateral effort to reduce the growth 
of greenhouse gas emissions in developing countries by 
financing the additional cost of deploying clean technologies 
over dirtier, usually cheaper, alternatives. The President's 
Fiscal Year 2009 budget includes a $400 million appropriations 
request for the initial U.S. contribution to the CTF, which 
will be housed at the World Bank where it will leverage the 
capital bases of multilateral development banks and the 
donations of other contributing countries. The Administration 
has requested authorization from Congress to commit $2 billion 
to the Fund over the next 3 years.
    We are aiming, along with our donor partners in the G8 and 
beyond, at a global effort of up to $10 billion over the next 3 
years, with the United States as the lead donor.
    Now, what is the problem we are trying to solve here? Let 
me outline for you the magnitude of the problem that this new 
multilateral aims to address and why it is so critical that the 
United States be a part of it.
    Since 2002, emerging and developing economies have been 
responsible for about two-thirds of global GDP growth. While 
this unprecedented expansion has brought economic opportunities 
and higher standards of living to desperately poor people from 
around the globe, it has also led to a surging demand for 
energy. That energy has come in the power industry in the 
transport, building, and industrial sectors.
    According to the International Energy Agency, by 2030, 
global demand for energy will have increased by over 50 
percent, with almost three-fourths of this increase coming from 
a handful of developing countries. Now, currently, most 
developing countries are focused on the most cost-effective way 
to grow their economies, feed their people, and raise their 
standard of living.
    They tend to invest in the available energy technology that 
can provide the most economic impact at the least cost. But 
each time they invest in dirty technology, such as a 
subcritical coal plant with a 30-year life span, the harder and 
more expensive it will be to mitigate the resulting climatic 
effects in the future.
    If we take no action to provide developing countries with 
the right incentives, their investments today could lock in the 
legacy of high-polluting, less-efficient technologies for which 
we would all eventually pay through the accelerated efforts of 
climate change.
    What is the response? Well, in response to this global 
challenge, the United States, the United Kingdom and Japan have 
been working multilaterally with the other G8 countries and 
potential donors to create an international Clean Technology 
Fund to help developing countries deploy these commercially 
available technologies. These are technologies that we in the 
United States and Japan and other developed countries are 
already using.
    Since September of 2007, Secretary Paulson, at the request 
of the President, has led U.S. efforts to negotiate the 
development of the Fund with our international partners.
    The proposed Clean Technology Fund has three objectives: 
first, to reduce emissions growth in developing countries 
through the accelerated deployment of existing commercially 
available clean technologies; second, to stimulate and leverage 
private-sector investment in these existing technologies; and, 
third, to promote international cooperation on climate change 
in the broader context of pursuing a future climate change 
agreement.
    The Clean Technology Fund will help developing countries 
finance the additional cost of deploying clean technologies 
over dirtier ones. The Clean Technology Fund will not cover the 
entire cost of any project. It will help cover the portion of 
the cost needed to reach the point of economic viability. 
National governments and private sponsors will be responsible 
for the bulk of project financing.
    The Clean Technology Fund will be a multilateral fund 
administered by the World Bank and implemented through all the 
multilateral banks. It will be able to leverage the resources 
of the MDBs, which collectively lent over $55 billion in 2007 
for international development. The Fund will invite developing 
countries with an emphasis on those with expected high 
emissions growth, and they will be invited to submit requests 
for CTF support to finance energy, transport, or other projects 
with significant emissions reduction potential, including 
large-scale energy efficiency projects.
    To be eligible to receive such funds, developing countries 
will be required to work with the World Bank to develop 
investment strategies that are based on national plans for low 
carbon growth. Projects would be evaluated based on their 
consistency with these national plans, their expected reduction 
of greenhouse gas emissions, and their capacity to transform 
sectors onto cleaner energy pathways. The Fund will use a mix 
of concessional loans, grants, equity investment, and credit 
guarantees to finance any additional cost of deploying clean 
technologies.
    Mr. Chairman, the status of the Fund--we have talked to 
many other countries. The United Kingdom and Japan already 
expressed publicly their contribution or their willingness to 
commit, and we recently had a CTF design conference in Germany 
where potential donor and recipient countries came together and 
reached general agreement on the parameters of the Fund. We 
believe donor support will go well beyond the G8 to include a 
number of countries in Europe and throughout the Middle East.
    A final comment, Mr. Chairman, for U.S. leadership and 
involvement, I believe the CTF will do more than make an 
immediate impact on emissions growth in the developing world. I 
believe it can contribute to building the kind of trust between 
developed and developing countries, trust that I am sorry to 
say has been lacking for some time, that will be necessary for 
a new U.N. climate arrangement to be reached in the years 
ahead. Thank you very much.
    [The prepared statement of Under Secretary McCormick can be 
found on page 47 of the appendix.]
    Chairman Gutierrez. Thank you very much for your testimony.
    Mr. McCormick, I only have one question. There is 
significant concern in the environmental community regarding 
the lack of a definition of ``clean technology'' in the 
Administration's proposal. Has Treasury ruled out certain 
technologies and projects that others might be pushing for 
eligibility under the CTF?
    In other words, are there technologies or projects that 
some might promote as clean or transformational that would not, 
in your view, be appropriately funded by the CTF? What about 
the super-critical coal plants?
    Mr. McCormick. Thank you, Mr. Chairman.
    The projects that would be considered, first, would only be 
those projects from countries that had already developed and 
had the approval for national plans for reaching low-carbon 
economic growth.
    Within that continuum of projects, we would expect that 
there would be a number of those projects that would be 
retrofitting existing infrastructure, trying to make existing 
infrastructure, whether it be buildings or transportation 
networks, much cleaner.
    We would also expect that there would be some of the 
projects that we would consider which would be new energy 
infrastructure. Within that new energy infrastructure there 
may, in some instances, be proposals for coal-related 
technologies.
    In those instances, those projects would be considered. I 
wouldn't expect that to be a significant portion of the 
portfolio, but it might be part of the portfolio. This, I 
think, does bring to the forefront a difference among many 
here. From a very practical standpoint, in some of these 
developing countries, they are moving forward with the 
development of coal-fired plants.
    The only question, really, is whether we may, in certain 
circumstances, within the context the of a low-carbon plan that 
they have agreed to, finance the deployment of the cleanest 
available coal technology possible, but those economies are 
going to develop, in some cases, coal infrastructure with or 
without our support.
    We think there may be cases that do, in fact, justify the 
deployment of the cleanest available coal technology possible, 
just as we would advocate that under certain circumstances in 
our open country.
    Chairman Gutierrez. Thank you, Mr. Under Secretary.
    The ranking member, Dr. Paul, is recognized for 5 minutes.
    Dr. Paul. Thank you, Mr. Chairman.
    Programs like this are always based on the assumption that 
without a program like this, no good can come of it; there is 
no other alternative, that there is never a market force, there 
is never a profit incentive to accomplish some of these goals.
    There is also the fact that some of these programs, if not 
most of them, programs of the multilateral development banks, 
aren't always that successful. Sometimes there is a lot of 
money wasted, and there are a lot of special interests who 
benefit.
    It is always designed to do good to help the poor and to 
clean up the environment, but sometimes we know that it 
feathers the pockets of some special interests. Of course, I 
have always had concerns about that.
    The other thing, of course, that we shouldn't ignore is the 
cost of a program like this. We are talking about just a 
piddling sum, you know, $2 billion, throw that out there. That 
is not much in a big budget. But we never talk about where the 
money is coming from, and I would like to find out what the 
Administration is thinking. Is this going to be part of the 
deficit? Is this going to be borrowed money, or is this going 
to be paid for by taxes?
    For a $2 billion program, the odds are, it will be a lot 
more. So, could you tell me, has anybody considered how we are 
going to pay for this, and what we should do? What are the 
considerations on paying for this?
    Mr. McCormick. Congressman Paul, thanks for that question.
    We certainly, I think, have a common agreement on the 
commitment to market forces, and in the area of the 
environment, particularly in the area of greenhouse gas 
emissions, that has typically been pointed to by many as a 
public goods issue, where we don't have market forces that are 
essentially operating at some of these developing countries 
where there is enough of an incentive for the investment in the 
cleanest available technologies possible.
    The reason for that is these governments are making trade-
offs in some cases--not in all cases--between basic human needs 
and incremental investment in clean technology, and they are 
making a trade-off that ultimately means dirtier technologies, 
which creates the public goods problem for us all. So that is 
what the Fund is designed to highlight.
    As Chairman Frank noted in his opening remarks, we are 
committed to this not being a trade-off between ODA funding, 
existing ODA funding for poverty reduction and environmental 
funding, so it is, indeed, additive. And it would be part of 
the overall President's budget. It is additive to our 
development funding.
    I recognize your concern, Mr. Paul, with overall deficit 
concerns and deficit spending. I can't point to a specific 
trade-off that is being made within the budget as a consequence 
of this or a specific tax, but I certainly do note your concern 
on that point.
    Dr. Paul. Yes, and I think this is probably typical. You 
know, the programs get started, and we don't pin it down, and 
it does contribute. You have a program here and there, and soon 
we have a national debt increase. This year, the national debt 
increase could be three-quarters of a trillion dollars at the 
rate we are going. It is close to 600 now.
    So if the economy continues down, it could be a major 
factor.
    But back to this idea about the market, you argue that, you 
know, in these circumstances, the market isn't available and 
doesn't work. Well, that almost guarantees bad decision-making 
because instead of picking and choosing, let's say, nuclear 
over wind and all these difficult things, if you don't have a 
market factor in there, somebody has to make the decision, and 
it has to be a bureaucrat. It has to be a politician, and it is 
going to be slower, and it is going to be more costly.
    So I guess, from what I am saying, I lack enthusiasm and 
belief that something like this can be successful, although, 
politically, it has a lot of appeal. I understand this, but I 
would caution everybody that someday we, as a country, will 
have to wake up and be responsible for paying these bills.
    Thank you.
    Mr. McCormick. May I respond?
    Chairman Gutierrez. Yes, if you would like to respond.
    Mr. McCormick. Certainly I think part of the issue here--
and I recognize $2 billion is a great deal of money. However, 
within the overall scheme of this gap, between existing 
infrastructure that is being deployed today, just in the energy 
sector alone, it is $30 billion. That is the differential in 
cost between the technology that is being deployed and the 
cleanest available technology.
    So if you think about the global implications of that from 
a carbon emissions standpoint, it is quite enormous. While $2 
billion is a lot, it is, frankly, just a fraction of addressing 
the overall problem.
    Now, why we think this $2 billion is a worthy investment 
for the taxpayers is because the $2 billion becomes $10 
billion, hopefully, if we are able to get multilateral support 
for it, and then is leveraged much more significantly than that 
by the fact that private-sector investment comes into this 
further, the countries' investment.
    So I don't mean to suggest market forces won't be at work 
here. They will be, because companies will compete for 
projects. Projects will complete among themselves for funding 
opportunities.
    I am simply saying the market is not working today in terms 
of helping countries make that trade-off because they are 
opting to address near-term poverty needs as opposed to the 
long-term implications of global warming. That is something we 
have a common interest in addressing as Americans.
    Thank you.
    Chairman Gutierrez. Congressman Frank. Please, Mr. 
Chairman.
    The Chairman. Thank you, Mr. Chairman.
    I won't intrude into a family dispute over the market 
between the gentleman from Texas and the Department of the 
Treasury, but I am interested in the budgetary implications. 
You were asking for a $400 million appropriation.
    Now, if I am correct, this is different than our usual 
financing of World Bank activities with the lending and 
leveraging, etc. There is leveraging in that we expect others 
to contribute, but this is a dollar-for-dollar appropriation, 
correct?
    Mr. McCormick. Yes, Mr. Chairman.
    The Chairman. This is money, unlike World Bank or other IFI 
funds that we have the dollar-for-dollar out-of-pocket 
spending, so you can assure me that the $400 million being 
requested is purely additive to what was otherwise being 
requested in the foreign aid budget?
    Mr. McCormick. Yes, sir, Mr. Chairman.
    The Chairman. Okay, the reason it is important for this to 
work is that--and I know a couple of the witnesses mentioned 
this as well--this is money that is going to be spent in 
middle-income countries, because poor countries are too poor to 
bother the environment very much, certainly not from their 
emissions.
    So we have the continuing scandal of starving children in 
Africa. This is not money that is going to go to Africa. It is 
not money that will go to the poorest countries, so that makes 
it especially important that we be very clear about that, and I 
will be talking to the budget and appropriation people.
    And I will tell you, I am ready to support this if we work 
this out--the way this would probably work is, if we do agree 
with it, we will be recommending it, in effect, if we pass it 
out of the Financial Services Committee, to the Foreign 
Operations Subcommittee.
    But I will be prepared to tell them that if they get into a 
budget crunch with the Administration and we are told we are 
spending too much, you go over this side first. I want to be 
very clear about that. I am prepared to support this but not at 
the expense of poverty alleviation. I don't like to have to 
make that trade-off, and I hope I am not forced to. You know, 
we do this, but my advice to the Foreign Operations people will 
be, okay, if you can do it that way.
    Then the other issue I would raise is--and I noticed this 
in some of the testimony--one of the things that could make it 
easier for us to get this done would be--you know, we talk 
about trade-offs. The World Bank has not compiled a record that 
most environmentalists approve of in its general operations, 
and there is a danger that we would have an ongoing World Bank 
operation that was not environmentally sensitive, and then 
this, you know, it is like they do their environmental work 1 
day a month, and then they undo it the other 29 days.
    A commitment from the World Bank, or a commitment from us 
to work to see that the World Bank does better on environmental 
issues, in general, could be very helpful. That is, again, why, 
I think we may be talking about a trial period here.
    But that would be important, that the World Bank not be 
funding projects, for example, that would go counter to a 
concern for clean technology. I think that is another issue 
that we would ask you to address and that we may address when 
we legislate on this.
    Now, let me ask you, one of the most controversial 
questions, controversial within this body as well, and that is 
clean coal. What is your sense about that, because that is 
probably the issue that causes the most controversy, because it 
causes it within this body as well?
    I would say to my environmental friends, obviously, there 
is not yet a consensus here on the issue the way they would 
like, but what would your sense be, would a significant amount 
of this go to clean coal, some part? What is your sense?
    Mr. McCormick. Mr. Chairman, thank you.
    First, just a word on the Bank. I think I would be the 
first to admit that there is a real tension in the Bank's 
poverty reduction mandate and also a growing prioritization 
within the Bank on an environmentally friendly energy and, in 
particular, climate change. I know President Zoellick has made 
this one of his top six priorities.
    And what you should take confidence in from the Fund is 
that, unlike other funding mechanisms at the World Bank, we 
would have, as the United States, as one of the members of the 
Fund trust committee, an ability to veto any project that is 
inconsistent with a mandate that we are discussing today.
    The Chairman. Well, I appreciate that, Mr. McCormick.
    And I mean no personal disrespect, but the fact that this 
Administration has a veto does not always fill me with joy.
    Mr. McCormick. Understood, Mr. Chairman.
    The second point is that, I think within these projects 
that would be funded, there is absolutely--and our friends from 
the NGO community have reinforced the importance of this many 
times--there needs to be a focus on retrofitting existing 
infrastructure, on efficiency and those types of projects, 
every bit as much as new infrastructure. Within the category of 
new infrastructure--
    The Chairman. You mean, the ongoing activity of the World 
Bank and the other MDBs, that this would have to be accompanied 
by some sensitivity there.
    Mr. McCormick. Yes, sir, and also within the Fund.
    The Chairman. I understand that, but if this is confined 
only to the Fund, you will run into trouble. One of the ways 
you can help is if a trade-off for the existence of the Fund is 
some more sensitivity within the main operation as well.
    Mr. McCormick. We think this is a critical way to help the 
Bank become more green in its outlook and how it thinks about 
projects, absolutely.
    There will be new infrastructure projects that we would 
expect this Fund to support. I wouldn't expect a 
disproportionate amount of that to be coal, but I do think that 
the Fund may, on occasion, consider projects that are clean 
coal technology and may, in fact, in some cases, support those.
    Again, Mr. Chairman, the argument that I would make to you 
is that those coal-fired facilities are going to be built in 
some countries anyway. We want to discourage that, but there 
may be cases where, if that is going to happen, we want to help 
finance a project.
    The Chairman. Let me call for this then, and this isn't 
going to satisfy everybody, but one potential trade-off that 
could help you would be if the Bank would say, okay, we are 
going to go ahead with this, but we would be much less likely 
now to finance existing coal technology, absent some 
improvement, so that, again, there is an interplay between what 
is done in the Fund and what is done in the main activity of 
the Bank.
    Mr. McCormick. Mr. Chairman, I couldn't agree more. The 
point I would make, just knowing this was an issue of concern, 
just looking back over the last 10 years, in terms of the Bank 
support for energy infrastructure, only about 10 percent of 
that has been coal.
    Of that 10 percent, roughly 75 percent has been 
retrofitting versus 25 percent of new infrastructure. I know, 
for many people, that 25 percent of the 10 percent is still 
much too much, but I think it would be unfair to represent coal 
as a major portion of the energy infrastructure today.
    I think, in the future, it can become less or probably 
should become less, and I think the Fund contributes to that.
    The Chairman. Thank you, Mr. Chairman.
    Chairman Gutierrez. I thank the gentleman.
    I now recognize Congresswoman Moore for 5 minutes.
    Ms. Moore of Wisconsin. Thank you, Mr. Chairman.
    Thank you, sir, for appearing today.
    I have questions that really relate to the questions that 
have already been asked by the subcommittee Chair and our full 
committee Chair, and perhaps you have answered them by saying 
that clean coal technology would, in fact, be regarded as part 
of this--eligible for the Fund.
    I suspect that we are going to hear testimony later on 
today which indicates that it is very inefficient, that there 
won't be anything brought on board until 2030. Yet other 
resources are going to be spent for technology that is really 
not clean. What is the thinking in terms of including that in 
this Fund?
    Mr. McCormick. Congresswoman, there was a real focus on not 
prejudging what technology would be most appropriate. So, 
again, I think we agree with Congressman Paul in the sense that 
we don't think the government should be in the process of 
developing or advancing technology. It is only supportive--just 
to be clear--of those technologies that are broadly available 
and already commercially deployed.
    So this is not meant to advance the development of the new 
technology but rather the deployment of assistant technologies. 
The trade-off, in terms of collecting, selecting, or willing to 
consider new projects--again, Congresswoman, I consider this to 
be a very small percentage of this--was based on the fact that 
some countries that are so heavily dependent on coal, to 
suggest that they wouldn't be deploying coal technology as part 
of supporting their energy technology just wasn't practical, 
just wasn't pragmatic.
    Ms. Moore of Wisconsin. All right. Thank you.
    The World Bank, as has been indicated before, is probably a 
suspect source of funding this project. What would be wrong 
with the United Nations framework? I realize that their limited 
capacity, perhaps, will not start till 2012. But if we could 
put this in place and perhaps turn the portfolio over to them, 
there would be a more global systematic deployment of these 
resources.
    The World Bank, as recently as April, did a major fossil 
fuel lending program, and there may be some conflicts of 
interest, we think, the huge portfolio that they have with 
fossil fuel projects and really using some due diligence in 
administering this program.
    So what was your thinking in terms of the World Bank, given 
their record and their portfolio, doing this lending?
    Mr. McCormick. Again, Congresswoman, I think this was just 
very practical and pragmatic so the UNFCCC is essentially then 
negotiating--or the Secretary oversees negotiation. It doesn't 
have the practical organizational capabilities for oversight of 
implementation, where that has traditionally been a role of the 
MDB. So we thought the Bank would be in a position to do that.
    We also thought sharing many of the things that have been 
said today about the need for the Bank to become more green, we 
thought the Clean Technology Fund housed within the Bank would 
give us greater influence in moving in that direction.
    Ms. Moore of Wisconsin. Let me just ask you this, 
countries, like Sub-Saharan Africa, as our chairman has already 
indicated, wouldn't initially be part of this concessional 
funding. But as other countries become more clean, and the 
World Bank has invested heavily in fossil fuel programs in Sub-
Saharan Africa, and we see climate change and floods and other 
problems, what would happen with the debt that those Sub-
Saharan countries have pursuant to fossil fuel creation and 
then, at some point, some imperative for them to come on board 
with clean coal technology?
    In other words, I am not clear as to how this two-track 
lending is going to work in the real world.
    Mr. McCormick. Congresswoman, we certainly haven't ruled 
out any country being a participant, any developing country 
being a participant. I simply said that we expect that the 
initial focus would be on some of those major economies that 
account for the most significant portion of greenhouse gas 
emissions.
    So it doesn't rule out the poor of the poorest countries, 
and we also share your concern, as Chairman Frank has outlined, 
and that was the reason for the President's increased request 
on ODA of about 30 percent win this budget.
    Ms. Moore of Wisconsin. I know, but they won't be able to 
afford the exploratory kind of clean technology in Sub-Saharan 
Africa, but they are going to have the debt on their books at 
whatever point they join the program. I see my time has 
expired.
    Chairman Gutierrez. You can answer the question, if you 
want.
    Ms. Moore of Wisconsin. Yes, thank you.
    Mr. McCormick. Congresswoman, they would be eligible. In 
other words, if they are financing energy infrastructure today, 
they would be potentially eligible for asking for support to 
finance the incremental gap between the clean technology and 
the dirty technology, so they would be eligible potentially for 
that program.
    Ms. Moore of Wisconsin. That is kind of an underwater loan. 
They are borrowing today, knowing that it is going to be 
inadequate. Thank you.
    Chairman Gutierrez. First of all, let me thank you for 
coming and testifying before the committee. We look forward to 
having more conversations as we move forward and try to define 
just what the moneys will be used for with a little more 
specificity. Hopefully, you will get to testify before your 
term has expired. I have a funny feeling this money might not 
get spent while you are there.
    I am not saying that in a negative way. It is just the 
reality of time, and the Administration is closing--you know, 
this is going to be 2009 by the time things go. I want to thank 
you. You have always been so kind and generous with your 
explanations before the committee and your answers. I want to 
thank you for your testimony this afternoon.
    Mr. McCormick. Thank you, Mr. Chairman.
    Chairman Gutierrez. Thank you, Mr. Under Secretary.
    We have a second panel, and we would like to welcome Mr. 
Brent Blackwelder, a senior environmental lobbyist and 
president of Friends of the Earth since 1994.
    Mr. Blackwelder founded the Environmental Policy Institute, 
which merged with Friends of the Earth in 1989, and the 
American Rivers, the national leading river-saving 
organization.
    Next we have Dr. David Wheeler, senior fellow of the Center 
for Global Development. As lead economist in the World Bank's 
development research group from 1993 to 2006, Mr. Wheeler 
directed environmental policy and research issues in 
collaboration with policymakers and academics from South 
America and Southeast Asia.
    Third, we have Mr. Jake Werksman, program director of the 
Institutions and Governance Program at the World Resources 
Institute. Dr. Werksman served as a lawyer, program director, 
and managing director at the Foundation for Environmental Law 
and Development for 10 years.
    Finally, we welcome Dr. Andrew Deutz, senior policy advisor 
of the Nature Conservancy. He currently heads the International 
Institutions and Agreements Team, which oversees relationships 
with a variety of multilateral and bilateral agencies.
    We welcome you all, and we ask Mr. Blackwelder to proceed.

STATEMENT OF BRENT BLACKWELDER, PRESIDENT, FRIENDS OF THE EARTH 
                               US

    Mr. Blackwelder. Good afternoon, Mr. Chairman.
    I am Brent Blackwelder, president of Friends of the Earth, 
United States. We are part of Friends of the Earth, 
International, with member groups in 70 countries. We are the 
world's largest global environmental advocacy network.
    We certainly commend you for holding this hearing on the 
Clean Technology Fund, and we also appreciate the role that 
this committee has played over the last 25 years. Going back to 
June of 1983, when we asked the committee to do the first 
oversight hearing on the lending of the World Bank--and I 
testified that June before this committee--and you proceeded to 
take my testimony and that given by my colleagues to heart. 
Many, many things were done to try to improve the lending of 
the Bank so that it actually didn't create big winners and 
losers; that it improved environmental quality; that it did not 
fund projects that spread disease or extinguished the lives of 
indigenous peoples, or displaced hundreds of thousands of 
people. We raised all those issues. Some steps have been taken.
    What I want to focus on in my testimony here are two 
questions: One, what is the definition of clean technology; and 
two, is the World Bank the right entity to be pursuing that?
    We are very concerned, in the first, place that coal, even 
when you try to use the most efficient plants, has a very dirty 
cycle from start to finish, whether it is the mining process, 
whether it is burned or the ash, when it is left, how it is 
disposed of. It is not only in the United States where we are 
blasting the mountain tops of West Virginia to smithereens and 
leaving little for the future of the people who would hope to 
reside there, or whether it is the power plants that we have 
focused on and testified about that have been financed by the 
Bank with our tax dollars--in India and China, most recently. 
One was referred to in earlier testimony. We have brought all 
those to your attention.
    The world is now burgeoning with many, wonderful clean 
technologies, whether it is getting rid of energy waste through 
efficient appliances, motors, gears, lights and the like, or 
whether it is going solar, wind technology and geothermal. 
There is no shortage.
    If the technologies of the past were not subsidized in one 
way or another, through the Tax Code and through 
appropriations, these things would be absolutely competitive. 
The problem has been that there is not a level playing field, 
and all the externalities of these dirty technologies are 
shoved off on others.
    So, in particular, if you allow a ``clean'' coal to come in 
with money going to carbon sequestration, which is decades away 
from commercial viability, it is another subsidy to coal. And 
that is not acceptable if we want to go in a new direction that 
does not have the adverse economic and social environmental 
consequences of this fossil-fuel lending.
    So in summary, we have to exclude coal and be very clear on 
what constitutes an acceptable recipient here. And furthermore, 
there are abundant possibilities.
    Let me next turn to the World Bank itself as an entity. 
Having looked at and tried to convince the World Bank, with the 
bipartisan support of Congress, to shift the energy lending 
over 25 years into newer technologies that were appropriate and 
that countries actually wanted, they have actually refused and 
continue to this day to fund very damaging projects.
    And over the years--I will just relate one incident. One of 
the Bank staffers said, ``We have some wonderful energy 
conservation loans that Tunisia wants, but we can't fund them; 
it is too small. The Bank doesn't want to do this.'' And it 
says, ``We can't manage a series of smaller projects.'' Well, 
McDonalds manages 28,000 small franchises; they found a 
managerial model that works.
    So I am trying to lay the grounds by saying, what has the 
World Bank done that would justify any confidence whatsoever 
that now it has changed its ways? The lending for fossil fuels 
hopped big time from Fiscal Year 2005 to Fiscal Year 2006. They 
are going in the wrong direction. Rather than coming to you and 
saying, ``Oh, we have changed our ways and look at what we are 
doing, look at the results we are getting, put more into 
us,''--no, they can't make this claim.
    We have no confidence at Friends of the Earth that this 
money would be spent wisely at the World Bank. There are other 
mechanisms which we lay out in our testimony that would be 
suitable.
    In summary, we would urge you not to proceed to give the 
World Bank the authority to do this, but to look at other ways 
to quickly accelerate the technologies that are available.
    [The prepared statement of Mr. Blackwelder can be found on 
page 33 of the appendix.]
    Chairman Gutierrez. Thank you.
    Dr. Wheeler, please.

 STATEMENT OF DAVID WHEELER, SENIOR FELLOW, CENTER FOR GLOBAL 
                          DEVELOPMENT

    Mr. Wheeler. Thank you, Mr. Chairman.
    I am here today for the Center for Global Development, 
which really works on issues that have to do with poverty in 
the developing world. And so we have an environment component, 
but it is not our main line as an organization. It is my main 
line.
    I worked in the World Bank for 17 years before coming to 
the center a year-and-a-half ago. So I thought I would offer 
you some remarks today to provide you a perspective, at least 
my perspective, on the World Bank and its candidacy for this 
Fund and also some conditions that might be useful in trying to 
steer the World Bank towards responsible governance in this 
context.
    I think I could frame this by trying a couple of 
retrospective stories on you. Suppose it is 2015. The money has 
been appropriated for the Clean Technology Fund. The World Bank 
has been designated as a steward for that Fund. We ask 
ourselves, what happened with that money?
    I think there are two stories we can tell here. At this 
point, they are equally credible stories, and the outcome will 
depend largely on the decisions you make.
    The first story we might call, ``Business As Usual.'' In 
that story, the World Bank, guided by the current draft for the 
Clean Technology Fund, pursues its normal course, which is to 
try to please everybody and all of its member countries and 
pass out the money on a number of demonstration projects which 
make people feel good, pass some of the money out to countries 
that want to clean up their coal technology a little bit. 
People feel pretty good about that.
    But at the end of 7 or 8 years, having spent billions of 
dollars, we ask ourselves where did we get for the money? The 
answer is, not far, because during that entire period, in all 
of these countries, dirty technology remained cheaper than 
clean technology.
    Without any regulation, the private sector, which is going 
to propel most of the investment of the power sector, continued 
right along investing in coal-fired power and fossil-fired 
power. So this was a feel-good project, but in the final 
analysis, I don't think the taxpayers' money was well spent.
    Now there is an alternative, and that will really depend on 
this committee, and that is to insist that this money will be 
focused where it can do the most good. The only credible 
argument here for a Clean Technology Fund is to find renewable 
sources of power whose costs you can drive down to 
competitiveness with fossil-fired power in fairly short periods 
of time.
    There are technologies out there, as we know. Solar thermal 
technology is one; wind is another. We are at the cusp here, 
and we can do this. Now if the money had been spent, as we look 
back in 2015, on that course, then what we would expect to have 
seen is the private sector with some subsidies coming into 
these sectors, coming in to these clean power sources. We would 
expect them to come down the learning curve, and we could fully 
expect that some of them would have met cost parity with dirty 
power by 2015. Then the private sector would take over, and we 
would have a very hopeful story.
    Now those are two equally plausible outcomes. I think the 
conditions that you put on this arrangement will determine 
which way we go.
    Perhaps I can offer you a few quick thoughts about the 
Bank, which I think I know pretty well. I have tremendous 
respect for the Bank. I have many good friends there. And the 
Bank has done some good work on the environment, and I can 
provide some details if you are interested.
    Fundamentally, it is a powerful organization with a global 
reach and a lot of experience in big projects. Those are the 
pros.
    What are the cons? Well, as some colleagues have said here, 
the Bank has a problem with focus. What we need for this Clean 
Technology Fund is focus, but the Bank has many constituencies. 
It has many agendas. It has a very hard time focusing and 
disciplining itself to do one thing well.
    Secondly, it is a bureaucracy. It is very natural for 
people in a bureaucracy to want to perpetuate business as 
usual. If you read the drafts of the proposals for the Clean 
Technology Fund, you will see all the voices in that 
bureaucracy weighing in, in various ways. And the drafts tend 
to wander around as different constituencies weigh in. It is a 
very natural thing. It has to be fought.
    Now, as my colleagues here have said, the Bank right now 
doesn't seem well-positioned as a steward for this Fund for two 
reasons. The first is--as has been said by several--it is still 
funding big coal-fired power projects. Now there is a rationale 
for that, but, honestly, it doesn't withstand much scrutiny. It 
is just business as usual. It has been doing it for a long 
time.
    The second thing is that the Bank is not into carbon 
accounting. It can't account for the carbon consequences of its 
own actions. Even though we have U.S. investment banks now 
doing the carbon accounting, thinking about the projects and 
valuing the carbon output to those projects, the Bank is not 
doing it.
    So, my conclusion, if you let this thing move forward as an 
authorization and appropriation without any conditions, what 
you are going to get is a bunch of feel-good projects that 
won't amount to anything in the final analysis that will solve 
the desperate problem that we face.
    But there are three conditions you can impose that will 
help a lot. The first is a mission focus; the purpose of this 
Fund should be to make clean power as cheap as dirty power, 
full stop. If we can't do that, we lose. That means you have to 
find sources of clean power that are near cost parity now and 
push those down the learning curve.
    And, finally, the World Bank cannot position itself to play 
well in this sphere if it is not doing carbon accounting. So 
the third condition I would propose would be, put carbon 
accounting in place. That is a prerequisite for doing this 
work. If you can't do it, you don't qualify.
    Thank you very much.
    [The prepared statement of Mr. Wheeler can be found on page 
60 of the appendix.]
    Chairman Gutierrez. Thank you very much.
    Mr. Werksman, please.

STATEMENT OF JACOB WERKSMAN, PROGRAM DIRECTOR, INSTITUTIONS AND 
         GOVERNANCE PROGRAM, WORLD RESOURCES INSTITUTE

    Mr. Werksman. Thank you, Mr. Chairman, it is an honor to 
present these observations on the proposal before you.
    I am speaking on behalf of the World Resources Institute, 
an environmental think tank based in Washington but with a 
network of hundreds of partners throughout the world dedicated 
to developing practical solutions to the world's most pressing 
environmental problems.
    We make our observations from a point of view of principle 
rather than prescription, because we understand that this 
decision is being weighed in the context of several layers of 
very complex multilateral negotiations, and even a body as 
powerful as the U.S. Congress can't prescribe outcomes.
    Nevertheless, a sizeable appropriation for clean energy 
could demonstrate that the United States is finally taking the 
leadership on climate change that the world has been waiting 
for. If these resources are invested wisely, the benefits will 
reach underserved communities in developing countries in 
desperate need of clean sources of energy.
    Successful investments could also demonstrate to audiences 
here in this country that these kinds of investments could, in 
fact, reshape our own energy sector. If combined with U.S. caps 
and domestic reductions obligations that support a global deal 
on climate change, that could help us build the resilience of 
communities vulnerable to climate change, and this 
appropriation could, in fact, lead to genuine U.S. leadership 
on combatting global warming.
    But $2 billion, as others has have said, is a small part of 
the trillions of dollars that are necessary to meet global 
energy demand. Congress must therefore engage in a process that 
ensures that these resources are committed to leveraging the 
greatest possible impact.
    Money for new technologies is not enough. In most 
countries, energy policies focus on short-term costs and 
supply, and overlook the longer-term benefits through cost 
savings, energy security and better environmental performance 
that can be offered by clean technologies. Only policy 
innovations can really lead to this long-term change.
    These could include things like demand-side management 
systems, incentives to encourage energy efficiency, feed-in 
tariffs for renewable energy, and renewable energy portfolio 
standards. And these policies can really open the door to long-
term introduction of renewable energy sources.
    Policymaking in the energy sector tends to be closed, and 
tends to be dominated by interests that have a stake in 
business-as-usual practices. So if policy reforms are able to 
take hold in these countries that we care about, they must be 
developed and implemented through transparent, open, and 
credible processes. But support for new technologies or policy 
reforms in developing countries should not be tied to narrow 
prescriptions or strategies designed to force unregulated 
reforms.
    Approaches based on conditionalities or on coercion could 
backfire and could undermine U.S. efforts to broker a global 
deal on climate change.
    This is, in other words, Mr. Chairman, a very complex 
challenge.
    We, therefore, believe that any U.S. investment in a CTF 
administrated by the World Bank needs to leverage 
transformation in the Bank itself as well as in the developing 
countries that are the target of these resources.
    We have basically three principles that we think should 
guide these investments:
    First, the Clean Technology Fund should leverage 
investments in transformational technologies of the kinds that 
David Wheeler just described, policies that fundamentally shift 
away from carbon-intensive fuels to renewable resources.
    Second, we think that this transformation needs to begin 
with the World Bank's core energy portfolio if the World Bank 
is, in fact, going to be administering these funds.
    Any congressional appropriation for a CTF should promote 
this transformation and should be seen as an opportunity to 
actually monitor and verify that the Bank is, in fact, 
following through on its commitments to be a significant 
steward of the planet's future with regard to climate change.
    Therefore, all of the multilateral development banks that 
have access to the Clean Technology Fund should rigorously 
measure and manage their greenhouse gas emissions along the 
lines that Mr. Wheeler suggested.
    Third, we think that the CTF itself, wherever it is housed, 
needs to operate in accordance with widely accepted principles 
that are reflected in the U.N. Framework convention and 
elsewhere.
    Donor governments should be prepared to demonstrate, as the 
co-chairman suggested, that CTF funds are indeed new and 
additional to development assistance that would otherwise be 
targeted at poverty alleviation; that the source of the 
technology used in these investments should not be tied to the 
nationality of any particular donor; and that the governance of 
the Fund itself needs to be guided by the principles of 
transparency, inclusiveness, and accountability by disclosing 
the information upon which the decisions are based by including 
a balanced representation of both donors and recipients and to 
provide opportunities for a meaningful, civil society 
participation in its decisions.
    We think that the governance, in order to succeed, must be 
selected on the basis of independence and expertise of the 
people involved in those decisions, as well as their ability to 
represent a diversity of interest.
    Overall, the United States and other donors involved in the 
design and implementation of the CTF need to take an approach 
that is based on genuine partnership that leads to the reform 
of the banks involved; that creates credible and legitimate 
governance structures; and that incentivizes the developing 
countries to take meaningful actions to reduce their emissions 
while allowing them to promote their sustainable development 
plans.
    And we stand by ready to help the committee with those 
issues.
    [The prepared statement of Mr. Werksman can be found on 
page 51 of the appendix.]
    Chairman Gutierrez. Thank you.

   STATEMENT OF DR. ANDREW DEUTZ, DIRECTOR OF INTERNATIONAL 
              INSTITUTIONS, THE NATURE CONSERVANCY

    Mr. Deutz. Good afternoon, Mr. Chairman, and members of the 
subcommittee. I am Dr. Andrew Deutz, Director of International 
Institutions and Agreements at The Nature Conservancy, a 
national nonprofit conservation organization representing about 
a million members in the United States with conservation 
activities in all 50 States and in 34 countries around the 
world. I would like to start by thanking you for the 
opportunity to testify today on the Administration's proposal 
to establish a multilateral Clean Technology Fund for climate 
change to be administered by the World Bank. The Clean 
Technology Fund is part of an emerging package to provide 
short-term incentives and assistance to developing countries to 
meet the challenge of climate change mitigation and adaptation 
and to help them take on new commitments in a future 
international climate change agreement.
    The United States has an opportunity to show strong 
leadership by contributing to the Clean Technology Fund, as 
well as provide additional funding for adaptation and reducing 
emissions from deforestation in developing countries. The World 
Bank has a comparative advantage to administer these funds in 
order to disperse large amounts of money to create the right 
incentives quickly. But the World Bank needs to ensure that it 
effectively leverages the Clean Technology Fund to both green 
its own lending portfolio and to green the development 
trajectory of its client countries. I would like to frame the 
discussion in terms of how the Clean Technology Fund can help 
catalyze global action of climate change. The Bali climate 
convention last December agreed to initiate a new round of 
global climate change negotiations to develop a new 
international agreement to reduce emissions by the end of 2009.
    One of the significant outcomes of that conference was that 
developing countries agreed to take on new commitments, but it 
is contingent on industrialized countries like the United 
States taking on further emissions reduction commitments and 
providing the technology and financial incentives to make that 
happen. In order to get a global deal by the end of 2009, we 
will need to construct a suite of incentives to bring 
developing countries on board. Some of the developing 
countries, the poorest of the poor, and sub-Saharan Africa and 
South Asia, will require new and additional resources to help 
them adapt to climate change. The forest-rich countries in the 
south, countries like Brazil, Malaysia, and Indonesia can be 
incentivized through a funding mechanism to reward their 
efforts to reduce emissions from deforestation. The rapidly 
industrializing countries, countries like China, India, and 
South Africa can be incentivized by providing funding to spur 
uptake of low carbon technologies across a wide range of 
sectors.
    And hopefully, that is what the Clean Technology Fund is 
there to do. The Nature Conservancy endorses the 
Administration's request for funds to contribute to the 
establishment of the Clean Technology Fund administered by the 
World Bank. We do, however, have a few qualifications: First, 
the funding must be new and additional to existing U.S. 
contributions for international climate change and biodiversity 
aid; second, we would like to see the United States contribute 
to and be an investor in the World Bank's forest carbon 
partnership facility to help reduce emissions from 
deforestation; third, we would also like to see the United 
States show real international leadership, and also provide 
similar funding for other critical incentive packages to enable 
a global deal, namely, funding for adaptation to help the 
poorest of the poor and for forests.
    Lastly, I would like to address the proposal for the World 
Bank to administer the funding. TNC believes that the World 
Bank, together with the other regional development banks, are 
capable of managing the clean development technology, but with 
caveats. The World Bank does have several comparative 
advantages, but the ability of the World Bank to manage these 
should be--the World Bank should be accountable against these 
comparative advantages. The success of the Clean Technology 
Fund and the future role of the World Bank in any evolving 
international climate change financing regime should be 
contingent on the ability of the World Bank to do two things: 
First, green its own lending portfolio; and second, help to 
green the pathway of the developing country clients that the 
World Bank serves. The World Bank has the ability to influence 
national development frameworks in developing countries. The 
World Bank is in dialogue continually with ministries of 
finance and planning, as well as line ministries, and thus in a 
position to ensure that clean energy pathways, as well as 
climate change resiliency and forest conservation are 
mainstreamed into the core development planning framework of 
the countries where it works.
    Unfortunately the World Bank's track record to date has 
been fairly poor in mainstreaming environmental concerns into 
poverty reduction strategies to developing countries. This will 
be a critical test of the World Bank's credibility going 
forward if it is to be a good environmental steward.
    Finally, the World Bank has the ability to use the Clean 
Technology Fund as a way to leverage its own much larger 
transportation and infrastructure lending portfolios. To be a 
credible part of any future international financial 
architecture for climate change, the World Bank will need to 
clean its own portfolio and demonstrate that it facilitates 
policy change in its client countries. The Clean Technology 
Fund should enable it to do this. The key point for the World 
Bank is that the percentage of low carbon technology in its 
portfolio has grown from 28 percent to 40 percent over the last 
few years at a time when the World Bank lending for energy 
sector has increased from roughly $4 billion to $8 billion.
    The good news is that the percentage of lending for clean 
technology is increasing, but the total amount of money for 
dirty technology is also increasing. And the World Bank will 
need to correct that if it is going to be a credible partner in 
a future international climate change financial architecture in 
2012 and beyond. Thank you, Mr. Chairman.
    [The prepared statement of Dr. Deutz can be found on page 
40 of the appendix.]
    Chairman Gutierrez. This is the first panel I have had 
where the minority witnesses and the majority witnesses don't 
have a great degree--I mean, there are differences, but I can 
see you are all headed in the same direction. That is unusual 
in my 16 years here in Congress. We have about 9 minutes, and 
then we are going to be voting for nearly an hour. So taking 
that into consideration, I would ask the members to take into 
consideration that the witnesses would have to wait for us for 
an hour. I will be back here in an hour, but I am going to try 
to see if we can't wrap this up. I am just going make two 
quick--Mr. Blackwelder, we hope to take your testimony and the 
testimony of your panelists as seriously as it was taken 25 
years ago, and hopefully be as good today as you suggest we 
were 25 years ago.
    We understand our responsibility, so I thank you for that 
comment. And secondly, to Mr. Wheeler, we are going to work on 
the second outcome that you suggested for this money. We are 
going to take into consideration all of the witnesses, because 
I think everybody, as I listened to all four of you, it is the 
second outcome that you all agree we should work on, and 
obviously, there is going to be some differences. With that, I 
would like to hand it over to my ranking member, Dr. Paul.
    Dr. Paul. Thank you Mr. Chairman. I only have a brief 
comment, and maybe one question. I was pleased to hear Mr. 
Blackwelder mention his reservations about the World Bank being 
the best vehicle for doing this, and I certainly agree with 
that. I also want to raise the question about the potential use 
of these funds for development of better technologies. Once 
again, I am always concerned about economic decisions being 
made and directed. It is sort of like politicians deciding, 
well, the very best way to have ethanol is to subsidize farmers 
and prohibit people from raising hemp, and hemp is so much 
better. We make these foolish things and we get off track. And 
in another area, I think we have done the same thing, and that 
has to do with nuclear power.
    We put up big road blocks to nuclear power. Everything I 
read, the evidence is pretty clear; it is clean, it is safe, it 
is efficient, but we don't even talk about it. It seems to me 
even in this country, which would apply to every country, if we 
had nuclear power and cheap electricity, maybe we would have a 
lot of electric cars running around the country today. Why is 
it that we hear no mention of nuclear power when the evidence 
is so overwhelmingly in favor of this being a very efficient 
and clean and cheap fuel? Does anybody care to make a comment?
    Mr. Blackwelder. I would be glad to speak to that because 
Friends of the Earth has been working on that issue now for 
almost 40 years. The problem is even if you had no radioactive 
waste disposal issues, even if there was no proliferation of 
bomb making material, even if terrorists weren't targeting 
nuclear power plants, which they have on their menu, and you 
said with none of those problems, nuclear power plants can't be 
built fast enough to do the job. If you had $20 billion to 
spend, you could go 4 to 10 times further in terms of 
greenhouse reductions by putting it into cost-effective on-the-
shelf technology available today. So why financially, 
economically would you want to go the nuclear route?
    Dr. Paul. Well, because after so much time, you can look 
back and say, why didn't we open up the door to allow it to 
develop? But we haven't done anything in 20 years. So if we do 
nothing but encourage the world and ourselves to stay away from 
it, 20 or 30 or 40 years, you will just say, well, it takes too 
long, we have to keep doing these things, then you get the 
pressure from the coal people. And they will say, we will clean 
up the technology, we will clean up the coal, we can be totally 
energy independent.
    Their arguments are powerful, and you have to come back and 
say, well, it really isn't all that clean. I am just saying 
that overall when we talk about energy, I think we are just 
harming ourselves. Even though these potential dangers exist, 
they all exist for mining coal. And oil and everything else has 
potential danger. But just think of the record. Think, we have 
had 50 years of nuclear submarines, men sleeping beside a 
nuclear reactor, and still no cancer in the people who have 
been on nuclear submarines. To me, it is rather miraculous, and 
all we seem to do is get in the way of it. So I am just 
throwing that out as a suggestion. I understand the time 
involved, it is true. But some day we have to plan for the 
future rather than planning for the next year or two. And I 
have no further follow-up.
    Chairman Gutierrez. Thank you, Dr. Paul. We have about 4 
minutes before the vote is over.
    The Chairman. I just want to say to the panel that I 
appreciate it. As you may have gotten from my questions, I read 
some of your testimony. My sense is that the Administration 
cares strongly about--something that is likely to happen. I 
think we will be glad to work with you on the conditions, 
including maybe a 1-year timetable. Beyond that, I don't want 
to get into the substance on the question of men's sleeping 
habits; that is one that I have tried to stay away from in 
public, so I won't comment further.
    Chairman Gutierrez. Thank you Mr. Chairman. Congresswoman 
Moore, do you want to make a comment before we close off?
    Ms. Moore of Wisconsin. Thank you. I appreciate all of your 
testimony. I was particularly taken by how thoughtful you all 
were. I think it was Dr. Deutz who talked about this being a 
three-part kind of process considering all the different 
economic statuses of all the countries, and saying that we 
would have to give a lot more foreign aid to more developing 
countries in order to keep pace with this technology. Thank 
you. And I will be thoroughly reviewing your testimony.
    Chairman Gutierrez. Let me thank the witnesses and the 
members for their participation in this hearing. The Chair 
notes that some members may have additional questions for the 
witnesses which they may wish to submit in writing. Therefore, 
without objection, the hearing record will remain open for 30 
days for members to submit written questions to the witnesses 
and to place their responses in the record. The subcommittee is 
now adjourned.
    Mr. Blackwelder. Mr. Chairman, may I submit a 2-page 
statement signed by over 100 international organizations, a 
global civil society statement for the record?
    Chairman Gutierrez. Without objection, it is so ordered.
    Mr. Blackwelder. I would also like to furnish the committee 
with two copies of ``Carbon-Free Nuclear-Free by 2050'' to show 
that it can be done.
    Chairman Gutierrez. Thank you so much, gentlemen, for your 
testimony.
    [Whereupon, at 2:45 p.m., the hearing was adjourned.]







































                            A P P E N D I X



                              June 5, 2008

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