[Senate Hearing 110-523]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-523
 
  INTERNATIONAL CLIMATE CHANGE NEGOTIATIONS: RESTORING U.S. LEADERSHIP

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

                                HEARING



                               BEFORE THE



                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE



                       ONE HUNDRED TENTH CONGRESS



                             FIRST SESSION



                               __________

                           NOVEMBER 13, 2007

                               __________



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                     COMMITTEE ON FOREIGN RELATIONS

                JOSEPH R. BIDEN, Jr., Delaware, Chairman
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
JOHN F. KERRY, Massachusetts         CHUCK HAGEL, Nebraska
RUSSELL D. FEINGOLD, Wisconsin       NORM COLEMAN, Minnesota
BARBARA BOXER, California            BOB CORKER, Tennessee
BILL NELSON, Florida                 JOHN E. SUNUNU, New Hampshire
BARACK OBAMA, Illinois               GEORGE V. VOINOVICH, Ohio
ROBERT MENENDEZ, New Jersey          LISA MURKOWSKI, Alaska
BENJAMIN L. CARDIN, Maryland         JIM DeMINT, South Carolina
ROBERT P. CASEY, Jr., Pennsylvania   JOHNNY ISAKSON, Georgia
JIM WEBB, Virginia                   DAVID VITTER, Louisiana
                   Antony J. Blinken, Staff Director
            Kenneth A. Myers, Jr., Republican Staff Director

                                  (ii)

  


                            C O N T E N T S

                              ----------                              
                                                                   Page

Dobriansky, Hon. Paula J., Under Secretary for Democracy and 
  Global Affairs; accompanied by Dan Reifsnyder, Deputy Assistant 
  Secretary, Bureau of Oceans Environment Science, Department of 
  State, Washington, DC..........................................     5
    Prepared statement...........................................     7
Kerry, Hon. John F., U.S. Senator from Massachusetts, opening 
  statement......................................................     1
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening 
  statement......................................................     3
Pershing, Dr. Jonathan, director, Climate, Energy, and Pollution 
  Program, World Resources Institute, Washington, DC.............    59
    Prepared statement...........................................    61
Sandor, Dr. Richard, chairman and CEO, Chicago Climate Exchange, 
  Chicago, IL....................................................    54
    Prepared statement...........................................    56
Wirth, Hon. Timothy, President, United Nations Foundation, 
  Washington, DC.................................................    49
    Prepared statement...........................................    51

             Additional Statement Submitted for the Record

Claussen, Hon. Eileen, president, Pew Center on Global Climate 
  Change, Washington, DC.........................................    88

                                 (iii)

  


  INTERNATIONAL CLIMATE CHANGE NEGOTIATIONS: RESTORING U.S. LEADERSHIP

                              ----------                              


                       TUESDAY, NOVEMBER 13, 2007

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:34 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. John F. 
Kerry, presiding.
    Present: Senators Kerry, Bill Nelson, Menendez, Casey, 
Lugar, Hagel, Corker, and Murkowski.

  OPENING STATEMENT OF HON. JOHN F. KERRY, U.S. SENATOR FROM 
                         MASSACHUSETTS

    Senator Kerry. This hearing will come to order.
    I appreciate, enormously, all of the witnesses for our two 
panels being here.
    This is a topic which some of us have been working on for 
many years--former Senator Wirth is here, and he will testify. 
He and I and Al Gore and John Heinz and John Chafee and a group 
of people were deeply involved in this issue back in the 1980s. 
In fact, I think Senator Gore and I had the privilege of 
hosting the first hearings on global climate change in the 
Commerce Committee back then. And, since then, we, all of us, 
traveled to Rio for the so-called Earth Summit and the original 
United Nations Framework Convention on Climate Change. And, 
subsequently, I attended a number of the COP Conferences--
specifically, Buenos Aires and The Hague--and went to Kyoto for 
those negotiations, which Senator Wirth played such an integral 
role in with Stu Eizenstat, the Vice President, and others.
    So, this is a path well journeyed, so to speak. And what 
strikes me is as remarkable, in a sense, is that, back in 1992 
in Rio, a hundred-and-whatever-it-was, 50-something, 60-
something, nations came together and agreed then that we had to 
do something about it, but agreed that it would be voluntary at 
that time. And, indeed, there was much to learn about the 
science, and much to learn about the modeling.
    Since then, we have learned a great deal. This topic has 
earned its way into the G-8 discussions, it's earned its way 
into the highest level of U.N. discussions. President Bush held 
a major economies meeting only months ago here. It has seen Al 
Gore become the recipient of the Nobel Peace Prize. It has seen 
an enormous awareness grow, on a global basis. Nation after 
nation after nation, President after President, Prime Minister 
after Prime Minister, Finance Minister, Environment Minister, 
Trade Minister, Economic Ministers--are all in the same place, 
having made a decision that they buy into the latest conclusion 
of the IPCC, of the United Nations, that anthropogenic--
manmade--causes are the primary--not the exclusive, but the 
primary cause of the climate impacts that we see, the warming 
that we see taking place. And there is no question, 
scientifically, whatsoever, that that warming is taking place.
    I have spent a lot of time talking to and meeting with 
scientists, from Jim Hansen, who is one of our premier 
scientists on this topic, to Bob Corell, to John Holdren, and 
others, and to listen to these people whose lives are dedicated 
to science, who are, by nature, as scientists, conservative, 
because a scientist is conservative, in that they don't draw 
conclusions that are speculative, they draw them based on 
scientific experiment and input, and they are all increasingly 
alarmed.
    The latest report of the United Nations cuts off at 2005. 
Since 2005, there has been a significant increase of scientific 
reporting, almost 2 years of it. And, indeed, in Valencia this 
week, they will be meeting to, sort of, put forward the final 
summary, if you will, of those reports that will help us all 
digest where we're heading as we go to the Bali Conference.
    I would just quickly comment that each and every one of 
those reports shows a greater level of alarm by scientists, 
alarm that is expressed not in their conclusions, but in what 
Mother Earth is demonstrating to us in what is called 
``feedback.'' All of the feedback from Earth itself is 
occurring at a greater rate and at a higher degree than those 
scientists had predicted. And, therefore, they are alarmed. Ice 
is melting faster. The Greenland ice sheet, that was stable in 
1990, is now seeing about 100 billion metric tons of melt-off a 
year. There are astonishing changes in migration patterns. The 
head of the Audubon recently reported to me that their--
gardeners--gardeners from, you know, Nebraska and from Kentucky 
and from Tennessee and elsewhere--are reporting to them a 
migration of growth patterns--you know, the crops that grow, 
the trees, the bushes, the flowers, all those changes that are 
taking place--a 100-mile swath of migration pattern now 
evidenced in the United States. Changes in species migration 
are significant--in South Carolina, there would be no duck 
hunting today if they didn't have farm ducks. This is one of 
the great duck-hunting States of our country. Arkansas, 
population of ducks apparently dropped from 1.23 million down 
to about 125,000 or so. You can run the list.
    Perhaps the most alarming are two reports. One about the 
increased impact of tropical deforestation, which adds about a 
quarter of the world's CO2. A second report by 
Russian scientists that says that, in Siberia--and we know this 
in Alaska--the pockets of methane that have been frozen for 
several hundred thousand years, that are now melting, are 
releasing, and have the potential of releasing, unbelievable 
amounts of methane into the atmosphere. Methane, as we know, is 
20 to 30 times more potent than CO2.
    And, finally, the CO2 oceans have been storing 
CO2 for as long as they have been there, but most 
recently in the industrial revolution--they've provided a sink, 
a storage place, for almost a quarter of the Earth's 
CO2. And now we see reports from scientists that--
and I was chairman of the Ocean Subcommittee for a number of 
years; we used to hear these reports 15 years ago--that there's 
evidence that that is already happening in the Antarctic and a 
few other places--that the oceans are at full capacity.
    So, we're witnessing dramatic, stunning, unbelievable 
changes in the atmosphere around us. And, globally, we're going 
to have a unique opportunity--in a few weeks, at Bali--for the 
United States to regain a position of global leadership, for 
the world to come together and do what we were unable to do 
with Kyoto.
    Kyoto, many of us knew, was a flawed agreement at the time 
that it was drafted. I managed the vote on the floor of the 
Senate. I was the manager when that 95-to-0 vote took place, 
which has always been misinterpreted. It was never a rejection 
of action to address global climate change, as some wanted to 
interpret, never a rejection of the concept of a multilateral 
treaty; it was a rejection of the notion that there can be an 
adequate solution that isn't global, that it could include just 
industrial countries--given the rapid rate at which the less-
developed world is coming online and the Annex B countries, 
particularly, are coming on line. We all have to be part of the 
solution, but, as Kyoto recognized and the framework 
recognized, at different levels, conceivably in different ways. 
That's the test. That's what we're here to think about.
    This treaty expires in 2012. Most European nations--Europe 
as a whole--is going to be at the 8-percent-below level. 
Different countries contribute to that in different ways. But 
we've remained outside it. We didn't ratify it. It isn't a 
treaty for us. So, the question is, here today, to talk openly 
about where we go at Bali: What will the position of the United 
States be? And I will be privileged, together with Senator 
Boxer on this committee, and who is chair of the Environment 
and Public Works Committee, to lead a delegation that will go 
to Bali in order to help contribute the Senate's thinking on 
these issues. And my hope is that today we can get an outline 
from both the administration itself, as well as people who have 
been deeply, deeply involved in this issue for a long period of 
time, about what we ought to be looking for, what we could hope 
to achieve there, and how we can advance this cause.
    Senator Lugar.

 OPENING STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR FROM 
                            INDIANA

    Senator Lugar. Well, thank you very much, Mr. Chairman.
    I join you in welcoming Secretary Dobriansky and our 
distinguished witnesses on the second panel.
    For too long, the climate-change debate has pitted 
implacable skeptics against so-called ``green idealists,'' and 
yet, safeguarding the environment should not be viewed as a 
zero-sum game, where limited resources and attention compete 
with programs devoted to more immediate goals. To the contrary, 
progress on preventing climate change is interlinked with 
energy security, air quality, technology advancements, rural 
development, and export opportunities for American business.
    I have urged the Bush administration and my colleagues in 
Congress to return to an international leadership role on the 
issue of climate change. Along with Senator Biden, I have 
cosponsored Senate Resolution 30, a resolution that advocates 
United States participation in multilateral forums that attempt 
to achieve global solutions to the problem of greenhouse gases.
    It's critical that the international dialogue on climate 
change and American participation in those discussions move 
beyond the disputes over the Kyoto protocols. Even those who 
are skeptical of prevailing climate-change science should 
recognize that absenting themselves from climate-change 
discussions is counterproductive. Many nations and businesses 
across the globe are moving to respond to climate change in 
innovative ways. How the United States participates in these 
efforts will profoundly affect our diplomatic standing, our 
economic potential, and our national security.
    I want to stress the importance of the Senate's unique 
constitutional authority to give its advice and consent to any 
treaties negotiated by the executive branch. During the 1980s, 
President Reagan had the foresight to establish an official 
Senate Observer Team to monitor arms-control talks and provide 
advice during the negotiation process. In doing so, he laid the 
groundwork for strong bipartisan cooperation on these 
agreements when they came to the Senate. A similarly farsighted 
approach is needed with regard to international negotiations on 
climate change.
    The United States should recognize that steps to address 
climate change involve economic opportunities, not just 
constraints. Thanks to new technology, we can control many 
greenhouses gases with proactive, progrowth solutions. Such 
technology represents an enormous opportunity for U.S. exports.
    We also need to anticipate the continued growth of 
financial markets for carbon credits. There is a strong 
possibility that the United States will join these 
international markets in some manner before any new climate--
change agreements are concluded. We need to start discussions 
on how to ensure that these markets are transparent and 
credible.
    In that regard, I look forward to hearing from our second 
panel of distinguished witnesses, including Richard Sandor, 
chairman and CEO of the Chicago Climate Exchange. I must admit 
that I've listed the walnut trees on my Indiana farm on the 
Chicago Climate Exchange. I've tried to highlight for American 
farmers and foresters the opportunities of participating in the 
markets for carbon sequestration. The innovative approach of 
these markets is an important tool in our broader climate-
change policy.
    I thank Senator Kerry very much for chairing this hearing, 
and I look forward to the testimony of our witnesses.
    Senator Kerry. Senator Lugar, thank you very much for your 
thoughtful and important contribution to this dialogue.
    And I want to just thank Senator Menendez quickly. This 
topic normally is under the jurisdiction of his subcommittee, 
but he agreed that this was of sufficient importance to have 
the full committee hear it, and I want to thank him for his 
graciousness in understanding that and agreeing to do it this 
way.
    Secretary Dobriansky, we welcome you here. Secretary 
Dobriansky, as everybody knows, is Secretary for Democracy and 
Global Affairs, and we look forward to her participation. And 
Dan Reifsnyder is with her, has briefed some of us up here--
myself, I know--and been involved in these discussions and 
negotiations for a long time. We welcome you. Thank you.

  STATEMENT OF HON. PAULA J. DOBRIANSKY, UNDER SECRETARY FOR 
 DEMOCRACY AND GLOBAL AFFAIRS; ACCOMPANIED BY DAN REIFSNYDER, 
   DEPUTY ASSISTANT SECRETARY, BUREAU OF OCEANS ENVIRONMENT 
          SCIENCE, DEPARTMENT OF STATE, WASHINGTON, DC

    Ms. Dobriansky. Mr. Chairman, thank you. I've submitted a 
longer testimony for the record.
    Climate change is a serious problem, and humans are 
contributing to it. We are at a critical moment. Addressing 
global challenge requires substantial global reductions in 
greenhouse gas emissions, and we are committed to doing our 
part.
    At this December's climate conference in Bali, we will work 
with our partners to launch a new phase in climate diplomacy. 
We seek a Bali roadmap that will advance negotiations under the 
U.N. Framework Convention on Climate Change and develop a post-
2012 framework that effectively addresses climate change and 
strengthens our energy security. The United States is committed 
to concluding this effort by 2009.
    I recently attended a meeting of key heads of delegation in 
Bogor, Indonesia, to prepare the way for a successful meeting 
in Bali. I was very encouraged to hear broad support for a Bali 
roadmap and for a 2009 end date.
    At the Bogor meeting, ministers identified four key 
elements that a Bali roadmap will need to address: Mitigation, 
adaptation to the impacts of climate change, finance, and 
technology. We enter the Bali meeting with an open mind, 
prepared to consider ideas proposed by our negotiating partners 
in pursuit of a post-2012 framework that successfully rises to 
the scale and the scope of this challenge. Our deliberations 
will be guided by two considerations. A post-2012 framework 
must be environmentally effective and economically sustainable.
    Emissions are global, and the solution, to be effective, 
will need to be global. We want the world's largest emitters, 
including the United States, to be part of a global agreement. 
An approach in which only some are acting is not 
environmentally effective.
    A future framework must be flexible and accommodate a 
diverse range of national circumstances. A future framework 
must also be cost effective and economically sustainable. We 
must develop and bring to market clean energy technologies at a 
cost that countries can justify to their citizens.
    The Major Economies process launched by President Bush in 
May 2007 is intended to contribute to progress toward a global 
agreement under the U.N. Framework Convention on Climate 
Change. Our aim is to find a formula that can work for all 
major economies and achieve consensus next year on key elements 
for a post-2012 framework.
    The September 27-28 Major Economies Meeting here in 
Washington marked an excellent start. We brought together 17 
economies, representing some 80 percent of the world's economy, 
energy use, and greenhouse gas emissions. U.N. representatives 
were also at the table with us. The major economies agreed that 
we would convene again in the new year informed by our 
deliberations in Bali.
    We believe the Major Economies process will make a positive 
contribution to efforts under the U.N. Framework Convention by 
focusing on certain key elements of a future global framework. 
We can work together to develop a long-term global goal for 
emissions reductions. We can identify national plans that will 
put us on the path toward this global goal, with each country 
designing its own mix of binding, market-based, and voluntary 
measures. We can identify technology development and deployment 
strategies for key sectors, such as advanced coal technologies 
and second-generation biofuels, working with the private 
sector, civil society, and international partners. We can 
explore ways to improve our measurement and accounting systems. 
We can discuss options for financing and eliminating barriers 
to trade in key energy goods and services. And we could address 
forestry, adaptation, and technology access.
    Let me just highlight these last three issues--forestry, 
adaptation, and technology access--because they will be 
critical to our discussions in the U.N. Framework Convention on 
Climate Change and the major economies.
    Avoiding deforestation is a priority for Indonesia and many 
other developing countries, and it will be a focus of 
discussions in Bali. The United States is an international 
leader in promoting forest conservation. For example, under the 
Tropical Forest Conservation Act, we have concluded, with 12 
countries, Debt for Nature Agreements that are generating some 
$163 million to help conserve up to 20 million hectares of 
important tropical forests around the world. We are combating 
illegal logging and the export of illegally harvested forest 
products in Africa, Asia, and Latin America through the 
President's Initiative Against Illegal Logging. And through the 
Congo Basin Forest Partnership, we have contributed some $68 
million to better manage 80 million hectares, an area the size 
of Texas, in the world's second-largest tropical forest.
    Adaptation is an increasing priority, both at home and 
internationally, and we are promoting effective planning as 
part of broader development strategies. The United States is 
leading such efforts with Global Earth Observation System of 
Systems, which gives communities early warning of natural 
disasters and improves decisionmaking for agriculture, coastal 
development, and other economic sectors that are affected by 
climate variability and change.
    And to accelerate the uptake of clean energy technologies 
around the world, President Bush has proposed a new 
International Clean Technology Fund. Secretary Paulson is 
working with international partners in developing a new 
approach for spurring investments in the global energy 
infrastructure that reduce greenhouse gas emissions.
    Another administration initiative that is engaging key 
economies in dealing with climate change is the Asia Pacific 
Partnership on Clean Development and Climate. This is a public-
private partnership to promote economic growth, enhance energy 
security, and mitigate greenhouse gas emissions. Under this 
partnership, countries that account for some 50 percent of the 
global economy, emissions, and energy use are putting clean 
technologies into widespread use. Canada just joined China, 
India, South Korea, Japan, Australia, and the United States in 
this partnership. Through the APP, American Electric Power, 
Southern Company, and other leading U.S. firms have been 
working, for example, with Chinese electricity producers, to 
move them toward U.S. levels of efficiency, which reduces 
emissions and toxic air pollution and fosters new trade 
relationships. The APP has brought to India state-of-the-art 
U.S. technologies for mining and preparing coal in ways that 
reduce sulfur dioxide emissions, cut greenhouse gas emissions, 
and increase mine safety. And throughout APP countries, we are 
fostering best practices in the cement, aluminum, and steel 
sectors that save money, reduce emissions, and increase 
international investment. Advanced coal technologies are a 
particular focus within and beyond the APP. The United States 
has invested more than $2.5 billion to research and develop 
clean coal, since 2001.
    In conclusion, the scale of climate change calls for 
comprehensive international action for generations to come. We 
are engaged, serious, pragmatic, and committed to continued 
leadership, internationally.
    Finally, I'd like to introduce Dan Reifsnyder, who is a 
Deputy Assistant Secretary in the Bureau of Oceans Environment 
Science at the State Department. He was deputy negotiator of 
the U.N. Framework Convention on Climate Change in 1989, and 
has participated in almost every Conference of the Parties. He 
will be with us in Bali.
    Thank you, Mr. Chairman, and I look forward to your 
questions.
    [The prepared statement of Ms. Dobriansky follows:]

    Prepared Statement of Dr. Paula Dobriansky, Under Secretary for 
 Democracy and Global Affairs, U.S. Department of State, Washington, DC

    Mr. Chairman and members of the committee, thank you for the 
opportunity to appear before you today.
    When President Bush hosted the Major Economies Meeting on Energy 
Security and Climate Change in September 2007, he stressed that climate 
change is a real problem, and humans are contributing to it. He also 
underscored that the United States takes climate change very seriously, 
for we are both a major economy and a major emitter.
    Addressing this global challenge requires substantial global 
reductions in greenhouse gas emissions. Meeting this long-term 
challenge requires a long-term commitment by the international 
community. And we are committed to doing our part.
    As a party to the United Nations Framework Convention on Climate 
Change (UNFCCC), the United States shares with the other 190 Parties to 
the Convention its ultimate objective of stabilizing greenhouse gas 
concentrations in the atmosphere at a level that would prevent 
dangerous anthropogenic interference with the climate system in a 
timeframe that allows ecosystems to adapt, ensures that food production 
is not threatened, and enables economic development to proceed.
    We look forward to the U.N. Climate Conference in Bali, Indonesia, 
in December, where we will work to advance negotiations. The Bali 
conference will mark the beginning of an important process toward a new 
global framework. In developing a new post-2012 framework on climate 
change, we seek a global approach that is environmentally effective and 
economically sustainable. This framework should involve a real effort 
and commitment of major economies in accordance with their national 
circumstances.
    There is broad international consensus that climate change is best 
addressed as part of an integrated agenda that promotes economic 
growth, advances energy security, reduces pollution, and eradicates 
poverty--as well as mitigates greenhouse gas emissions.
    The President has put forth a comprehensive climate-change policy. 
Our robust, flexible approach involves the promotion of international 
cooperation, near-term policies and measures to slow the growth in 
greenhouse gas emissions, the advancement of climate change science, 
and vigorous efforts to accelerate low-carbon and no-carbon technology 
development and deployment. As Secretary Rice has said, we will need a 
technological revolution.
    The President has requested, and Congress has provided, substantial 
funding for climate-change science and observations, technology, 
international assistance, and incentive programs--approximately $37 
billion since 2001. The President's fiscal year 2008 budget requests 
nearly $7.4 billion for climate-related activities.
    President Bush has consistently highlighted the importance of 
international cooperation in developing a global response to the 
complex and long-term challenge of climate change. On May 31, he called 
upon the world's major economies, from both the developed and 
developing world, to work together toward a global goal on long-term 
greenhouse gas reductions. This initiative recognizes that the major 
emerging economies must join together in a common effort, and that 
economic growth, energy security, and climate change must be addressed 
in an integrated and sustainable way.
    The first Major Economies Meeting (MEM) on September 27-28, 2007, 
in Washington, DC, was attended by the personal representatives of 
leaders from 17 major economies and the United Nations. In his speech 
during the MEM, President Bush emphasized, among other things, that 
these countries would work within the U.N. process to strengthen 
programs addressing energy efficiency and to advance the global 
transfer and adoption of clean energy technologies.
    Progress toward a global emissions reduction goal will be 
underpinned by midterm national targets and programs. In addition, 
participants will work on sectoral approaches to low carbon power 
generation, transportation, and land use and steps to disseminate 
technologies by creating an international clean energy fund and 
removing trade barriers. The President also proposed strengthening 
climate-related efforts that benefit all countries, including promoting 
adaptation to climate change, reversing deforestation, and promoting 
clean energy technology.
    By the end of 2008, the Major Economies process will generate a 
detailed contribution to a post-2012 framework. Our aim is for the 
Major Economies process to advance negotiations toward a global 
agreement under the UNFCCC by 2009. Leaders from all G-8 and APEC 
countries have embraced the Major Economies process as a constructive 
input to the global effort.
    Under President Bush's leadership, the United States is 
successfully carrying out a number of international collaborations--
including the Asia-Pacific Partnership on Clean Development and Climate 
(APP), the Carbon Sequestration Leadership Forum (CSLF), the Group on 
Earth Observations (GEO), the Generation IV International Forum (GIF), 
the Global Nuclear Energy Partnership (GNEP), the International 
Partnership for a Hydrogen Economy (IPHE), the Methane to Markets 
Partnership (M2M)--and our 15 bilateral and regional partnerships which 
involve 79 nations and the European Union.
    Our results at home compare well with those of other industrialized 
nations. For the years 2001-2005, inclusive, the U.S. population grew 
by 5 percent and our GDP grew by 12 percent, while greenhouse gas 
emissions increased by 1.6 percent. Latest estimates show that from 
2005-2006, our economy grew 2.9 percent, while energy-related carbon 
dioxide emissions decreased 1.3 percent.
    The Annex to this statement details selected U.S. programs 
addressing climate change.
    As President Bush indicated at the Major Economies Meeting, climate 
change is one of the great challenges of our time. In taking on this 
challenge, the United States is engaged, serious, and pragmatic. 
Leading international efforts to address climate change will continue 
to be one of our top priorities.
                                 ______
                                 

                                 Annex

selected international and domestic components of the u.s. approach to 
                         global climate change
A. Promoting international cooperation
    Asia-Pacific Partnership on Clean Development and Climate (APP) 
\1\: The Asia-Pacific Partnership for Clean Development and Climate 
(APP), launched in January 2006 in Sydney, Australia, by ministers from 
Australia, China, India, Japan, Republic of Korea, and the United 
States, is one of our most consequential multilateral initiatives. It 
is a multi-stakeholder partnership working to generate practical and 
innovative projects promoting clean development and the mitigation of 
greenhouse gases. Through engaging private industry as well as 
government officials, the APP is using public-private partnerships to 
build local capacity, improve efficiency and reduce greenhouse gas 
emissions, create new investment opportunities, and remove barriers to 
the introduction of clean energy technologies in the Asia-Pacific 
region. What makes the approach unique is that APP activities are 
identified and supported using an innovative ``bottom up'' approach. 
Together, APP partner countries account for about half of the world's 
population, economic output, energy use, and greenhouse gas emissions.
---------------------------------------------------------------------------
    \1\ See http://www.asiapacificpartnership.org/ and http://
www.state.gov/g/oes/climate/app/.
---------------------------------------------------------------------------
    The APP has created eight task forces to achieve the Partnership's 
goals: (1) Cleaner fossil energy; (2) renewable energy and distributed 
generation; (3) power generation and transmission; (4) steel; (5) 
aluminum; (6) cement; (7) coal mining; and (8) buildings and 
appliances. The Task Forces, with representatives from both the public 
and private sectors, have each prepared an Action Plan.
    At the New Delhi ministerial meeting on October 15, 2007, the 
original six APP Partners warmly welcomed Canada as the seventh member 
of the Partnership. Ministers also released a communique \2\ which 
summarizes the accomplishments of the Partnership since its inaugural 
Ministerial meeting in Sydney. Ministers also recognized the eight Task 
Force Action Plans and their accompanying 110 projects. Agreement was 
reached on a Flagship portfolio of 18 projects and activities that best 
exemplify the achievements of the Partnership.\3\ In addition, the 
Partners endorsed the Asia-Pacific Energy Technology Cooperation 
Centre. The meeting concluded with an event with industry in which 
representatives from the private sector discussed opportunities for 
collaboration with Ministers and high level representatives present.
---------------------------------------------------------------------------
    \2\ See http://www.asiapacificpartnership.org/2ndMinisterial/
New%20Delhi%20Communique%20
strawman%20%2014%20Oct%2007FINAL.pdf.
    \3\ See http://www.asiapacificpartnership.org/2ndMinisterial/
Flagship%20brochure%20FINAL.
pdf.
---------------------------------------------------------------------------
    The President's fiscal year 2008 budget request includes $52 
million to support APP.
    Major Economies Meeting: On May 31, 2007, the President called upon 
the world's major economies, both from the developed and developing 
world, to work together to develop a global goal on long-term 
greenhouse gas reductions.\4\ This international initiative recognizes 
that the major emerging economies must develop and participate in an 
effective global strategy, and that economic growth, energy security, 
and climate change must be addressed in an integrated way. The United 
States in September hosted the first of a series of meetings with other 
countries--including rapidly growing economies like India and China--to 
establish a new framework for the post-2012 world. Progress towards a 
global emissions reduction goal will be underpinned by midterm national 
targets and programs that are tailored towards each participant's 
current and future energy needs, and that will be subject to a robust 
review process. In addition, participants will work on sectoral 
approaches to energy intensive industries and concrete steps to promote 
the development and deployment of clean energy technologies. The 
President believes that by encouraging and sharing cutting-edge 
technologies, the major economies will build the capacity to meet 
realistic reduction goals.
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    \4\ See http://www.whitehouse.gov/news/releases/2007/05/20070531-
9.html.
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    As part of his international initiative, the President also 
proposed strengthening climate-related initiatives at the U.N. that 
benefit all countries, including adaptation to climate change, 
deforestation and technology. Finally, the President's initiative 
addresses practical action necessary to advance the global development 
and deployment of clean energy technologies. This could include low-
cost capital sources to finance investment in clean energy, mechanisms 
to share government-developed technology at low cost, or in some cases, 
no cost at all, and elimination of market barriers.
    Carbon Sequestration Leadership Forum (CSLF) \5\: CSLF is a U.S.-
launched initiative that was established formally at a ministerial 
meeting held in Washington, DC, in June 2001. The Forum is focused on 
the development of improved cost-effective technologies for the 
separation and capture of carbon dioxide (CO2) for its transport and 
long-term safe storage. Its purpose is to make these technologies 
broadly available internationally, to identify and address wider issues 
relating to carbon capture and storage. CSLF, which includes 21 
countries and the European Commission (EC), has endorsed 19 
international research projects, 13 of which involve the United States, 
and approved a technology roadmap to provide future directions for 
international cooperation.
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    \5\ See http://www.cslforum.org/ and http://www.fe.doe.gov/
programs/sequestration/cslf/. CSLF members are the United States, 
Australia, Brazil, Canada, China, Colombia, Denmark, European 
Commission (EC), France, Germany, Greece, India, Italy, Japan, Mexico, 
Netherlands, Norway, Republic of Korea, Russian Federation, Saudi 
Arabia, South Africa, and the United Kingdom.
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    Group on Earth Observations (GEO) \6\: Of particular importance is 
the need for a broad global observation system to support measurements 
of climate and other environmental variables. On July 31, 2003, the 
United States hosted 33 nations including many developing nations at 
the inaugural Earth Observation Summit, out of which came a commitment 
to establish GEO and an intergovernmental, comprehensive, coordinated, 
and sustained Global Earth Observation System of Systems (GEOSS). While 
the use and benefits of these observations are extensive, 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 CO2 and aerosols in the atmosphere, and to develop 
strategies for carbon sequestration. The United States was instrumental 
in drafting a ten-year implementation plan for a GEOSS, which was 
approved by nearly 60 nations and the EC at the 3rd Earth Observation 
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 to help coordinate a wide range of 
environmental monitoring platforms, resources, and networks.\7\ The 4th 
GEO Plenary session and Ministerial Summit will be held in Cape Town, 
South Africa, November 28-30, 2007.
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    \6\ GEO has 71 countries and the EC as Members, as well as 46 
Participating Organizations (see http://earthobservations.org).
    \7\ See http://usgeo.gov/docs/EOCStrategic_Plan.pdf.
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    Generation IV International Forum (GIF) \8\: GIF, formally 
established in July 2001, is a multilateral collaboration comprised of 
10 countries and EURATOM (the European Atomic Energy Community) to 
fulfill the objective of the Generation IV Nuclear Energy Systems 
Initiative. GIF's goal is to develop the fourth generation of advanced, 
economical, safe, and proliferation-resistant nuclear systems that can 
be adopted commercially no later than 2030. Six technologies have been 
selected as the most promising candidates for future designs, some of 
which could be commercially ready in the 2020 to 2030 timeframe. GIF 
countries are jointly preparing a collaborative research program to 
develop and demonstrate the projects.
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    \8\ See http://www.ne.doe.gov/genIV/neGenIV2.html. GIF member 
countries include the United States, Argentina, Brazil, Canada, France, 
Japan, Republic of Korea, South Africa, Switzerland, and the United 
Kingdom, with the OECD-Nuclear Energy Agency and the International 
Atomic Energy Agency as permanent observers. In July 2006, the GIF 
voted unanimously to extend offers of membership to China and Russia. 
These two countries officially signed the GIF Charter in November 2006 
at the Policy Group meeting in Paris and have one year to sign the 
Framework to become full members.
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    Global Nuclear Energy Partnership (GNEP) \9\: GNEP is a 
groundbreaking new effort that seeks to develop a worldwide consensus 
on enabling expanded use of economical, carbon-free nuclear energy to 
meet growing electricity demand. It has two major goals: (1) To expand 
carbon-free nuclear energy to meet growing electricity demand 
worldwide; and (2) to promote nonproliferation objectives through the 
leasing of nuclear fuel to countries which agree to forgo enrichment 
and reprocessing. A more fully closed fuel cycle model envisioned by 
this partnership requires development and deployment of technologies 
that enable recycling and consumption of long-lived radioactive waste. 
The GNEP initiative proposes international partnerships and significant 
cost-sharing to achieve these goals.
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    \9\ See http://www.gnep.energy.gov/.
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    On May 21, 2007, U.S. Department of Energy (DOE) and senior energy 
officials from China, France, Japan, and Russia issued a joint 
statement in support of GNEP.\10\ At the second GNEP Ministerial held 
September 16, 2007, in Vienna, Austria, U.S. DOE Secretary Bodman and 
senior international officials from 16 nations agreed to increase 
international nuclear energy cooperation through the GNEP.\11\ China, 
France, Japan, Russia, and the United States--the original GNEP 
partners--as well as Australia, Bulgaria, Ghana, Hungary, Jordan, 
Kazakhstan, Lithuania, Poland, Romania, Slovenia, and Ukraine signed a 
``Statement of Principles,'' which addresses the prospects of expanding 
the peaceful uses of nuclear energy, including enhanced safeguards, 
international fuel service frameworks, and advanced technologies.\12\
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    \10\ See http://www.energy.gov/media/GNEP_Joint_Statement.pdf.
    \11\ See http://www.gnep.energy.gov/gnepPRs/gnepPR091607a.html.
    \12\ http://www.gnep.energy.gov/pdfs/gnepSOP_091607.pdf.
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    International Partnership for the Hydrogen Economy (IPHE) \13\: 
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 to launch IPHE. The Partnership's 
16 countries and the EC are working together to advance research, 
development, and deployment of hydrogen and fuel-cell technologies, and 
develop common codes and standards for hydrogen use. The IPHE Steering 
Committee has officially recognized 23 collaborative projects to 
advance the Partnership's goals, and through the IPHE, the U.S. has 
assisted Brazil and China in developing hydrogen roadmaps.
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    \13\ See http://www.iphe.net/. IPHE Partner members are the United 
States, Australia, Brazil, Canada, China, EC, France, Germany, Iceland, 
India, Italy, Japan, New Zealand, Norway, Republic of Korea, Russian 
Federation, and the United Kingdom.
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    Methane to Markets Partnership \14\: In November 2004, the United 
States and representatives from 13 countries launched the Methane to 
Markets Partnership, which is led on the U.S. side by EPA, with active 
participation from the U.S. Department of Agriculture (USDA), U.S. 
Agency for International Development (USAID), U.S. Trade and 
Development Agency (TDA), and the State Department. This Partnership, 
now with 20 member countries and the EC and over 640 public and private 
sector organizations, 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. The Partnership is targeting four major methane 
sources: Landfills, underground coal mines, natural gas and oil 
systems, and agriculture (animal waste management).
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    \14\ See http://www.epa.gov/methanetomarkets/ and http://
www.methanetomarkets.org/. Methane to Markets member governments 
include the United States, Argentina, Australia, Brazil, Canada, China, 
Colombia, Ecuador, Germany, India, Italy, Japan, Mexico, Nigeria, 
Poland, Republic of Korea, Russian Federation, Ukraine, the United 
Kingdom, and Vietnam. The EC became the 21st Partner in September 2007.
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    The Methane to Markets Partnership Expo was held in Beijing, China, 
from October 30 to November 1, 2007, to celebrate the third anniversary 
of the Methane to Markets Partnership.\15\ Over 700 participants from 
34 countries--representing government, private sector, and 
nongovernmental organizations--shared expertise and developed 
strategies to advance cost-effective, near-term projects to reduce 
methane emissions. The Expo's ``International Methane Capture 
Marketplace'' was the first international forum devoted entirely to 
methane project opportunities and technologies, and showcased 91 
potential projects in multiple sectors.
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    \15\ http://yosemite.epa.gov/opa/admpress.nsf/
eebfaebc1afd883d85257355005afd19/9574895bfc
44bcc852573850047d278!OpenDocument.
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    The Partnership has the potential to deliver by 2015 annual 
reductions in methane emissions of up to 50 MMTCE or recovery of 500 
billion cubic feet of natural gas--equivalent to removing 33 million 
cars from the roadways for one year, planting 55 million acres of 
trees, or eliminating emissions from fifty 500 megawatt coal-fired 
power plants; or providing enough energy to heat approximately 7.2 
million households for one year. These measurable results, if achieved, 
could lead to stabilized or even declining levels of global atmospheric 
concentrations of methane.
    Bilateral and Regional Partnerships \16\: 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. These 
partnerships encompass over 400 individual activities, and successful 
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.
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    \16\ Bilateral 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.
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    Clean Energy Initiative \17\: At the 2002 World Summit on 
Sustainable Development (WSSD) held in Johannesburg, South Africa, the 
United States launched a ``Clean Energy Initiative,'' whose mission 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 modernizing energy services. 
The Initiative consists of four market-oriented, performance-based 
partnerships:
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    \17\ See http://www.sdp.gov/sdp/initiative/cei/28304.htm.

   Global Village Energy Partnership (GVEP) \18\ is an 
        international partnership with over 700 public and private 
        sector partners including the World Bank, the U.N. Development 
        Programme, and leading energy companies. The U.S. 
        implementation of GVEP, led by the USAID, is a 10-year 
        initiative that seeks to increase access to modern energy 
        services for those in developing countries in a manner that 
        enhances economic and social development and reduces poverty. 
        Through U.S. Government support for GVEP and other energy 
        access programs, 12.9 million people have received increased 
        access to modern energy services since the 2002 Johannesburg 
        Summit.
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    \18\ See http://www.sdp.gov/sdp/initiative/cei/44949.htm.
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   Partnership for Clean Indoor Air (PCIA) \19\: Poor air 
        quality caused by indoor and outdoor air pollution is related 
        to approximately 1.6 million deaths annually and more than 3 
        billion people in the developing world face an increased 
        environmental health risk due to breathing elevated levels of 
        indoor smoke from home cooking and heating practices. The PCIA 
        currently has over 140 public and private partners working 
        together to increase the use of affordable, reliable, clean, 
        efficient, and safe home cooking and heating practices to 
        reduce the burden of disease. The partners are contributing 
        their resources and expertise to improve health, livelihood and 
        quality of life by reducing exposure to indoor air pollution, 
        primarily among women and children, from household energy use. 
        Ten U.S.-funded PCIA pilot projects have already resulted in: 
        (1) More than 800,000 households educated about the health 
        impacts of indoor air pollution from household energy use; (2) 
        over 237,000 people with reduced exposure to indoor air 
        pollution from cooking and heating; and (3) in the 58,000 homes 
        in which improved cooking and heating have been adopted, over 
        440,000 people demonstrated an increased knowledge of indoor 
        air pollution and mitigation solutions.
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    \19\ See http://www.sdp.gov/sdp/initiative/cei/29808.htm and http:/
/www.pciaonline.org/.
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   Partnership for Clean Fuels and Vehicles (PCFV) \20\: The 
        PCFV is working with developing countries to reduce vehicular 
        air pollution by promoting the elimination of lead from 
        gasoline, reducing sulfur from fuels, and introducing clean 
        technologies into new and existing vehicle fleets. The U.S. 
        Environmental Protection Agency (EPA) is a founding member and 
        leading supporter of the PCFV, which has over 80 members from 
        governments, industry, and civil society, representing more 
        than 30 countries. Since the 2002 World Summit on Sustainable 
        Development, PCFV has assisted in the elimination of lead in 
        gasoline in the 49 countries of sub-Saharan Africa, providing 
        health benefits for over 733 million people. The Partnership's 
        future targets include the global elimination of lead in 
        gasoline by 2008, and the global reduction of sulfur in fuel to 
        50 parts per million or below globally.
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    \20\ See http://www.unep.org/pcfv/.
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   Efficient Energy for Sustainable Development (EESD) \21\: 
        The EESD initiative aims to improve the productivity and 
        efficiency of energy systems in developing countries, while 
        reducing waste and pollution, saving money and improving 
        reliability through energy-efficient and clean processes and 
        technologies and production modernization. With more than 80 
        organizations committed to furthering the objectives of the 
        EESD, this partnership has focused on project development, 
        public leadership by example, building local commercial 
        infrastructure for self-sustaining financing and developing 
        sustainable integrated energy community systems.
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    \21\ See http://www. sdp.gov/sdp/initiative/c17707.htm.

    ITER \22\: In January 2003, President Bush announced that the 
United States was joining the negotiations for the construction and 
operation of the international fusion experiment known as ITER.\23\ On 
November 21, 2006, the representatives of China, EU, the Republic of 
India, Japan, the Republic of Korea, the Russian Federation and the 
United States of America signed the ITER Joint Implementation 
Agreement, which entered into force on October 27, 2007. If successful, 
this multi-billion-dollar research project, which is to be sited in 
Cadarache, France, and completed in 2016, would advance progress toward 
producing clean, renewable, commercially available fusion energy by the 
middle of the century.
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    \22\ ITER member countries include the United States, China, 
European Union, Japan, Russian Federation, and the Republic of Korea. 
(See https://www.iter.org/ and https://www.usiter.org/index.shtml.
    \23\ See http://www.whitehouse.gov/news/releases/2003/01/20030130-
18.html.
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    Global Bioenergy Partnership (GBEP) \24\: The 2005 G-8 Summit at 
Gleneagles, Scotland, helped launch the GBEP, an Italian initiative to 
support wider, cost-effective biomass and biofuels deployment, 
particularly in developing countries where biomass use is prevalent. 
The United States is actively supporting GBEP and is leading work on 
developing common methodologies for measuring the GHG benefits of 
biofuels. GBEP partners include ten governments and nine international 
organizations and the United Nations Foundation.
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    \24\ See http://www.globalbioenergy.org/. GBEP partners are Canada, 
China, France, Germany, Italy, Japan, Mexico, Russian Federation, the 
United Kingdom, and the United States of America, the International 
Energy Agency, U.N. Food and Agriculture Organization (FAO), U.N. 
Conference on Trade and Development, U.N. Department of Economic and 
Social Affairs, U.N. Development Programme, U.N. Environment Programme, 
U.N. Industrial Development Organization, U.N. Foundation, World 
Council for Renewable Energy, and the European Biomass Industry 
Association. The FAO is hosting the GBEP Secretariat in Rome with the 
support of the Government of Italy.
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    International Biofuels Forum (IBF): The IBF is a joint project of 
Brazil, China, India, the United States and the EC, was launched on 
March 2, 2007, to develop strategies to promote the sustained use and 
production of biofuels around the globe. The forum has created a 
mechanism to structure the dialogue among some of the biggest producers 
and consumers of biofuels to address energy security and global warming 
issues and to use biofuels as an instrument for development. IBF is 
working closely with GBEP to create common standards and codes for 
bioenergy products, which would help facilitate world trade.
    Renewable Energy and Energy Efficiency Partnership (REEEP) \25\: 
REEEP seeks to accelerate and expand the global market for renewable 
energy and energy-efficiency technologies. To date, REEEP has funded 
over 100 projects in 44 countries that address market barriers to clean 
energy in the developing world and economies in transition. These 
projects provide new business models, policy recommendations, risk 
mitigation instruments, handbooks, and databases for advancing 
renewable energy and energy efficiency, in addition to delivering 
measurable greenhouse gas reductions. To further REEEP's agenda, the 
U.S. has been especially active in developing best practices for 
financing energy efficiency and renewable energy projects and an open 
network of affiliated organizations for distributed peer production of 
models and tools for energy smart community planning and development.
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    \25\ See http://www.reeep.org/.
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    Renewable Energy Policy Network for the 21st century (REN21) \26\: 
REN21 is a global policy network, which connects governments, 
international institutions and organizations, partnerships and 
initiatives, and other stakeholders on the political level with those 
``on the ground,'' and is aimed at providing a forum for international 
leadership on renewable energy. Its goal is to allow the rapid 
expansion of renewable energies in developing and industrial countries 
by bolstering policy development and decisionmaking on subnational, 
national, and international levels. To date, REN21 has produced several 
notable renewable energy analyses, the most noteworthy being its 
comprehensive ``REN21 Global Status Report.'' The United States serves 
as one of the 13 national government entities on REN21's Steering 
Committee.
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    \26\ See http://www.ren2l.net/.
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    Washington International Renewable Energy Conference 2008 (WIREC 
2008): On May 1, 2007, Secretary of State Condoleezza Rice announced 
that the State Department will host the WIREC 2008 in March 2008.\27\ 
WIREC 2008, which will held in Washington, DC, March 4-6, 2008, will be 
the third global ministerial level event on renewable energy and will 
be a key opportunity for government, industry and civil society leaders 
to advance the integration of renewable energy and advance shared goals 
for climate, sustainable development and energy security. The event 
builds upon outcomes from the 2002 World Summit on Sustainable 
Development and the Bonn (2004) and Beijing (2005) Renewable Energy 
Conferences. The timing for WIREC 2008 is optimal, because many 
countries have established leadership positions in renewable energy 
technology development, manufacturing and market adoption through 
innovative policies.
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    \27\ See http://www.state.gov/r/pa/prs/ps/2007/may/84115.htm.
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    WIREC 2008 will focus on rural development, finance, 
commercialization/market adoption, research and development, as well as 
other cross-cutting issues. It includes a ministerial level meeting for 
governments (federal and local), the private sector and civil society, 
and a co-located, but separately managed trade show and exhibition. 
WIREC 2008 will also provide an opportunity to advance renewable energy 
globally by bringing world leaders together to raise issues, exchange 
information, share experiences and best practices, and provide a global 
platform to highlight and promote strategies for significant 
development and rapid scaleup of renewable energy systems worldwide, 
including second generation biofuels.
    Other examples of our engagement across the globe in advancing 
climate change science and addressing greenhouse gas emissions include 
our participation in the Intergovernmental Panel on Climate Change 
(IPCC), the Global Environment Facility (GEF) and activities under the 
Tropical Forest Conservation Act.
    Intergovernmental Panel on Climate Change (IPCC) \28\: The IPCC was 
established by the World Meteorological Organization (WMO) and the 
United Nations Environment Programme (UNEP) in 1988 to assess 
scientific, technical and socio-economic information relevant for the 
understanding of climate change, its potential impacts and options for 
adaptation and mitigation. It is open to all members of the United 
Nations and of WMO.
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    \28\ See http://www.ipcc.ch/.
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    We are extremely pleased that the IPCC shares this year's Nobel 
Peace Prize. The United States has played an active role in the IPCC 
since its establishment and has provided more of its funding than any 
other nation. Dr. Susan Solomon, a senior scientist at the National 
Oceanic and Atmospheric Administration's Earth System Research 
Laboratory in Boulder, Colorado, serves as co-chair of the IPCC Working 
Group I, which assesses the scientific basis of climate change. The 
United States hosts the Working Group's Technical Support Unit and 
hundreds of U.S. scientists have participated in the preparation of the 
IPCC's Fourth Assessment Report, which is due to be completed next week 
in Valencia, Spain.
    Global Environment Facility (GEF) \29\: U.S. participation in the 
GEF, the financial mechanism under the UNFCCC, is another example of 
our engagement across the globe of addressing the threat of poverty and 
greenhouse gas emissions. Launched in 1991, the GEF provides funding 
(largely grants) for projects that provide global environmental 
benefits and support sustainable development. Since its inception, it 
has approved over $6.8 billion in grants, leveraging over $20 billion 
in pledged co-financing to support more than 1,600 projects in over 160 
countries, with about 33 percent of cumulative allocations supporting 
the reduction or avoidance of greenhouse gas emissions. For fiscal year 
2008, the administration is requesting $80.0 million for the second of 
four payments toward a total U.S. contribution of $320 million pledged 
during the fourth replenishment (GEF-4) and $26.8 million to clear a 
portion of outstanding U.S. arrears.
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    \29\ U.S. Department of Treasury, Treasury International Programs, 
Justification for Appropriations, FY 2008 Budget Request, pp. 43-44, 
and 65 (see http://www.treas.gov/offices/international-affairs/intl/
fy2008/fy2008-budget.pdf).
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    Tropical Forest Conservation Act (TFCA) \30\: Many of our 
international activities also help to promote the biological 
sequestration of CO2, an important tool for addressing climate change 
that can have benefits both for conservation and climate change. The 
TFCA authorizes debt relief for low- and middle-income countries with 
tropical forests to support conservation of endangered forests. Since 
2000, the United States has concluded 13 TFCA agreements with 12 
countries that will generate more than $163 million to protect tropical 
forests during the next 10 to 25 years. Under the TFCA debt swap 
mechanism, a unique public/private partnership has evolved in which 
environmental NGOs such as The Nature Conservancy, World Wildlife Fund, 
and Conservation International have provided additional funds totaling 
approximately $12.1 million for debt reduction, increasing the size of 
individual agreements, and contributing additional expertise in the 
management of resulting programs. Seven of the 12 TFCA agreements so 
far provide for debt swaps. In fiscal year 2008, the administration has 
requested a total of $20 million for TFCA.
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    \30\ U.S. Department of Treasury, Treasury International Programs, 
Justification for Appropriations, FY 2008 Budget Request, pp. 1, 23, 
27, and 68 (see http://www.treas.gov/offices/international-affairs/
intl/fy2008/fy2008-budget.pdf). TFCA agreements have been concluded 
with Bangladesh, Belize, Botswana, Colombia, Costa Rica, El Salvador, 
Jamaica, Panama (two agreements), Paraguay, Peru and the Philippines. 
On July 3, 2007, in response to the Indonesian Government's request, 
the United States Government announced that Indonesia is also eligible 
to participate.
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B. Near-Term Polices and Measures to Slow the Growth of Greenhouse Gas 
        Emissions
    In February 2002, President Bush set an ambitious national goal to 
reduce the greenhouse gas intensity--that is, emissions per unit of 
economic output--of the U.S. economy by 18 percent by 2012, a goal we 
are on target to meet. When announced, this commitment was estimated to 
achieve a reduction of 100 million additional metric tons carbon 
equivalent (MMTCE) emissions in 2012, with more than 500 MMTCE 
emissions in cumulative savings over the decade. To meet the 
President's goal, the administration is now implementing numerous 
programs--including voluntary partnerships, consumer information 
campaigns, incentives, and mandatory regulation--including the 
following:
    Climate VISION (Voluntary Innovative Sector Initiatives: 
Opportunities Now) \31\: In February 2003, President Bush announced 
that 12 major industrial sectors and The Business Roundtable had 
committed to work with four of his Cabinet agencies (the Departments of 
Energy, Transportation, and Agriculture and the Environmental 
Protection Agency) to contribute to meeting his 18-percent intensity 
reduction goal by improving the energy efficiency or greenhouse gas 
emissions intensity of its sector. Today, business and trade 
associations representing 14 energy-intensive industry sectors that 
account for approximately 40 to 45 percent of total U.S. greenhouse gas 
emissions have issued letters of intent to meet specific targets. 
Participating sectors include: Aluminum, automotive manufacturers, 
cement, chemical manufacturing, electric power, forest products, iron 
and steel, lime, magnesium, minerals, mining, oil and gas, railroads, 
and semiconductors. Climate VISION partners have issued letters of 
intent to meet specific targets that in 2012 alone could avoid an 
estimated 90 million metric tons of carbon dioxide equivalent.
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    \31\ See http://www.climatevision.gov/.
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    Climate Leaders \32\: Announced in February 2002, Climate Leaders 
is an EPA partnership encouraging individual companies to develop long-
term, comprehensive climate change strategies. Under this program, 
partners set corporate-wide greenhouse gas reduction goals and 
inventory their emissions to measure progress. Climate Leaders has 
grown to include 147 partners whose revenues add up to almost 10 
percent of the United States gross domestic product and whose emissions 
represent more than 8 percent of total U.S. greenhouse gas emissions. 
EPA estimates that GHG reductions by Climate Leaders Partners will 
prevent more than 11 MMCTE per year--equivalent to the annual emissions 
of more than 7 million cars.
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    \32\ See http://www.epa.gov/climateleaders/.
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    SmartWay Transport Partnership \33\: Launched in February 2004, the 
SmartWay Transport Partnership is a public-private partnership that 
aims to reduce greenhouse gas emissions, fuel consumption, and criteria 
pollutants from ground freight transportation operations. Over 600 
companies, including some of the nation's largest shippers and 
carriers, have joined SmartWay. The efforts of these companies, which 
include the use of fuel efficient technologies and anti-idling devices, 
improved aerodynamics, and the next generation single-wide tires, will 
reduce greenhouse gas emissions and fuel consumption. Additionally, 
there are over 80 diesel truck and locomotive engine idling reduction 
projects being implemented around the country.
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    \33\ See http://www.epa.gov/otaq/smartway/index.htm.
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    SmartWay is broadening its reach to include other modes of freight 
transportation throughout the global supply chain, such as ocean 
shipping and air cargo. EPA estimates that by 2012, the companies that 
participate in the Partnership will cut CO2 emissions by up to 66 
million metric tons (18.0 MMTCE) per year, and nitrogen oxide emissions 
by up to 200,000 tons per year. It will save about $9 billion in fuel 
costs and as much as 150 million barrels of oil per year--enough oil to 
heat 17 million houses for one year.
    ENERGY STAR \34\: Recognizing the importance of energy efficiency, 
EPA established the voluntary ENERGY STAR program in 1992, and has 
partnered with DOE since 1996 to accelerate the adoption cost-
effective, energy-efficient products and practices in the residential, 
commercial, and industrial sectors. Since the inception of the program, 
more than 2 billion ENERGY STAR qualified products across more than 50 
categories have been purchased, more than 30,000 commercial buildings 
have been benchmarked for energy usage, close to 725,000 new homes have 
been constructed to ENERGY STAR specifications, more than 28,000 
existing homes have been retrofitted, and hundreds of industrial 
partners have lowered their energy use using ENERGY STAR tools.
---------------------------------------------------------------------------
    \34\ See http://www.energystar.gov/.
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    EPA has recently revised the specifications for many product 
categories including computers, computer monitors, and imaging 
equipment; has added new products to the ENERGY STAR family including 
commercial icemakers, commercial dishwashers, external power supplies 
and battery chargers; and is in the process of updating the 
requirements for televisions. In addition, DOE recently updated the 
qualification requirements for ENERGY STAR residential clothes washers, 
dishwashers and refrigerators. EPA has also extended its standardized 
measurement system for energy use in buildings and facilities to 
include about 75 percent of the commercial square footage in the United 
States and about 6 industrial sectors. In 2006 alone, Americans, with 
the help of ENERGY STAR, prevented 37 million metric tons of greenhouse 
gas emissions roughly equivalent to the annual emissions of 25 million 
vehicles and saved about $14 billion on their utility bills.
    Green Power Partnership \35\: Introduced in 2001 as part of the 
President's National Energy Policy, the EPA's Green Power Partnership 
is designed to increase the adoption of clean energy supply 
technologies across the United States. The Partnership assists 
organizations in demonstrating environmental leadership by choosing 
electricity products generated from renewable energy sources. It now 
has more than 750 partners committed to purchasing more than 10 billion 
kilowatt-hours of green power by the end of 2007, which would be enough 
electricity to power more than 600,000 average American homes annually. 
Achieving this goal will avoid the equivalent CO2 emissions associated 
with more than 1.1 million passenger cars each year.
---------------------------------------------------------------------------
    \35\ See http://www.epa.gov/greenpower/.
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    Combined Heat and Power (CHP) Partnership \36\: Launched in 2001, 
EPA's Combined Heat and Power Partnership provides technical assistance 
to promote CHP projects along each step of the project development 
cycle in order to make investments in CHP more attractive. EPA also 
educates industry about the benefits of CHP, provides networking 
opportunities, and works with state governments to design air emissions 
standards and interconnection requirements that recognize the benefits 
of clean CHP. The Partnership now includes over 200 partners and 
through 2006 had assisted more than 250 projects representing 3,568 
megawatts of new CHP capacity in a variety of sectors, including 
university campuses, heavy industry, and the hospitality industry, 
among others. On an annual basis, these projects will prevent the 
emissions of approximately 2.67 million metric tons CO2 equivalent. 
This is equivalent to the annual emissions of more than 1.7 million 
cars, or the sequestration from more than 2.6 million acres of forest.
---------------------------------------------------------------------------
    \36\ See http://www.epa.gov/chp/.
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    EPA State Clean Energy-Environment Partnership \37\: In 2005, EPA 
launched the State Clean Energy-Environment Partnership Program, 
designed to help states adopt a variety of clean energy policies and 
deploy clean energy programs, including both energy efficiency and 
renewable energy initiatives. Through the State Clean Energy-
Environment Partnership program, states use comprehensive guidance on 
successful, cost-effective policies and initiatives; measurement and 
evaluation tools for co-benefits of the policies; and peer exchange 
opportunities to explore and advance new policies. The partnership is 
working with 15 states which represent about 50 percent of the U.S. 
population and energy consumption and more than half of all U.S. 
greenhouse gas emissions.
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    \37\ See www.epa.gov/cleanenergy/stateandlocal/.
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    EPA Domestic Methane Programs \38\: The EPA works in collaboration 
with the private sector and state and local governments to implement 
several voluntary programs that promote profitable opportunities for 
reducing emissions of methane, a potent greenhouse gas and clean energy 
source, from landfills, coal mines, oil and gas systems, and 
agricultural operations. EPA's methane programs, including the Landfill 
Methane Outreach Program, Coalbed Methane Outreach Program, Natural Gas 
STAR, and AgSTAR, are designed to overcome a wide range of 
informational, technical, and institutional barriers to reducing 
emissions, while creating profitable methane recovery and use 
opportunities. The collective results of EPA's methane programs have 
been substantial. U.S methane emissions in 2005 were 11.5 percent below 
1990 levels, in spite of economic growth of more than 55 percent over 
that time period. EPA expects that these programs will maintain 
emissions below 1990 levels in the future due to expanded industry 
participation and the continuing commitment of the participating 
companies to identify and implement cost-effective technologies and 
practices.
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    \38\ See http://www. epa.gov/methane/voluntary.html.
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    EPA High Global Warming Potential Gas Partnership \39\: A set of 
voluntary partnerships between EPA and industry is substantially 
reducing U.S. emissions of high global warming potential (high GWP) 
gases--including perfluorocarbons (PFCs), hydrofluorocarbons (HFCs), 
and sulfur hexafluoride (SF6). The high GWP partnership 
programs involve several industries, including HCFC-22 producers, 
primary aluminum smelters, semiconductor manufacturers, electric power 
companies, magnesium smelters and die-casters, and mobile air 
conditioning. These industries are reducing greenhouse gas emissions by 
developing and implementing cost-effective improvements to their 
industrial processes. EPA High-GWP Partnership Goals include:
---------------------------------------------------------------------------
    \39\ See http://www.epa.gov/highgwp/.

   PFC Reduction/Climate Partnership for the Semiconductor 
        Industry--Reduce PFCs 10 percent below 1995 baseline by year-
        end 2010.
   Voluntary Aluminum Industrial Partnership--A direct carbon 
        intensity (TCE/ton) reduction of 53 percent from 1990 levels by 
        2010.
   SF6 Emissions Reduction Partnership for the 
        Magnesium Industry--Eliminate SF6 emissions by the 
        end of 2010.
   Mobile Air Conditioning Partnership--Reduce HFCs 50 percent 
        and improve fuel-efficiency by 30 percent.

    To date, these voluntary programs have achieved significant 
emission reductions and industry partners are expected to maintain 
emissions below 1990 levels beyond the year 2010 despite sizable 
expansion in many of these industries that would ordinarily be 
accompanied by higher emission levels.
    Targeted Incentives for Greenhouse Gas Sequestration: The USDA 
provides targeted incentives through its conservation programs to 
encourage wider use of land management and production practices that 
sequester carbon and reduce greenhouse gas emissions. USDA also 
provides financial and technical assistance to help farmers install 
renewable energy systems and make improvements in energy efficiency 
that help reduce greenhouse gas emissions. In 2007, USDA's Farm Bill 
reauthorization proposals would provide approximately $4.4 billion in 
conservation activities on agricultural lands, and this level of 
funding represents an increase of about $1.6 billion from 2002.\40\
---------------------------------------------------------------------------
    \40\ See Office of Management and Budget, ``Fiscal Year 2008 Report 
to Congress on Federal Climate Change Expenditures,'' May 2007, p. 25 
at http://www.whitehouse.gov/omb/legislative/fy08_climate_change.pdf.
---------------------------------------------------------------------------
    Through the Conservation Reserve Program (CRP),\41\ USDA encourages 
farmers to remove environmentally sensitive lands from production, and 
also encourages installing vegetative covers that sequester carbon. In 
addition, CRP gives landowners the right to sell carbon credits 
generated from lands enrolled in the program; current enrollment is 
36.8 million acres. In 2006, carbon sequestration on CRP lands was 
estimated at 50.6 million metric tons CO2. Additionally, reductions in 
CO2 and nitrous oxide (N2O) emissions associated with reduced field 
operations and less use of nitrogen fertilizers were estimated at 9.0 
million metric tons carbon dioxide equivalent.
---------------------------------------------------------------------------
    \41\ See http://www.nrcs.usda.gov/programs/crp/.
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    The Conservation Security Program (CSP) \42\ promotes the 
conservation and improvement of soil, water, air, energy, plant and 
animal life on Tribal and private working agricultural lands. CSP has 
emerged as a significant contributor within the area of carbon 
management through enhancement activities that promote carbon 
sequestration. Since its inception in 2004, over 22.4 million 
collective acres have been engaged in soil management activities to 
improve carbon levels in soils.
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    \42\ See http://www.nres.usda.gov/programs/csp/.
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    Finally, USDA provides Conservation Innovation Grants (CIG) \43\ to 
fund the application and demonstration of innovative technologies and 
approaches to conservation issues. Many of the awards made through the 
program have greenhouse gas benefits. For example, farm-level wind and 
solar power projects reduce CO2 emissions, and new technologies for 
livestock manure management and fertilizer application reduce methane 
and N2O emissions.
---------------------------------------------------------------------------
    \43\ See http://www.nres.usda.gov/programs/cig/.
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    Improved Corporate Average Fuel Economy (CAFE) Standards: On April 
1, 2003, the Bush administration finalized regulations requiring an 
increase in the fuel economy of light trucks for Model Years 2005 to 
2007, the first such increase since 1996. The increase from 20.7 miles 
per gallon to 22.2 miles per gallon by 2007 more than doubles the 
increase in the standard that occurred between Model Years 1986 and 
1996. The new increased fuel economy standards are expected to save 
approximately 3.5 billion gallons of gasoline over the lifetime of 
these trucks, with the corresponding avoidance of more than 30 million 
metric tons of CO2 equivalent (8.2 MMTCE). The administration also 
promulgated a new round of standards in March, 2006. The new standards 
cover model years 2008-2011 for light trucks and raise fuel economy to 
24 miles per gallon for model year 2011. The rule is expected to save 
10.7 billion gallons of gasoline over the lifetime of these vehicles, 
thereby reducing GHG emissions by 73 million metric tons of CO2 
equivalent (19.9 MMTCE).
    Energy Policy Act of 2005 Tax Incentives to Reduce Greenhouse Gas 
Emissions: The Energy Policy Act of 2005 includes over $14.5 billion in 
tax incentives from 2005 to 2015. Many of these tax incentives and 
credits will have significant greenhouse gas reduction benefits and are 
designed to spur investments in clean energy infrastructure, enhance 
domestic energy security, and promote deployment of conservation and 
energy efficiency technologies, renewable energy and alternative motor 
vehicles. The Act also provides authority to DOE to issue loan 
guarantees for a wide range of advanced technologies that avoid, 
reduce, or sequester greenhouse gas emissions. Further, it provides 
standby support coverage to indemnify against certain regulatory and 
litigation delays for the first six new nuclear plants. In addition, 
the Act establishes 16 new appliance efficiency mandates and a 7.5 
billion gallon renewable fuel requirement by 2012.
    Voluntary Greenhouse Gas Emission Registry (1605(b)) \44\: The 
Voluntary Reporting of Greenhouse Gases Program, authorized under 
Section 1605(b) of the Energy Policy Act of 1992, provides a means for 
utilities, industries, and other entities to establish a public record 
of their greenhouse gas emissions and the results of voluntary measures 
to reduce, avoid, or sequester greenhouse gas emissions. For the 2005 
reporting year, 221 U.S. companies and other organizations reported 
that they had undertaken 2,379 projects and reduced or sequestered 294 
million metric tons CO2 equivalent (80.2 MMTCE) of direct reductions, 
67 million metric tons CO2 equivalent (18.3 MMTCE) of indirect 
reductions, 8 million metric tons CO2 equivalent (2.2 MMTCE) of 
reductions from carbon sequestration, and 13 million metric tons CO2 
equivalent (3.5 MMTCE) of unspecified reductions. In April 2006, new 
guidelines were issued for the program. The new guidelines, which went 
into effect in 2007 for the 2006 reporting year, will strengthen the 
program by encouraging comprehensive, entity-wide reporting of 
emissions and emission reductions, including sequestration, and by 
increasing the measurement accuracy, reliability, and verifiability of 
reports.
---------------------------------------------------------------------------
    \44\ See http://www.eia.doe.gov/oiaf/1605/frntvrgg.html and http://
www.pi.energy.gov/enhancing
GHGregistry/index.html.
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    American Competitiveness Initiative (ACI) \45\: President Bush 
announced the American Competitiveness Initiative (ACI) in his 2006 
State of the Union Address.\46\ Its goals are to increase federal 
investments in research and development, strengthen education, and 
encourage entrepreneurship. A centerpiece of the ACI is the commitment 
to doubling the investment in key Federal agencies that support basic 
research programs in the physical sciences and engineering over the 
next 10 years. As part of the ACI, the fiscal year 2008 Budget does 
include $4.4 billion, a 7-percent increase over last year's Budget, for 
the Department of Energy's (DOE's) Office of Science. The Initiative 
overall commits $50 billion to increase funding for research and $86 
billion for research and development tax incentives, some of which will 
be directed toward investments in clean energy technology research 
including solar, bioenergy, wind, hydropower, and hydrogen and fuel 
cell technology. The ACI will enhance cutting-edge basic research, 
helping to advance U.S. competitiveness by inspiring a new generation 
of American innovation through world-leading initiatives in high end 
computation; bio-energy research centers; fourth generation light 
sources; and nanotechnology.
---------------------------------------------------------------------------
    \45\ See http://www.whitehouse.gov/stateoftheunion/2006/aci/ and 
http://www.ostp.gov/html/budget/2008/ACIUpdateStatus.pdf.
    \46\ See http://www.whitehouse.gov/stateoftheunion/2006/.
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    Twenty in Ten Initiative \47\: President Bush announced his Twenty 
in Ten Initiative in his 2007 State of the Union Address. The goal is 
to reduce the Nation's gasoline consumption by 20 percent in 10 years 
by: (1) Increasing the supply of renewable and other alternative fuels 
by setting a mandatory fuels standard to require the equivalent of 35 
billion gallons of renewable and other alternative fuels in 2017, 
nearly five times the 2012 Renewable Fuels Standard mandate established 
by the Energy Policy Act of 2005, to displace 15 percent of projected 
annual gasoline use in 2017; and (2) reforming and modernizing CAFE 
standards for cars, and extending the light truck rule to reduce 
projected annual gasoline use by up to 8.5 billion gallons in 2017, a 
further 5-percent reduction in gasoline use. As a result of the recent 
Supreme Court decision in Massachusetts v. EPA, on May 14, 2007, the 
President directed EPA and the Departments of Transportation, Energy, 
and Agriculture to take the first steps toward regulations using the 
20-in-10 plan as a starting point and to complete this regulatory 
process by the end of 2008.\48\
---------------------------------------------------------------------------
    \47\ See http://www.whitehouse.gov/stateoftheunion/2007/
initiatives/energy.html.
    \48\ See http://www.whitehouse.gov/news/releases/2007/05/20070514-
2.html.
---------------------------------------------------------------------------
    President's Budget \49\: As noted earlier, from fiscal year 2001 to 
the end of fiscal year 2007, the U.S. Government will have devoted 
nearly $37 billion to climate science and observations, technology, 
international assistance, and incentive programs. President Bush's 
fiscal year 2008 budget calls for nearly $7.4 billion for climate-
related activities, includes $3.9 billion for the Climate Change 
Technology Program, over $1.8 billion for the Climate Change Science 
Program, $212 million for climate change-related international 
assistance programs, and nearly $1.4 billion for energy tax provisions 
that may reduce greenhouse gas emissions.
---------------------------------------------------------------------------
    \49\ See http://www.whitehouse.gov/omb/legislative/
fy08_climate_change.pdf.
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    We expect these efforts will contribute to meeting the President's 
10-year goal to reduce the Nation's greenhouse gas intensity by 18 
percent, which represents an average annual rate of improvement of 
about 1.96 percent. According to EPA data reported to the UNFCCC 
Secretariat, U.S. greenhouse gas intensity declined by 1.9 percent in 
2003, by 2.4 percent in 2004, and by 2.4 percent in 2005. Put another 
way, from 2004 to 2005, the U.S. economy increased by 3.2 percent while 
greenhouse gas emissions increased by only 0.8 percent. Further, a May 
21, 2007, preliminary ``flash estimate'' by the Energy Information 
Administration of energy-related CO2 emissions--which account for more 
than four-fifths of total greenhouse gas emissions--shows an absolute 
drop in these emissions of 1.3 percent and an improvement in CO2 
emissions intensity of 4.5 percent in 2006.\50\ Although we are only a 
few years into the effort, we are on track to meet the President's 
goal.
---------------------------------------------------------------------------
    \50\ See http://www.eia.doe.gov/neic/press/press284.html.
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    Progress in the U.S. compares favorably with progress being made by 
other countries. ``Greenhouse Gas Emission [GHG] Trends for Developed 
Country Parties to the U.N. Framework Convention on Climate Change for 
the Years 2001-2005, Inclusive'' (Attachment 2) and ``Carbon Dioxide 
[CO2] Emission Trends for Developed Country Parties to the 
U.N. Framework Convention on Climate Change for the Years 2001-2005, 
Inclusive'' (Attachment 3) show how GHG and CO2 emission 
trends in the U.S. compare to other industrialized countries based on 
national data reported to the UNFCCC Secretariat. These data, which 
include countries that have obligations under the Kyoto Protocol, 
indicate that for the years 2001-2005, inclusive, the major developed 
economies of the world are at about the same place in terms of actual 
greenhouse gas emissions. In some countries, emissions are increasing 
slightly, in others they are decreasing slightly. No country is yet 
able to decrease its emissions massively. Note that the U.S. has seen 
its actual greenhouse gas emissions increase by 1.6 percent--slightly 
more than that for the EU. In contrast, U.S. CO2 emissions 
over the same period increased by 2.5 percent--less than the increase 
for the EU.
C. Advancing Climate Change Science
    The President established the U.S. Climate Change Science Program 
(CCSP) \51\ in 2002 as part of a new ministerial-level management 
structure to oversee public investments in climate change science and 
technology. The CCSP incorporates the U.S. Global Change Research 
Program, established by the Global Change Research Act of 1990, and the 
Climate Change Research Initiative, established by the President in 
2001. The Program coordinates and integrates scientific research on 
global change and climate change sponsored by 13 participating 
departments and agencies of the U.S. Government. It is responsible for 
facilitating the development of a strategic approach to federally 
supported climate research, integrated across the participating 
agencies. The President's budget requests $1.836 billion for CCSP in 
fiscal year 2008.
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    \51\ See http://www.climatescience.gov.
---------------------------------------------------------------------------
    Since CCSP was created in 2002, the program has successfully 
integrated a wide range of the research and climate science priorities 
of the 13 CCSP agencies. CCSP has taken on some of the most challenging 
questions in climate science and is developing products to convey the 
most advanced state of knowledge to be used by federal, state and local 
decisionmakers, resource managers, the science community, the media, 
and the general public.
    Twenty-one Synthesis and Assessment Products are identified in the 
Strategic Plan to be produced through 2008. The first of these, 
``Temperature Trends in the Lower Atmosphere: Steps for Understanding 
and Reconciling Differences,'' was released in April of 2006 and 
answers a set of key questions related to ongoing observations of the 
Earth's temperature. This report was an important addition to the IPCC 
Working Group I Fourth Assessment Report. This year, two more reports 
have been released. In July, the program released ``Scenarios of 
Greenhouse Gas Emissions and Atmospheric Concentrations and Review of 
Integrated Scenario Development and Application,'' which in part used 
computer-based models to assess the economic and technological impacts 
of limiting greenhouse gas emissions. In October, a report was released 
that summarized our current understanding regarding the effects of 
climate change on energy production and use in the United States. The 
report, ``Effects of Climate Change on Energy Production and Use in the 
United States,'' focused on three questions:

          1. How might climate change affect energy consumption;
          2. How might climate change affect energy production and 
        supply; and
          3. How might climate change have other effects that 
        indirectly shape energy production and consumption?

    The reports, overall, are designed to address a full range of 
science questions and evaluate options for responses that are of the 
greatest relevance to decision and policymakers and planners. The 
products are intended to provide the best possible state of science 
information, developed by a diverse group of climate experts, for the 
decision community.
D. Accelerating Climate Change Technology Development and Deployment
    While acting to slow the pace of greenhouse gas emissions intensity 
in the near term, the administration is laying a strong technological 
foundation to develop realistic mitigation options to meet energy 
security, economic development, and climate change objectives.
    The Bush administration is moving ahead on advanced technology 
options that have the potential to substantially reduce, avoid, or 
sequester future greenhouse gas emissions. Over 80 percent of current 
global anthropogenic greenhouse gas emissions are energy related, and 
although projections vary considerably, a tripling of global energy 
demand by 2100 is not unimaginable.\52\ Therefore, to provide the 
energy necessary for continued economic growth while we reduce 
greenhouse gas emissions, we will have to develop and deploy cost-
effective technologies that alter the way we produce and use energy.
---------------------------------------------------------------------------
    \52\ See ``U.S. Climate Change Technology Program Strategic Plan,'' 
September 2006, p. 2 at http://www.climatetechnology.gov/stratplan/
final/CCTP-StratPlan-Sep-2006.pdf.
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    The United States is leading the development of many advanced 
technology options that have the potential to reduce, avoid, or 
sequester greenhouse gas emissions. The Climate Change Technology 
Program (CCTP) \53\ was created in 2002, and subsequently authorized in 
the Energy Policy Act of 2005, to coordinate and prioritize the Federal 
Government's annual investment in climate-related technology--a 
proposed $3.9 billion in Fiscal Year 2008--and to further the 
President's National Climate Change Technology Initiative (NCCTI). Ten 
Federal agencies support a broad portfolio of activities within this 
framework.
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    \53\ See http://www.climatetechnology.gov/.
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    Basic guidance for the program is provided through CCTP's Strategic 
Plan, released in September 2006. 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 carbon dioxide; (4) reducing emissions of 
other greenhouse gases; (5) measuring and monitoring emissions; and (6) 
bolstering the contributions of basic science.
    CCTP's principal aim is to accelerate the development and reduce 
the cost of new and advanced technologies. It provides strategic 
direction for the climate-related elements of the overall Federal 
technology portfolio. CCTP also is assessing different technology 
options and their potential contributions to reducing greenhouse gas 
emissions over the short, mid, and long term. CCTP's boasts a diverse 
R&D portfolio that covers a wide range of technology options in energy 
efficiency, renewable energy, nuclear power, and clean coal, and non-
CO2 gases.
    Many CCTP activities build on existing work, but the Bush 
administration also has expanded and realigned some activities and 
launched new initiatives in key technology areas to support the CCTP's 
goals. The President's NCCTI, for example, includes 12 discrete R&D 
activities that, if successful, could advance technologies to reduce 
greenhouse gas emissions on a large scale.
    Advanced Energy Initiative (AEI) \54\: In his 2006 State of the 
Union Address,\55\ President Bush announced plans for the Advanced 
Energy Initiative (AEI), which will help reduce America's greenhouse 
gas emissions, pollution, and dependence on foreign sources of energy 
by accelerating advanced energy technologies. Examples of AEI 
investment include: The Solar America Initiative, which aims to make 
solar energy cost-competitive with conventional forms of electricity by 
2015; the Biofuels Initiative, which aims to make cellulosic ethanol 
cost competitive with gasoline by 2012; the Hydrogen Fuel Initiative, 
which aims to develop the technology needed for commercially viable 
hydrogen-powered fuel cells; the Plug-in Hybrid Electric Vehicle (PHEV) 
research, which aims to develop advanced battery technologies that 
allow PHEVs to have a 40-mile range operating solely on battery charge; 
the FutureGen near-zero-emissions coal-fired power plant; and the 
Nuclear Power 2010 program. By investing in these and other advanced 
energy technologies, AEI will allow us to alter the way we power our 
buildings and automobiles within 20 years. The President's budget for 
fiscal year 2008 includes $2.7 billion in the Department of Energy for 
the AEI, an increase of 22 percent above the 2007 enacted level.
---------------------------------------------------------------------------
    \54\ See http://www.whitehouse.gov/stateoftheunion/2006/energy/
energy_booklet.pdf.
    \55\ See http://www.whitehouse.gov/stateoftheunion/2006/.
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    Energy Efficiency and Renewable Energy \56\: 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. Raising the efficiency level of home appliances and 
commercial equipment is a high priority. Efficiency standards for 
products that are subject to regulation are being developed at a pace 
substantially greater than at any time in the history of regulating 
these products. In addition, Zero Energy Homes and Buildings have been 
proven technically achievable, but at significant added cost. The 
Department of Energy believes that the required technical advances to 
enable most of the Nation's new homes to be constructed as net zero 
homes can be achieved in less than a decade via an aggressive private/
public partnership. For commercial buildings, adequate technical 
capability can be available by 2020.
---------------------------------------------------------------------------
    \56\ See http://www.eere.energy.gov/.
---------------------------------------------------------------------------
    Renewable energy includes a range of different technologies that 
can play an important role in reducing greenhouse gas emissions. The 
United States invests significant resources in wind, solar, geothermal, 
and biomass, industrial and buildings efficiency and alternative 
transportation technologies. Many of these technologies have made 
considerable progress in price competitiveness, but there remain 
opportunities to reduce manufacturing, operating, and maintenance costs 
of many of these technologies as well as to reduce barriers to market 
penetration.
    Hydrogen \57\: President Bush announced his Hydrogen Fuel 
Initiative in his 2003 State of the Union Address.\58\ The goal is to 
work closely with the private sector to accelerate our transition to a 
hydrogen economy, on both the technology of hydrogen fuel cells and a 
fueling infrastructure. The President's Hydrogen Fuel Initiative and 
the FreedomCAR Partnership \59\ which was launched in 2002 will provide 
$1.7 billion through 2008 to develop hydrogen-powered fuel cells, 
hydrogen production and infrastructure technologies, and advanced 
automotive technologies, with the goal of commercializing fuel-cell 
vehicles by 2020.
---------------------------------------------------------------------------
    \57\ 57See www.hydrogen.gov.
    \58\ See http://www.whitehouse.gov/news/releases/2003/01/20030128-
19.html.
    \59\ See http://www.eere.energy.gov/vehiclesandfuels/.
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    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 the world's most reliable and lowest cost 
form of energy. A realistic approach is to find ways to capture and 
store the CO2 produced when these fuels are used at centralized power 
generation and industrial applications. DOE's core Carbon Sequestration 
Program \60\ emphasizes technologies that capture CO2 from large point 
sources and store it in geologic formations. In 2003, DOE launched a 
nationwide network of seven Regional Carbon Sequestration 
Partnerships,\61\ 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. Today the partnerships include more than 400 
organizations in 41 U.S. states, three Indian nations, and four 
Canadian provinces. The Regional Partnerships have progressed to a 
validation phase in which they are conducting 25 field tests involving 
the injection of carbon dioxide into underground formations where it 
will be stored and monitored. The Regional Partnerships are also 
planning several large-scale field tests throughout the United States 
to validate the efficacy of long-term storage of CO2 in a variety of 
geologic storage sites.
---------------------------------------------------------------------------
    \60\ See http://www.fe.doe.gov/programs/sequestration/index.html.
    \61\ See http://www.fe.doe.gov/programs/sequestration/
partnerships/.
---------------------------------------------------------------------------
    Additionally, EPA leads U.S. Government efforts to evaluate any 
risks to human health and the environment associated with underground 
injection and storage. EPA is responsible for developing regulatory 
guidance and a risk-management framework under Safe Drinking Water Act. 
The Agency also designs inventory and accounting methodologies for 
carbon capture and sequestration.
    Coal-Fired, Near-Zero-Emissions Power Generation: The United States 
has vast reserves of coal, and about half of its electricity is 
generated from this fuel. Advanced coal-based power and fuels, 
therefore, is an area of special interest from both an energy security 
and climate change perspective. The Coal Research Initiative (CRI) 
consists of research, development, and demonstration of coal-related 
technologies that will improve coal's competitiveness in future energy 
supply markets. The Clean Coal Power Initiative (CCPI),\62\ within the 
CRI, is a cost-shared program between the government and industry to 
demonstrate emerging technologies in coal-based power generation and to 
accelerate their commercialization. A major priority under the CRI is 
the FutureGen project,\63\ a 10-year, $1 billion international 
government-industry cost-shared effort to design, build, and operate 
the world's first near-zero atmospheric emissions coal-fired power 
plant. This project, which now includes India and the Republic of Korea 
as partners (with other countries expected to join shortly), will 
incorporate advanced coal gasification technology integrated with 
combined cycle electricity generation and the capture and long-term 
storage of carbon dioxide. Through the CRI, clean coal can remain part 
of a diverse, secure energy portfolio well into the future.
---------------------------------------------------------------------------
    \62\ See http://www.fe.doe.gov/programs/powersystems/cleancoal/
index.html.
    \63\ See http://www.fe.doe.gov/programs/powersystems/futuregen/
index.html.
---------------------------------------------------------------------------
    Nuclear Fission: Concerns over resource availability, energy 
security, and air quality as well as climate change suggest a larger 
role for nuclear power as an energy supply choice. While current 
generations of nuclear energy systems are adequate in many markets 
today, new construction of advanced light-water reactors in the near 
term and of even more advanced systems in the longer term can broaden 
opportunities for nuclear energy, both in industrialized and developing 
countries. The Nuclear Power 2010 program \64\ is working with industry 
to demonstrate the Nuclear Regulatory Commission's new licensing 
process, and earlier this year the Nuclear Regulatory Commission 
approved the Early Site Permits for two new nuclear power plants.
---------------------------------------------------------------------------
    \64\ See http://www.ne.doe.gov/np2010/neNP2010a.html.
---------------------------------------------------------------------------
    The Generation IV Nuclear Energy Systems Initiative \65\ is 
investigating the more advanced reactor and fuel cycle systems that 
represent a significant leap in economic performance, safety, and 
proliferation-resistance. One promising system being developed under 
the Nuclear Hydrogen Initiative \66\ would pair very-high-temperature 
reactor technology with advanced hydrogen production capabilities that 
could produce both electricity and hydrogen on a scale to meet 
transportation needs. Complementing these programs is the Advanced Fuel 
Cycle Initiative,\67\ which is developing advanced, proliferation 
resistant nuclear fuel technologies that can improve the fuel cycle, 
reduce costs, and increase the safety of handling nuclear wastes.
---------------------------------------------------------------------------
    \65\ See http://www.ne.doe.gov/genIV/neGenlV1.html.
    \66\ See http://www.ne.doe.gov/NHI/neNHI.html.
    \67\ See http://www.ne.doe.gov/AFCI/neAFCI.html.
---------------------------------------------------------------------------
    Fusion \68\: Fusion energy is a potential major new source of 
energy that, if successfully developed, could be used to produce 
electricity and possibly hydrogen. Fusion has features that make it is 
an attractive option from both an environmental and safety perspective. 
However, the technical hurdles of fusion energy are very high, and with 
a commercialization objective of 2050, its impact would not be felt 
until the second half of the century, if at all. Nevertheless, the 
promise of fusion energy is simply too great to ignore.
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    \68\ See http://www.energy.gov/sciencetech/fusion.htm.
---------------------------------------------------------------------------
    Advances in these and other technology areas in the CCTP portfolio 
could put us on a path to ensuring access to clean, affordable energy 
supplies while dramatically reducing the greenhouse gas profile of our 
economy over the long term. Moreover, the deployment of cleaner energy 
technologies in developing economies like China and India can make a 
huge difference in altering the future global energy picture.










    Senator Kerry. Thank you very much, Madam Secretary. We 
really appreciate it.
    And what we'll do is have 7-minute rounds, and we'll try to 
get through as much as we can.
    First of all, let me just quickly put on the record that we 
have heard, through sources, that, in Valencia, the 
administration is sort of working behind the scenes to tone 
down, a little bit, the urgency that the IPCC folks want to 
give to this summary agreement. Can you tell us whether there's 
any reality to that? Are we somehow--I mean, as you know, 
there's been an unfortunate record here of EPA and other 
reports in science being somewhat stomped on over the course of 
the last few years. So, are you expressing, today, a State 
Department view or an administration view? And are there any 
efforts you know of to sort of reduce the impact of what comes 
out of Valencia?
    Ms. Dobriansky. I'm part of the State Department, but I'm 
part of this administration. With regard to any toning down, 
I'm not aware of any toning down. We have a delegation that is 
there; a delegation that also participated in the three working 
groups that were held previously as part of the IPCC process. 
The United States welcomed the reports of each working group. 
Dr. Susan Solomon of NOAA has been cochair of one of the 
working groups. We certainly have not only welcomed, but 
strongly supported, her work and the work of many of the 
American scientists who have been part of this.
    I might just add that the United States has been one of the 
largest contributors to the work that is done under the IPCC. 
We welcome the work that has been done. It informs us, and will 
continue to inform us.
    Senator Kerry. To the degree that it informs you, have you 
accepted--or, do you accept the now-revised scientific 
consensus that no longer believes we can tolerate a 3-degree 
increase, Centigrade, in the Earth's temperature, but only a 2-
degree, and that we can no longer tolerate a 550-parts-per-
million increase, or level, of greenhouse gases, but, rather, 
we have to stabilize at around 450? Is that the starting 
working premise of the administration with respect to what we 
need to do?
    Ms. Dobriansky. Senator, we welcome the findings of the 
IPCC; and specifically, the language that is used in the report 
is, it doesn't precisely give one figure, one degree, or 
another degree. It provides a range. And, as you know, as part 
of the U.N. Framework Convention on Climate Change, we're very 
committed to this goal. In fact, that's one of the reasons why 
we have put forth the--and joined other countries in the 
importance of establishing a long-term global goal that needs 
to be identified.
    Senator Kerry. Well, here's the conundrum, and this is what 
I'm trying to get at. You--I mean, this is not an issue where 
you can be half pregnant. You can't accept the science and say, 
``Yes, it's happening; yes, it's having these consequences; 
yes, it's moving more rapidly than we had anticipated, with 
greater consequences than were originally predicted''--you 
can't accept all of that and then discard, at whim, the 
accompanying targets that those same scientists give us as to 
what is tolerable or not, particularly when measured against 
what is happening at the rate of pulverized coal-fired plant 
construction in China and India and here. If we proceed as we 
are in the next few years with those coal-fired power plants 
being built without capture and sequestration, we're looking at 
somewhere between 600 and 900 parts per million of a greenhouse 
concentration, way outside of what the scientists tell us is 
the tipping point, the catastrophe point for Earth.
    So, the question is not a theoretical one. I mean, it's a 
really practical one. Are we going to Bali accepting these 
targets? And will that guide what we think have to be the 
policies? Or are we going to be sort of rhetorically pregnant 
and kind of play around, here?
    Ms. Dobriansky. I would say we're going to Bali accepting, 
as you've indicated, the findings of the IPCC, and the outcomes 
and the products of the different working groups. And, toward 
that end, on the specific question, there was a range that was 
provided and----
    Senator Kerry. And what do you understand the range----
    Ms. Dobriansky [continuing]. That the----
    Senator Kerry [continuing]. To be?
    Ms. Dobriansky [continuing]. Scientists, in fact, put 
forth. They did not precisely pin down one degree over another.
    Senator Kerry. What do you understand the range to be?
    Ms. Dobriansky. The range is as was stated in----
    Senator Kerry. What is the----
    Ms. Dobriansky [continuing]. The report----
    Senator Kerry [continuing]. Range?
    Ms. Dobriansky [continuing]. Which was--it was a general 
range. I will let my colleague comment--would you like to--
because you were there.
    Mr. Reifsnyder. Well, I don't know, Senator--sorry--I don't 
know, Senator, what the actual range that the IPCC has 
projected this go-round has been, but I know that it has been--
it's not that dissimilar from that which has been projected for 
a long time by the IPCC, since the first assessment report in--
--
    Senator Kerry. Well, the range is what I've just laid out, 
folks. I mean, the range is--in terms of allowable degrees of 
Centigrade warming and allowable measure of greenhouse gas. 
It's what I just said.
    Ms. Dobriansky. And I think I indicated, Senator, we do 
embrace that range. That was----
    Senator Kerry. OK. Now, if you----
    Ms. Dobriansky [continuing]. The range.
    Senator Kerry [continuing]. Embrace it----
    Ms. Dobriansky. That's a bit different from citing one 
particular degree. And I know that the report did not, in fact, 
do that.
    Senator Kerry. No; it doesn't do that, but what it does is, 
it sets out parameters that any reasonable person who accepts 
science has to look at it and say, ``Whoa, we've got a big task 
here.'' Now, you know, you had a key word in your testimony, 
the word ``voluntary.'' We've had voluntary for the last 20 
years. It hasn't worked. How do you heed the warning of a Jim 
Hansen, who said, ``Look, you've got 10 years to get this 
right''? How do you respond to the notion that one coal-fired 
pulverized plant per week is going to be built in China, and, 
if we go ahead with what's happening today without U.S. 
leadership to sort of put the brakes on and offer alternatives, 
that we're ever going to meet this challenge? How do you do 
that in a voluntary scheme?
    Ms. Dobriansky. Well, first, in terms of our own domestic 
policy mix, we've had a mix of mandatory, voluntary, as well as 
those programs which are supported by tax incentives. There are 
a variety of mandatory programs. The President put forth the 
``20-in-10'' reduction on gas consumption. There has also been 
a building and appliance efficiency----
    Senator Kerry. Those are goals.
    Ms. Dobriansky [continuing]. Goals that have been put 
forth.
    But, on the second, when you look at it globally, one of 
our goals and objectives, Senator, is--as we go into Bali, is 
to look at, first and foremost, how we can get a global 
agreement, a global agreement where all are at the table, 
ourselves included, as well as big emitters. And a challenge 
here is: How do you achieve that? A number of countries have 
put forward long-term goals that are aspirational--Japan, 
Canada, the European Union. When we met together in the Major 
Economies Meeting, we had a discussion about this. One of the 
things that we then talked about was, all right, how can you 
then look at, on a national basis, the variety and differences 
among the countries around the table, that we could go forward 
with medium-term goals, and--in which countries would put 
together their portfolios, and in which there would be 
accountability, of which part of that would be on a country-by-
country basis, mandatory approaches, and maybe a mix of 
mandatory/voluntary. But, basically, all would be at the table, 
so that we would have an effective approach and that there 
would be results derived from it.
    Senator Kerry. Well, I appreciate what you're saying. My 
time is up. I just want to--I'll close by saying this, and I 
want to continue this dialogue. And it's a very important one. 
Most of the foreign environment ministers and others that we've 
been meeting with from Europe and elsewhere, have indicated to 
us that they believe it ought to be mandatory, and they believe 
the United States has to lead on this. We're a quarter of the 
world's greenhouse gas emissions, the most industrial country. 
And when I talk to the Chinese or the Indians or others, it's 
very clear that, unless we do something with some sort of real 
goals, they're not going to believe, No. 1, that we're serious, 
and, No. 2, they know that there's nothing compelling them, 
therefore, to, sort of, come to the table in any mandatory way. 
And most people don't believe it can happen without mandatory.
    Second, we have done mandatory. We have a great, great 
example that we all adopted, right here in the Congress. And I 
was part of those negotiations, as I think Senator Wirth was, 
and others, back in 1990s, when we did the Clean Air Act. We 
heard the same kinds of arguments. The industry all came in and 
said, ``Don't do this to us. If you do this to us, we're going 
to be noncompetitive, we're going to lose jobs, we're going to 
fall behind, it's going to cost $8 billion, take 10 years.'' 
The environment community came in and said, ``No; that's all 
industry, you know, self-interest talk. It's really only going 
to cost $5 billion, and it's going to take about, you know, 5 
years.'' Well, guess what? George Herbert Walker Bush, Bill 
Reilly, John Sununu sat at that table with George Mitchell, we 
put it in place--acid rain, sulfur dioxide emissions in the 
Clean Air Act--mandatory. And, lo and behold, it took about $2 
billion and took about 2\1/2\ years. Why? In fact, the pricing 
in the auction place on the permits went from about $1,000 down 
to about $60, then bounced back up to 100. The reason it worked 
is that no one is capable of predicting what happens when the 
entrepreneurial, innovative spirit of our country is applied 
economywide to the task of meeting one of those goals, and no 
one can predict how the technology then takes over in the 
creation of jobs, cheaper ways of doing it, which is precisely 
what everybody believes will happen here if we take the lead in 
doing it.
    So, I'd like to pursue that with you a little bit later. 
I'm sure colleagues will pursue some of that in the dialogue 
here. But I think we shouldn't ignore our own history of what 
happens in voluntary versus mandatory.
    Senator Lugar.
    Senator Lugar. Thank you very much, Mr. Chairman.
    Secretary, as we prepare for the Bali Conference, I'm 
hopeful that our delegation and the administration are trying 
to focus on a parallel course of discussions we need on energy 
requirements for our country, as well as for the world. They 
have to run at the same time, and they are often divisive, 
contradictory, and competitive.
    To be specific, many talk about gaining a greater degree of 
energy independence for our country, and they usually phrase it 
that way, as opposed to saying ``energy independence,'' because 
it's an awesome goal, given the dependence we have on imported 
oil and other energy sources. We've been attempting, as a 
government, to think of ways of replacing imported oil. You've 
cited some of the President's programs, that over the course of 
several years, we would substitute imported oil with energy 
sources that we produce here.
    My fear is that, even with our resolve and our programs, 
this is all moving tediously slowly. It is not without note 
that even our debate in the Congress this year on energy 
legislation is bogged down in all sorts of ways that I'll not 
try to describe. It may be that the market works and that 
somehow--through idealism--people will do the research that's 
required; forward the money, loans from government or private 
industry to develop experimental things, such as cellulosic 
ethanol. But this is not happening very fast.
    What is occurring very fast--and you've cited this, as 
Senator Kerry has--is the need for greater electric power 
throughout the country, whether it be our computers or the rest 
of our electronic society, the impelling problem is how to use 
coal. The problem then is how to clean up the coal, how to 
sequester the carbon from the coal. We're taking this 
seriously, although these are still very, very experimental 
situations. We are beginning to put a toe in the water again 
with regard to nuclear power. Even this is bogged down in all 
sorts of difficult situations, even as we advise India or China 
or other countries that that probably should be the course for 
them. As we note, they're opening up coal-fired electric 
plants, if not one a week in China, as sometimes suggested, 
maybe one a month at least. And, as Senator Kerry has said, 
this is occurring even while the debate in Bali proceeds. In 
real life, people are not going to let the lights go out. They 
are--in fact, going to demand that their government produce 
light. Or, worse still, demand that their government produce 
gasoline at very subsidized prices. Even in Iraq and Iran, 
we've found gasoline selling for a pittance, because 
politically it's impossible for the leadership to let the 
market work, even in a society of that sort, quite apart from 
our own.
    I mentioned all of this because it seems to me that it is 
not easy to float off into the climate change argument 
oblivious of real life, but there's a tendency to do this, and 
this is why it doesn't work. Ultimately, people come back down 
to earth in a democracy and say, ``That's all very interesting, 
that the elite of the country have these ideas.'' And clearly 
there is a problem. The ice floes are melting, and the polar 
bears are in trouble. And we understand things are coming along 
poorly. We feel that. But we also, as a matter of fact, in day-
by-day living, want jobs. We want the lights to go on. We want 
heat in the winter. We want electricity to run our computers. 
As a matter of fact, we want to live during this particular 
period and not in 2080 or at some other time, granted, that our 
grandchildren may have a hard time.
    Now, I go through all of this rhetoric simply because it 
appears to me that an approach to Bali or any other conference 
has to have both of these streams of thought moving along if 
they're going to be successful. Clearly, we need to recognize 
that with climate change there will be very great reticence to 
take the steps that are important in energy conservation in 
this country. Why would anybody buy a hybrid car and try to get 
50 miles to the gallon unless there is, in fact, a desire, 
first of all, to conserve energy, and, second, to do something 
about CO2? But some people do buy such cars, and we 
hope that some more will be produced. Why does anybody 
distribute ethanol, E85? Well, not many do. Despite all the 
rhetoric in my State, barely 110 stations out of several 
thousands, despite corn and all the rhetoric on ethanol. In 
other words, our whole national emphasis here has got to move 
together.
    Now, can you make some comment of reassurance that, as the 
planning is proceeding, in your shop at least, there are 
recognition of these factors, and you're prepared to address 
them in practical ways for our country, as well as other 
countries that we are talking to?
    Ms. Dobriansky. Senator, I think you make a very important 
point, and let me, in response, make three comments.
    First, I think that there has been a shift in the 
orientation of these global discussions on the environment, 
where there's an integration of issues that I don't think had 
really occurred before. The fact that you have countries, not 
only ourselves, but others, like India, China, Brazil, looking 
at issues of economic reform and advancement, how you apply 
your economic growth to these issues, and the critical issue of 
energy security matters. I think you're quite right in saying, 
in every discussion we have with countries that are emerging 
economies, they're very focused on not only growing their 
economies, but how they get energy sources to, particularly, 
their rural areas, and what are the most clean and efficient 
ways of doing that, and which will have consequences and 
benefits, environmentally? So, the first point I would make is, 
is that I have noticed that the discourse has shifted, and I 
think there is an acceptance of the integration of these 
issues.
    Second, I would make the point that, during the Major 
Economies Meeting, which is geared toward advancing the 
negotiation process in the U.N. Framework Convention--we 
brought together not only representatives that represent 
environmental ministries, but also those in attendance were 
from Ministries of Energy, my counterparts in Foreign 
Ministries, and also those dealing with finance. That kind of 
integrated discussion was absolutely essential--essential as we 
go forward, not only to Bali, but also it's critical as we come 
out of Bali.
    Also, toward that end, if I may say, the areas that we 
addressed during this exchange involved not only power 
generation, but we had a session with also participants from 
the private sector, focusing on the question of how you deal 
with transportation, vehicles, and many of the innovative ways 
that we should be rapidly moving forward on; land use, as well 
as financing.
    Finally, as I referenced in my earlier comments about the 
Asia Pacific Partnership on Clean Development and Climate, that 
through the Asia Pacific Partnership, one of the things that 
we've been striving to do is, particularly in working with 
China and India, is to try to draw them in and work effectively 
with them on near-term steps that can be undertaken and that, 
by the way, don't cost a lot, but adds up.
    Do we need to do more? Yes; we do need to do more. These 
are only a few examples of some of the things that we are 
doing, but this is an area that absolutely is essential. Our 
own Major Economies Meeting was entitled ``Energy Security and 
Climate Change'' because of that key integration.
    Senator Lugar. Thank you.
    Thank you, Mr. Chairman.
    Senator Kerry. Thank you, Senator Lugar. Appreciate it.
    Senator Nelson.
    Senator Bill Nelson. Madam Secretary, you've got a pretty 
good idea of what we think should be the role that the United 
States would play in the Bali meeting. What do you think are 
the international expectations of the United States in these 
U.N. talks in Bali?
    Ms. Dobriansky. Well, I attended, as I've indicated, the 
preministerial meeting, which was in Bogor, Indonesia, which 
comprised some 35 nations. And, first, I would say that one 
expectation was to see how we would embrace the various 
recommendations that were put on the table, including the 
importance of having a Bali roadmap. We support that, we want 
to see that. Two, in terms of having the four areas that I 
mentioned in my comments--adaptation, mitigation, financing, 
and technology--be elements comprising our discussion of a 
framework--a post-2012 framework. Third, we were very vocal, 
during those discussions, about the importance of forestry and 
how critical it is to address the issue of deforestation and 
land misuse, which comprises 20 percent of greenhouse gas 
emissions. We came forward and supported having a beginning, a 
middle, and an end. In other words, that we would have an 
outcome concluded by 2009. I might add that there were others 
around that table who did not necessarily support what I am 
sharing with you.
    I think we have already indicated, going into this meeting, 
that we are open-minded. We want to have a constructive 
approach. We want to see movement. Senator Kerry referenced, 
before, the importance of the IPCC. That will be a critical 
component of the discussions in Bali. And we also think that 
that is going to inform our discussions, as well.
    Senator Bill Nelson. Do you think that the rest of the 
world thinks that the United States should lead in the 
development of this post-2012 agreement in Bali?
    Ms. Dobriansky. In fact, during the preministerial meeting 
in Bogor, a suggestion was made by the chair in the 
Indonesian's chairman's summary, that the United States 
effort--the launch of the Major Economies Meeting--would be 
helpful to moving the process of negotiations along, and that 
that effort should report back to the U.N. Framework Convention 
on Climate Change. Why am I sharing this? This is an important 
initiative that we have put forward, which seeks to bridge 
differences. We want to see a global agreement. We want to see 
a global framework, of which we are part and of which we do our 
part. At the same time, we want others, who have not also 
joined, to come to the table, as well. And how do we go about--
--
    Senator Bill Nelson. I'm going to have to cut you off, 
here, because we're running----
    Ms. Dobriansky. I'm sorry.
    Senator Bill Nelson [continuing]. Out of time. So, the 
answer to that question was yes?
    Ms. Dobriansky. Yes.
    Senator Bill Nelson. The rest of the world expects us to 
lead in the post-2012----
    Ms. Dobriansky. I think----
    Senator Bill Nelson [continuing]. Agreement.
    Ms. Dobriansky [continuing]. I--first, we plan to lead, and 
also, I think others would welcome our leadership.
    Senator Bill Nelson. So, the answer is yes.
    Now, on mandatory reductions, doesn't the rest of the world 
expect us to lead on mandatory reductions?
    Ms. Dobriansky. I would say we have a dilemma here, 
Senator, and that dilemma is: How do you get a global agreement 
that's going to be environmentally effective and economically 
sound? Let me give you an example. We have canvassed a variety 
of developing countries, and have asked them the question: If 
the United States goes forward and supports mandatory 
commitments, would you join us in this effort? The answer has 
been, ``No.'' Why? Through the Major Economies Meeting, we are 
striving to bring parties together, we are looking at a way 
forward that will be robust and that will make a difference. We 
have put forth, along with others, the need for having a long-
term global goal. Second, we have put forth the notion of 
having national plans, and, in those national plans, the 
establishment of medium goals, which could be mandatory----
    Senator Bill Nelson. So, they----
    Ms. Dobriansky [continuing]. And they could be----
    Senator Bill Nelson. So----
    Ms. Dobriansky [continuing]. Complied----
    Senator Bill Nelson. So, the answer is yes--and the 
question is, the rest of the world expects us to lead in 
mandatory reductions.
    Ms. Dobriansky. In this regard, I would say that they're 
looking to us for our leadership, and leadership that could 
bring us all to the table and bridge consensus.
    Senator Bill Nelson. All right, let's try to----
    Ms. Dobriansky. And toward that end----
    Senator Bill Nelson [continuing]. Bridge some of that 
consensus with China and India as greenhouse gas emitters. Now, 
you mention that we had taken steps to do that. What specific 
steps have we taken? You just mentioned we had taken steps. 
Specifically, what?
    Ms. Dobriansky. Meaning, in terms of the Major Economies 
Meeting----
    Senator Bill Nelson. China and India.
    Ms. Dobriansky. China and India have been part of our 
discussions in the Major Economies Meeting. This affords an 
opportunity for looking at a way forward, a way forward in 
bringing them into a global agreement and also our having a 
part in a global agreement. And here, as I've indicated, one of 
the approaches under discussion--and there are a variety of 
approaches under discussion--is to have the differences of our 
national characteristics put on the table, and then to look at, 
how does one come forward with approaches that are going to be 
accountable and that will be, in fact, complied with? If you 
have midterm goals established, you have national plans, you 
will have domestic laws, which you can ensure enforcement. This 
is one of the dilemmas and one of the challenges that we are 
confronting. And, as I've indicated, this is one approach that 
we've put on the table, but there are other approaches. In 
order to be really effective here, and to make a difference, it 
has to be global, and it has to be environmentally effective.
    Senator Bill Nelson. Final question. Are you personally 
committed to hand off to the next administration, and to work 
with the next administration, in order to achieve the strongest 
possible 2012 post agreement?
    Ms. Dobriansky. Senator, I'm personally committed. And, may 
I just add, I have taken the personal time and effort to hear 
the views of a wide variety of interlocutors from the business 
community, from civil society, from some of the representatives 
who are even here today who will be speaking later; our 
panelists. Having a discussion and trying to come forward with 
a way that will bring us all around the table and for a global 
agreement that's effective, we are committed to.
    Senator Kerry. Senator Hagel.
    Senator Hagel. Mr. Chairman, thank you.
    Madam Secretary, welcome.
    Ms. Dobriansky. Thank you.
    Senator Hagel. Secretary Dobriansky, you and I have, on 
many occasions, had many of these same conversations. And I 
wanted to refer back to the general theme of Senator Lugar's 
comments, because I think what he has focused on--and, as you 
know, through our previous conversations and some of what you 
talked about in the Asia Pacific Framework and the technology 
sharing public-private partnerships--came as a direct result of 
my legislation that was the environmental title of the Energy 
Act of 2005. I have always believed that we cannot 
realistically talk about, look at, environmental policy without 
integrating energy and economic policy. And I think much of the 
discussion today reflects that point. And so, as Senator Lugar 
took you through a number of those issues, I want to reflect 
on, generally, the integration of those three components; 
specifically, on what you can tell us might be the form that we 
will see begin to shape in Bali with the integration of those 
three dynamics. The President of China, for example, I think, 
in September at the APEC meeting, said--and I think it was 
rather--this direct--that China would not be held hostage to 
any mandatory requirements on the issue of emissions--carbon 
emissions. Now, I assume that the President of China speaks for 
China and reflects China's position, as was the case in 
Indonesia, as will be the case in Bali. So, how and what form 
are you going to integrate all of this so that, at some point, 
we are going to hopefully come out of Bali with something 
tangible, productive, and positive?
    Ms. Dobriansky. Well, two comments.
    First, in terms of Bali, I think that, as I've indicated, 
our fundamental goal and objective is to identify what are the 
core elements that we need to address in a post-2012 framework. 
We need to have a process forward, and we need to identify ways 
of advancing and pushing that process forward, because, 
clearly, going to Bali, there are differing viewpoints about 
how one is committed. The one fundamental goal and objective 
that we have going into this is to have a global agreement that 
is environmentally effective, as I've mentioned, and 
economically sustainable. And, by putting forward the Major 
Economies Meeting, we're striving to bring these countries, 
that are 80 percent the biggest energy users, 80 percent in 
terms of their economic output, and also 80 percent emitters, 
to forge the most robust and effective way of reducing 
emissions. You're quite right in stating--and as I have 
mentioned previously to Senator Nelson's question to me--we 
have posed the question to a number of developing countries, 
``Well, what if we took on certain measures? What would you 
do?'' Here, technology matters greatly. Economic growth matters 
greatly to the developing world. We think that there's a dire 
need to look at the most innovative and practical ways of 
bringing these countries in.
    Why I cited the Asia Pacific Partnership earlier and as 
you've indicated, we've had conversations about this, and given 
your legislation, we have tried to have practical ways of 
bringing other countries into this fold to see that there are 
benefits to be accrued from taking very concrete and tangible 
steps that have economic consequences. These steps also have 
consequences in terms of energy security, and at the same time, 
by the way, will also reduce greenhouse gas emissions, which is 
part of our goal and objective.
    What I can say to you is, is that our effort is to try to 
get a successful roadmap and to try to work vigorously with all 
of these partners, particularly the emerging countries, to 
address the kinds of concerns that they have.
    If I may give one more example, we put forth the--President 
Bush announced the formation of an International Clean Energy 
Fund. Why? Because there's a need to have others come forward, 
including developing countries to provide investments in this 
area. It's not only in their interest, in our interest, it's in 
the world's interest, it's in the planet's interest, 
specifically. Those are the kinds of initiatives that we are 
trying to come forward with.
    I would say that there is a dire need for innovation here. 
We welcome this opportunity to come forward and have this 
discussion, and to continue it, because innovation is really 
needed as we go forward.
    Senator Hagel. Thank you, Madam Secretary, Mr. Chairman.
    Senator Kerry. Thank you very much, Senator Hagel.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Madam Secretary, in the Asia Pacific Partnership Meeting 
that you've talked about often, this past February, you said, 
``The U.S. policy is a mix of mandatory/voluntary/tax-incentive 
measures to address climate change. We believe climate policy 
should be science-based.'' And, in that regard, we welcome the 
recent release of the Intergovernmental Panel on Climate 
Change's fourth assessment report.
    Now, before, in response to Senator Kerry's question, what 
mandatory aspect of this were you referring to? Because, as far 
as I know, the administration has never supported any form of 
mandatory provisions. And certainly not what you were referring 
to before; those are goals.
    Ms. Dobriansky. The administration has supported mandatory 
measures, domestically. That's what we are referring to in 
this----
    Senator Menendez. Which----
    Ms. Dobriansky [continuing]. Case.
    Senator Menendez [continuing]. One, specifically.
    Ms. Dobriansky. Specifically, President Bush has put 
forward, here, to the Hill, the ``20-in-10'' proposal, about 
having a 20-percent reduction in 10 years on gas consumption. 
We have building code standards----
    Senator Menendez. Those are goals. They're aspirations. The 
question is: What mandates does the administration support that 
actually puts the bite to ensure that, in fact, any 
aspirational goal is achieved? None that I know of. Correct me 
if I'm wrong.
    Ms. Dobriansky. As I said, Senator, even Senator Kerry 
referred to, before, the Clean Air Act. We just came back from 
negotiating----
    Senator Menendez. Well, the Clean Air----
    Ms. Dobriansky [continuing]. The Montreal Protocol----
    Senator Menendez [continuing]. The Clean Air Act is the law 
of the land. I'm asking you----
    Ms. Dobriansky. The Montreal Protocol--my colleague just 
came back from negotiating that, which has binding commitments. 
There are a number of areas that have been----
    Senator Menendez. Well, I----
    Ms. Dobriansky [continuing]. Part of our mandate.
    Senator Menendez. With all due respect, I think that----
    Ms. Dobriansky. We have Federal standards, in terms of 
building codes----
    Senator Menendez. With all due respect, I think that those 
are aspirations--you know, the----
    Ms. Dobriansky. I'm not aware that----
    Senator Menendez [continuing]. The bottom line is----
    Ms. Dobriansky [continuing]. Those are aspirations. I've 
seen a significant change, in terms of our building codes----
    Senator Menendez. Bottom line, I think it's fast and loose 
to suggest that mandatory, as you described, is, in fact, 
mandatory in any consequential way to the ultimate challenge we 
have.
    Let me ask you this. How is it that you talk about science-
based, when scientists are telling us that we need to cut 
emissions 80 percent by 2050, and there's nothing that the 
administration has put forth that would meet that challenge?
    Ms. Dobriansky. Senator, science informs our policy, but we 
look at a broad range of issues in determining what are the 
most effective policies. We look at what are economic 
components of our policy, what might make a difference, where 
jobs may not be cut or other----
    Senator Menendez. So, it's science-conditioned.
    Ms. Dobriansky. No; I wouldn't say that. I think that one 
of the appeals made by science is indicating that the Earth is 
warming and that also humans are contributing to it.
    Senator Menendez. Well, let me ask you this.
    Ms. Dobriansky. We're looking at approaches that address 
those----
    Senator Menendez. You consistently----
    Ms. Dobriansky [continuing]. Kinds of concerns.
    Senator Menendez [continuing]. Refer to costs, but you only 
talk about the costs of action. Why is it that you fail to talk 
about the costs of inaction and quantify that as part of the 
equation?
    Ms. Dobriansky. By the way, when the Stern report came out, 
one of its main appeals was, we need to act now, and that there 
are costs of inaction. And, by the way, we think that there 
should be near-term steps taken now, there shouldn't be costs 
of inaction. We should take near-term steps, medium-term steps, 
and long-term steps. We commented on the issuance of the Stern 
report, which made that appeal.
    Senator Menendez. Well, if I were to listen to just about 
every--every time I've heard the administration speak, you 
would hear the manner of exorbitant costs that would be imposed 
on business and consumers. There's very little discussion about 
the costs of failure to act, yet we know rising sea levels will 
be an enormous expense for all of the coastal States of this 
country, including my home State of New Jersey. And, we know 
that Sir Nicholas Stern has estimated that failure to act could 
actually shrink the global economy by 20 percent. And we know 
that every dollar spent now would save us five or more later 
on. That never seems to be something that I hear about in the 
balance of the equation of costs.
    Let me ask you this.
    Ms. Dobriansky. Senator, may I----
    Senator Menendez. Do you think----
    Ms. Dobriansky [continuing]. May I just respond to that, 
though?
    Senator Menendez. I----
    Ms. Dobriansky. Because my mandate----
    Senator Menendez [continuing]. I heard your----
    Ms. Dobriansky [continuing]. Is not----
    Senator Menendez [continuing]. Response.
    Ms. Dobriansky. My mandate is----
    Senator Menendez. Basically, it's not----
    Ms. Dobriansky [continuing]. International----
    Senator Menendez [continuing]. Part of it.
    Ms. Dobriansky. No; but it's important. My mandate is 
international. And we have put some $37 billion into efforts 
that support a wide range of initiatives--carbon sequestration, 
methane, hydrogen, renewables, nuclear--that are international. 
We are acting now, we are engaging others. My mandate----
    Senator Menendez. Let me----
    Ms. Dobriansky [continuing]. Is not domestic.
    Senator Menendez. Let me ask you this. You keep referring 
to the developing countries. And you know, carbon dioxide stays 
in the atmosphere for an average of 100 years or more. 
Industrialized nations clearly are, by far, more responsible 
for current greenhouse gas emissions concentrations than 
developing nations. So, then, why should we expect developing 
nations to agree to mandatory cuts, when, historically, they 
are much less responsible for the problem that was created by 
industrialized countries? In other words, why are we constantly 
hearing from the administration that we look to developing 
nations for leadership on an issue that developed nations 
created?
    Ms. Dobriansky. Senator, there are two key points here. One 
is, in order to really have an impact on the reduction of 
greenhouse gas emissions, an effort forward must be global; No. 
1. No. 2, in terms of obligations--by the way, I've indicated 
that we should be sensitive to the diverse characteristics of 
individual countries. And let me just add that, in terms of the 
character of commitments, all countries have responsibility, 
but, in terms of the content, I would say to you that that 
content must be differentiated. There are countries that should 
take on and shoulder greater responsibility. That will be part 
of our discussion as we go forward from here.
    Senator Menendez. Well, let me just close by saying, we 
can't, in a sense, lead in so far as the concern that other 
countries will not act accordingly. You know, it seems to me, 
if you look at Senator Lieberman and Warner's bill, and any 
possible cap-and-trade bill, that they will allow for tariffs 
to be placed on imported goods from major emitters who do not 
have adequate measures to cut their own emissions. In this way, 
our own domestic cuts will provide international leadership and 
incentives for developing countries to act.
    What I largely hear, to be very honest with you, is that, 
as the world heats up, we meander down a cool path in which I 
hear a lot of wordspeak, but I don't hear a lot of leadership 
that creates any real action. And, at the end of the day, that 
leads us to a consequential path in which we will have a fatal 
result. And that's not something we should be bequeathing to 
the next generation of Americans. I listened to your answers, 
but I'm not sure where we're headed under real leadership.
    Thank you, Mr. Chairman.
    Senator Kerry. Thank you, Senator Menendez.
    And, as I turn to Senator Corker, let me just comment on 
the Montreal Protocol we passed in 1992, I think, if I recall 
correctly, and DuPont and others were screaming for us to pass 
it, because they had an alternative, and the companies 
basically wanted to move there. So, it's reassuring to know you 
didn't want to move back on it. But it's hardly this 
administration's mandatory request or requirement.
    Senator Corker.
    Senator Corker. Thank you, Mr. Chairman.
    And, Madam Secretary, thanks for your testimony.
    It is interesting to continually sort of feel this 
conundrum that we're in, where, you know, we don't want to take 
a leadership role, because other countries might not play a 
role. And setting all of that aside, if you could be the czar, 
if you will, and lay out what an agreement in 2009 should look 
like, what would be the basic components of that agreement, 
setting aside this conundrum, if you will, that we continue to 
talk about?
    Ms. Dobriansky. Well, in terms of taking a leadership role, 
our goal and objective here is to have, as I've indicated----
    Senator Corker. No, no, no; I'm not talking about goal, I'm 
talking, like, specific----
    Ms. Dobriansky. Specific----
    Senator Corker [continuing]. Attributes. Yeah, I mean, I 
understand about the goals and all that. But what would be the 
specific attributes that countries around the world would agree 
to as it relates to lowering carbon emissions?
    Ms. Dobriansky. Well, I was going to say--I wasn't using 
the term ``goal''--goal out of Bali, that's what I was going to 
say.
    Senator Corker. OK, yeah.
    Ms. Dobriansky. Not literally a goal, in the sense that 
you're referring to.
    Look what other countries have focused on. They want to 
discuss mitigation, adaptation--adaptation is critical in this 
upcoming meeting. Adaption has not--in previous COP meetings--
has not really taken on the significance or the prominence, 
that is requested by many developing countries. Why does that 
matter? Because adaptation measures are measures that will 
especially build capacity and help developing countries in 
dealing with climatic change. We have embraced that. We have 
indicated that we would like to see stronger measures taken in 
the area of adaptation. That is one of the areas that they 
have----
    Senator Corker. Let me----
    Ms. Dobriansky [continuing]. Identified.
    Senator Corker. Let me focus. And I apologize. We just have 
limited time.
    Let's just focus on mitigation only, and let's talk about 
the attributes there, that if you were the czar and could set 
all the rules in play that the United States and Europe and 
Asia and other players would be a part of, what would those 
attributes be, of mitigation?
    Ms. Dobriansky. Well, in terms of attributes of mitigation, 
we would like to see all countries have responsibility for the 
character of a framework and its outcome. In terms of the 
content, we would see it as being differentiated, and that 
would be contingent upon countries' different circumstances. We 
would like to see domestic laws. One of the challenges here has 
been in terms of compliance and accountability. Even if you 
have a global framework, if a particular country is not meeting 
its requirements, then how do you enforce particular measures 
in that country? So, that's the kind of discussion that we are 
having. How do you get compliance? how do you get 
accountability? and how do you get countries at the table?
    One of my colleagues gave a----
    Senator Corker. Let me just ask you the--so, you would not, 
then, be talking about some global exchange with carbon, some 
cap-and-trade system that emerges, where the world is involved 
in that. That would not be----
    Ms. Dobriansky. Some have put forward that suggestion, but 
let me say that there are those who have spoken to this issue. 
I know----
    Senator Corker. But I'm asking you----
    Ms. Dobriansky. I'm going to----
    Senator Corker [continuing]. Not----
    Ms. Dobriansky. I'm going to respond.
    Senator Corker. OK.
    Ms. Dobriansky. That some have spoken to this issue, like 
Jeffrey Sachs who recently has looked at the developmental 
consequences of such an approach. How can you verify it? How 
can you ensure that there is accountability? We are looking at 
a variety of approaches, which come back to the basic concept 
of getting results and effectiveness.
    Senator Corker. If we had troubles getting other countries 
involved, and we decided, as a country ourself, to be involved 
in a cap-and-trade program, would tariffs on their goods coming 
into our country be something that you would find that 
interesting, if they were not a part of a regime like that 
themselves?
    Ms. Dobriansky. I--would you----
    Mr. Reifsnyder. Well, no, if I just could mention, Senator, 
because it may be illustrative, in the--at the Montreal 
Protocol meeting in India last year, which India hosted, they 
were quite critical of those aspects of the Montreal Protocol 
that provide for trade sanctions. And this kind of--the notion 
that we could unilaterally take on a cap on our emissions and 
then threaten people with trade sanctions who didn't comply has 
not been a very popular approach over the years in the U.N. 
Framework Convention on Climate Change. I think it's one of the 
things that makes people quite nervous about meetings like 
Bali, when they feel that they're being threatened with 
sanctions if they don't agree to the approach someone else has 
laid out for them. I think we have to build a cooperative 
approach to this.
    Senator Corker. Does anybody--do you all work with the 
Energy Department very closely? I've found a--but on this 
particular issue as it relates to----
    Ms. Dobriansky. Very closely, as I--as I indicated, when 
we--when we go to COP meetings, we have a Department of Energy 
representative. When we launched the Major Economies Meeting, 
the Department of Energy has been a key player. In fact, 
Senator Menendez mentioned mandates, were many of the mandates 
here--building codes, Federal appliance efficiency, Federal 
renewable fuels, Federal fuel economy, CAFE, all of these are 
mandated--have mandatory standards. The majority of them have 
mandates that have been brokered through the Department of 
Energy.
    Senator Corker. Do any of the folks at Energy look at a 
potential cap-and-trade program? And I only focus on this 
because I know that's more immediate, if you will, as it 
relates to our focus, because of some bills that are emerging. 
Do any of those people look at cap-and-trade as an opportunity 
for our country as it relates to energy security?
    Ms. Dobriansky. There's a discussion and a debate that's 
going on, as you know, about this, on the issue of cap-and-
trade, and there have been reservations and serious concerns 
expressed by the administration because of the ramifications of 
cap-and-trade domestically--the ramifications on our economy, 
and the ramifications for companies putting investments into 
technologies. There have been a number of issues that have been 
of concern, that have been expressed by those on the domestic 
side.
    Senator Corker. Thank you. And I apologize for trying to 
focus just during this 7 minutes, but thank you very much for 
your testimony.
    Ms. Dobriansky. Thank you.
    Senator Kerry. Thank you, Senator Corker. I think it's been 
good to try to get that focus.
    Senator Casey.
    Senator Casey. Mr. Chairman, thank you very much. And thank 
you for putting this hearing together for us. It's very 
valuable.
    Madam Secretary, I just want to make a brief statement, in 
summary fashion, but then also get to some questions.
    And this is, of course, my opinion, but I think it's widely 
shared opinion, and I think it--it's the point of departure, 
when you begin a discussion about climate change 
internationally or our responsibilities here in the United 
States.
    I think this discussion, with all the details in between, 
they're all important, and the players are all important. But 
this discussion begins and ends with the President of the 
United States, and this President. And, unfortunately, no 
matter how you--no matter how I look at this issue, when you 
consider what President Bush has said or not said, actions he 
has taken or not taken, just look at his calendar for the last 
couple of years, there's a palpable sense--or, I'd say, a 
palpable reluctance or a sense that you have of his own 
reluctance. I don't really get a sense that he believes this at 
all, that he really believes this is a threat to human life. We 
can talk about the environment in a very abstract way, but a 
threat to human life, and that this is a major priority, maybe 
in the top two, maybe three, of any President of any 
administration of any Congress. I don't get that sense at all 
from this President. I don't know what he believes, really. I'm 
not sure he really believes that it is the threat that I 
believe it is. There's no sense of urgency. I mean, this is a 
President who, on many issues where people don't--people 
disagree with him, there's a clarity when he speaks about some 
things. You know exactly where he stands.
    And on this issue, there's no sense of clarity, there's no 
sense of commitment or urgency or intensity. Pick your word, 
it's not there with this President. So, you've got a tough job 
on your hands, because I don't get the sense at all that this 
administration is committed to anything you're talking about, 
unfortunately. And I know that there are administrations of 
both parties that have that problem, where the people in the 
trenches, whether you're an Under Secretary of State or whether 
you're much further down in the pecking order, that you're 
doing things that are about trying to manage that imbalance or 
that inconsistency between what should be done and what maybe 
the Department of State would want to do and what the President 
doesn't want to do. That's my own opinion. But I think it has a 
direct connection to what we're talking about here.
    I mean, we're talking about an administration--let me just 
ask you, just a parenthetical management question. Who's the 
top person in the State Department on this issue? You're that 
person?
    Ms. Dobriansky. Right.
    Senator Casey. Now----
    Ms. Dobriansky. Correct.
    Senator Casey [continuing]. Other than you and Secretary 
Rice--I'll leave the President out of this for a brief moment--
other than you and Secretary Rice, who else would you identify 
as the top people in this administration on climate change 
internationally. Let's set aside the domestic considerations.
    Ms. Dobriansky. On international issues, we also have 
Deputy Secretary John Negroponte. He was previously the 
Assistant Secretary for Oceans Environment and Science--he 
cares a great deal about these issues. There is the Chairman of 
the Council on Environmental Quality, Jim Connaughton; the 
Deputy National Security Advisor for International Economic 
Affairs, Dan Price; and Steve Johnson, the Administrator of the 
Environmental Protection Agency. We also have worked very 
closely with the Department of Energy, and its Secretary, Sam 
Bodman, and his----
    Senator Casey. OK.
    Ms. Dobriansky [continuing]. Team; and the President of the 
United States.
    Senator Casey. OK. How long have you been in this job?
    Ms. Dobriansky. I have been in this job since the beginning 
of this administration. I came in----
    Senator Casey. OK.
    Ms. Dobriansky [continuing]. On May 1 of 2001.
    Senator Casey. In all the time that you've had this job, 
how many times were those individuals listed--how many times 
were those people in the same room with the President of the 
United States for a--not just a briefing, but a substantial 
meeting about these issues?
    Ms. Dobriansky. A very significant number of times. In my 
first year, prior to----
    Senator Casey. How many since you've been there?
    Ms. Dobriansky. Oh, I can't quantify, because we've had so 
many meetings on----
    Senator Casey. With the President of the United States.
    Ms. Dobriansky. Some which have included the President of 
the United States. My first year, the issue of climate change 
was nonstop, in terms of meetings at the White House, and that 
was, I was just about to say, before September 11.
    Senator Casey. Well, if you can provide to the committee, 
as part of our record, the dates on which all those individuals 
had a meeting with the President of the United States on this 
issue, I think that's important for the record.
    [The written response of Under Secretary Dobriansky to the 
above question follows;]

    Climate change comes up frequently as part of the President's 
regular business. While I cannot speak to the wide range of officials 
that you have listed, I can say that I have attended a number of 
meetings convened by the President on climate-related matters. Most 
recently, before this hearing, I joined Secretary Rice for a policy 
discussion with the President on September 20. And, as you know, the 
President hosted the Major Economies Meeting on Energy Security and 
Climate Change on September 27-28, 2007. In addition, climate has been 
discussed in various bilateral and multilateral meetings, for many of 
which I joined the President. Two of the most significant meetings were 
the U.S.-EU summits and the G-8 meetings.

    Senator Casey. And I was looking at a--this is a list of 
principles that our office put together when we talk about this 
issue, just basic foundational principles on climate change 
that guide me, because there's a lot of legislation out there 
and a lot of ideas. But, let me just give you the top three, in 
this order. No. 1, make mandatory--mandatory greenhouse gas 
emissions. No. 2, reduce greenhouse gases at rates and levels 
identified by the international sciences of 80 percent by 2050. 
And, No. 3, take immediate action--immediate action to reduce 
emissions in the short term.
    Here's the problem I have. They are three basic goals that 
I think are widely shared around the country, widely shared in 
the Senate and the House in both parties. I come from a big, 
big State, a big, diverse State. And I think those principles 
are generally agreed to. I don't have any polling to show that, 
but I can't imagine there isn't broad support for those. And 
here's the problem. You're asserting here before this committee 
that the President of the United States, who a lot of people 
don't believe has a real commitment to this--he doesn't agree, 
and your administration doesn't agree, with any of those three, 
or maybe one of those three, I'm not sure which. So, how can 
the President be an effective international leader on climate 
change when he isn't leading a consensus on climate change in 
the United States of America? I don't know how that works. If 
you can tell me, I'd--I'm--I've got 20 seconds left, I want to 
ask another question.
    Ms. Dobriansky. In 20 seconds, Senator, my mandate is 
international. I work very closely with my colleagues on the 
domestic side. And I'd like to respond to your question, 
actually, for the record with that, and involve my domestic 
colleagues because there's a very strong effort, domestically, 
in charting a course for the United States. I've tried to 
indicate what we're doing internationally, which--a substantial 
amount has been put into it over these years, and the breadth 
and the scope is really significant, in terms of carbon 
sequestration, methane among other areas. My colleague just 
came back from a meeting in Norway, and he told me that, 
actually, many of the interlocutors there were even amazed at 
the kinds of steps being undertaken in dealing with one of the 
most potent sources of greenhouse gas emissions--methane.
    Simply put, I would say to you that, in my longer 
testimony, if you look through that, you will see the scale and 
the scope of the kinds of initiatives that we are taking, and 
that we have been engaging other countries on, and in which we 
are very committed to this issue.
    Senator Casey. Well, we need Presidential leadership, but 
we'll--my time is up.
    Senator Kerry. Thank you, Senator Casey.
    Are we ready to go?
    Senator Murkowski. Ready to go? Thank you.
    Thank you, Madam Secretary, for your appearance here this 
afternoon. You know, we've had a fair amount of discussion 
about the mitigation aspect, a little bit about the technology, 
certainly Senator Hagel has been involved with that initiative 
through EPAct 2005. But I want to ask a couple of questions 
about the adaptation component that you have addressed. And you 
mentioned, specifically, the forestry adaptation.
    Certainly in my State, climate change is happening. We are 
seeing it, whether it is change in vegetation as it advances 
northward, whether it is the change in our fisheries--we're 
seeing different species of fish further north. Certainly, you 
see all of the articles about the thinning of the ice and the 
receding of the ice pack and the consequences, the impact, not 
only to the land, to the animals, to the water fowl that is out 
there, but the people that rely on them. So, for us, adaptation 
is very, very key. It's not some theoretical exercise. Senator 
Menendez mentioned that, in his State of New Jersey, with the 
coastline, potentially his constituents could be impacted. 
Well, my constituents are being impacted. I've got communities 
that are literally being washed out to sea as we speak. And 
yet, we--we're trying to advance legislation here within the 
Congress that addresses things from the domestic perspective, 
and we really are not focused on the adaptation component.
    So, I'm pleased to see that there is a--I guess, a greater 
focus as we move forward. I'm curious, though, how much has the 
discussion really centered on adaptation, and how will we be 
able to provide for this, financially? Take just one coastal 
village. We're looking at $120 to $140 million to move a little 
village. This is one small village in Alaska. What is the 
proposal, as we move forward? I noticed in the Framework for a 
Post-2012 Agreement on Climate Change, there is reference to--
in the adaptation section, ``a substantial package of financial 
support, including public and private funds, should be 
established.'' Certainly necessary. We're also going to need 
considerable capital as we develop the technologies, not only 
for this country, but the technologies that we will be required 
to help other countries with, perhaps the less developed 
nations. They're going to be looking to us for that assistance. 
To what extent--whether it's the adaptation or the technology, 
to what extent does the financing piece of this come into play? 
And what are the proposals out there for how we realistically 
can deal with these very, very difficult situations?
    Ms. Dobriansky. Senator, thank you. I'd like to make 
several points. First, as I indicated earlier, it is very 
significant that adaptation is put into the framework, and, at 
the same level of mitigation. Far too often, we have looked at 
mitigation, and mitigation alone. And what has been striking, 
in terms of the discourse in the recent meetings leading up to 
Bali is that there has been agreement that there is a need to 
address adaptation. So, first, this is where countries 
basically are.
    Second, in terms of the issue of funding, we have put in, 
ourselves, a significant amount of resources for practical 
approaches, starting with the basic approach of being able to 
determine and help those developing countries forecast and deal 
with climatic change. And how do you prepare for that? That's 
through the Global Earth Observation System of Systems, in 
which you have some 70 countries, and even over that, 
developing countries, in particular. We've put moneys into this 
initiative to try to help them in building capacity. That's not 
enough.
    Senator Murkowski. Who else is helping us with that 
financing----
    Ms. Dobriansky. I could provide you the list. It's 
significant----
    Senator Murkowski. Well, I know that----
    Ms. Dobriansky [continuing]. Of both----
    Senator Murkowski [continuing]. with the----
    Ms. Dobriansky [continuing]. Developed and developing of--
--
    Senator Murkowski [continuing]. With the Asia Pacific----
    Ms. Dobriansky [continuing]. A wide range----
    Senator Murkowski [continuing]. Partnership, the United 
States had kicked in their share, but there was some issue as 
to whether or not every--the other participants had made equal 
financial contribution.
    Ms. Dobriansky. There have been different contributions put 
in. There's a meeting coming up of the Global Earth Observation 
System of Systems in South Africa, in 2 weeks' time. Other 
countries have come forward and have put in resources.
    Mr. Reifsnyder. The European Commission, in particular, has 
been very supportive of this effort and has put a lot of money 
into the--GEO, the Group on Earth Observations, I should say.
    Ms. Dobriansky. But, third, that's not enough. What is also 
critical is looking for those most effective development 
strategies. We have worked very closely with the U.S. Agency 
for International Development in looking at how we deal, not 
only with issues of climate change, but how we also deal with 
development approaches to countries and in a way that's 
sustainable. One of the most graphic examples is dealing with 
forestry, because forestry has been looked--at mostly in a 
mitigation context. But, by the way, there are also these 
issues you hear from small island states--How can you help us 
in terms of our livelihood and ensure that we can use forests 
as part of our livelihood, and, at the same time, also preserve 
our forests? How do you balance the two? We look at these 
issues through a broader prism of development strategies in 
which we've put in significant resources.
    I'd like to mention--which I know you have an interest in, 
Senator--my colleague was in Norway, and they were discussing, 
in particular, adaptation measures in the Arctic and looking--
--
    Senator Murkowski. Is that going to be part of the Arctic 
policy that we advance, then?
    Mr. Reifsnyder. Yes; this meeting on Oslo last week was 
really concerned about not only carbon dioxide emissions as a 
factor, in terms of warming in the Arctic, but also on 
emissions of other gases; in particular, methane, volatile 
organic compounds, and black soot was another key focus. I know 
that they're concerned about melting of the Greenland ice 
sheet, about the melting of sea ice, and about release of 
methane from Arctic tundra.
    This was a very interesting opportunity, Senator, because 
we had countries there--in particular, Sweden and Norway--that 
knew very little, I found at the meeting, about our Methane-to-
Markets Partnership, and I detected a great deal of interest in 
that, in trying--in terms of addressing methane emissions as a 
way of trying to slow warming in the Arctic, in particular. So, 
it was a very positive outcome from the session.
    Could I mention, if I could, one other aspect? I've been--I 
was the person that was in Montreal in September that 
negotiated, on behalf of the United States, the accelerated 
phaseout of HCFCs under the Montreal Protocol, which has an 
enormous impact, 25 percent of Kyoto is what we anticipate is 
the CO2 equivalent, 3 gigatons. And it's been kind 
of disappointing to me to--that people have not really focused 
on the fact that this was a major step forward on the climate 
front. It has the potential, if we can find substances that 
have no global warming potential, or a much lower global 
warming potential, to be even bigger than the impact of Kyoto.
    So, I think it's important to keep in mind--I understand 
that Montreal Protocol is not the focus of our climate efforts, 
but the links between actions under Montreal Protocol and the 
climate that have a great impact on emissions of greenhouse 
gases.
    Senator Murkowski. Thank you.
    Senator Kerry. Senator Murkowski, thank you very much.
    We could easily have another round, but we don't have time 
to have another round. We have an excellent second panel that's 
been waiting patiently.
    Senator Bill Nelson. Mr. Chairman, I just want to enter in 
the record, if I may, a statement made by the Executive 
Secretary of the U.N. Framework on Climate Change, in response 
to the question that I had asked the witness on the United 
States committing to leading the development of the post-2012 
agreement in Bali. And this is what the Executive Secretary 
says. Senator Wirth is going to quote this in his statement, 
``Bali needs to launch a negotiating agenda, decide that 
negotiations need to begin on post-2012 climate-change policy, 
launch that process formally, decide what the main elements 
that need to be negotiated are, set a timetable for 
negotiations, and, like every good timetable, set an end date. 
That end date should be 2009.''
    Senator Kerry. Well said, Senator. And let me just, as I 
thank you, Secretary Dobriansky--and I do thank you, we're very 
appreciative of you being here; it's a very important dialogue, 
and, you know, this is not a ``gotcha'' process, it's really a 
sort of ``how do we get there'' process, and share our 
thoughts--but let me just underscore one thing, if I can, to 
you. You know, it is sometimes forgotten in some ways, because 
of the power of the Presidency, but we are a separate and 
coequal branch of government, and I know that the democratic 
majority of this Congress wants to proceed forward and show 
leadership on this. And it is my hope that we don't have two 
separate policies in Bali. We're certainly prepared to sit with 
you and talk about it, but we are also equally prepared to go 
there, to make sure that the rest of the world understands how 
serious America is about this, and how there is leadership in 
the waiting, if you will.
    You will not complete this task; 2009 will have a new 
administration of one party or the other, and a new President. 
But many of the people up here will still be here and trying to 
move forward on it. So, I think that's an important component 
of how we go at this, No. 1.
    No. 2, there really is a kind of disconnect on the 
leadership issue. I know those countries look to us when we 
have a discussion with them, and I've heard the Indians, and 
I've heard the Chinese--for 20 years, I've heard the Chinese 
tell us it's a conspiracy against their ability to grow, and 
it's a Western ability to hold them down. And that's now 
transitioned. They've got a new line on it. In fact, they're 
changing, quite significantly, on the issue, because they're 
seeing the consequences of their own sacred glaciers melting 
and rivers and other agricultural problems that are ensuing. In 
fact, China just announced some very significant mandatory 
steps with respect to their businesses. Now, whether they're 
enforced or not, that's the next measure. But they announced 
them, and they've set a goal of 36 miles per gallon for their 
vehicles, which is way ahead of where the Senate bill is. So, 
other countries are doing things that, if we were smart, we 
could just take and measure. Those are the measurements. They 
can be given credit for those things. This can be worked out in 
a way that doesn't diminish their ability to grow, and speaks 
to that fear and sense of conspiracy, all of which can become 
part of the mosaic of a global agreement that we're moving in 
the same direction. But if the United States isn't saying to 
them, ``Yes; we know your reservations, but this is what we 
have to do, this is the direction we've got to move in,'' it'll 
be like Senator Lugar said, it's just going to kind of drag on 
and to go anywhere. They're waiting for us to show that 
leadership.
    And the--I'd just close by saying this to you. You know, if 
we're all wrong, if every one of those scientists--everybody's 
wrong, and the figures aren't going to be what they are, and 
you've made the decisions to go down this road, what's the 
worst that's going to happen? Well, the worst that's going to 
happen is, you're going to have a whole bunch of new 
technologies, you're going to have cleaner air, you're going to 
have new jobs, the health of your nation will be better, you'll 
have reduced hospital visits for kids with asthma, you'll have 
unbelievably better agricultural practices, kids will be able 
to fish again in some places in America where they can't 
today--19 States, you can't fish, you're not allowed to eat the 
fish; 44 States, they have warnings against it. You can run 
down the list of these things. All those things improve, not to 
mention the national security of the United States, because, to 
deal with climate change, you have to deal with energy; and to 
deal with energy, it makes us more secure, less dependent on 
foreign sources.
    So, in every respect--that's the downside; if we're wrong, 
we've done all those good things. But if you're wrong, or those 
who resist this are wrong and don't show leadership, the 
downside is catastrophe, by everybody's measure.
    So, I think, as public people, we've got a big 
responsibility here, and I hope we're going to see the 
leadership in Bali--in ensuing days. And we're ready and 
prepared to meet with you any day, anytime, anywhere, to work 
through how we do this. But I think--you know, Nicholas Stern 
made it clear, every economist makes it clear, you've got to 
measure the downsides of the mitigation. Lisa Murkowski just 
talked about it: $140 million in Alaska for one village. What 
happens if that 20 inches to 55 inches of sea rise, at the 
current rate, that's without the Arctic glacier and without the 
Antarctic, and so forth, melting--you know, that's 40 million-
plus--50 million people displaced on the planet. Just that. 
Current expectation.
    So, I really think the urgency of leadership has got to be 
felt, and it would be so wonderful to have a sense of how the 
President feels--everybody knows how the President feels about 
Iraq, but they sure don't know how he feels about this. In 
fact, they think it's to the contrary. That's the distinction 
Senator Casey was talking about.
    So, we hope this can change in the next weeks. Maybe it 
won't, but we sure hope it can.
    Ms. Dobriansky. Senator, may I just make two closing 
comments?
    Senator Kerry. Absolutely.
    Ms. Dobriansky. I wanted to read--you know, I was 
previously with the Council on Foreign Relations before coming 
into this job. You gave a speech at the Council, and you had, 
``Our primary goal''--at least from your prepared text--``Our 
primary goal in Bali must be to arrive at a mandate for future 
negotiations to finally reach a truly global agreement on a 
truly global effort, not one that leaves the world's largest 
emitter of the past and the largest emitters of the future 
outside the system.''
    I want to say, in the spirit of what you're saying, we 
completely agree with that goal, that objective, going into 
Bali. I will look forward to continuing this discussion and 
thinking about, you know, in trying to reach that objective, 
how we can go forward in the most effective way. And there are 
multiple ways of doing that.
    The second point I just would like to make is the comment, 
you know, made before, about the President. The President has, 
I think, shown leadership in ways that I think need to be 
underscored; the fact that, at a time when we didn't have a 
global agreement and all parties at the table, that we did not 
go forward with that.
    In terms of the scale and the scope of the range--full 
range of what we're doing, my mandate is international. I may 
not know everything that we're doing domestically. I have 
colleagues that do that. But we are doing a significant amount 
that President Bush has blessed, has launched, has encouraged. 
And we want to continue along that path.
    As I said in my longer version of my testimony, it fully 
documents the scale and the scope of how we're using, and how 
we've used, some $37 billion toward that end.
    Senator Kerry. Well, let me give you an example of the kind 
of thing you might grab onto. And I appreciate those comments, 
and I stick by them. I think that's the goal. But I still think 
we have to lead to get there.
    Senator Stevens and I have introduced, on the Commerce 
Committee, a bill to immediately deploy three to five carbon 
capture and carbon storage plants. So, we have storage and 
sequestration, three to five of each--we ought to do this, 
immediately, commercial scale, as rapidly as possible. Now, I 
think if you went to Bali and embraced that, and said, ``The 
United States is going to immediately do this, and we're 
prepared to share the technology and assist China and other 
countries in order to implement it as rapidly as we know what's 
best,'' that would go a long way, in my judgment, to bring 
people to the table in a serious way. So, we hope you'd 
consider that and some other steps. We're about to spend $25 
billion in the farm bill for a program put in place in the 
1980s, called, you know, Freedom to Farm, which allows people 
who don't even farm to get huge payouts. How much are we going 
to put on the table in Bali to help with this technology 
development and these other practices? I think those are the 
issues of leadership here that we need to see. And so, we hope.
    I don't know if--Senator Lugar, I've monopolized. Thank 
you.
    We really thank you. This record will remain open in the 
event any Senators want to submit some questions.
    And we do look forward to testimony of the next panel. 
We're very grateful to you for coming. I look forward to 
following up with you before we go there.
    Ms. Dobriansky. Likewise. Thank you.
    Senator Kerry. Thanks so much.
    Thank you.
    Ms. Dobriansky. Thank you.
    Senator Kerry. Could we ask the second panel to come up? 
And we're very, very appreciative for your patience. It's a 
worthwhile engagement, and we look forward to your testimonies: 
Tim Wirth, who is a good former colleague of all of ours, and 
friend, and current president of the United Nations Foundation, 
who, I might add, has been unbelievably diligent and involved, 
and has traveled near and far in an effort to further these 
issues and others, and we're very grateful for his work and 
leadership; Richard Sandor, chairman and CEO of the Chicago 
Climate Exchange; and Jonathan Pershing, director of the 
Climate, Energy, Pollution Program at the World Resources 
Institute.
    Thank you all very much for being here.
    Senator Wirth, would you--Secretary Wirth.

  STATEMENT OF HON. TIMOTHY WIRTH, PRESIDENT, UNITED NATIONS 
                   FOUNDATION, WASHINGTON, DC

    Senator Wirth. Thank you very much, Mr. Chairman. And I'm 
delighted to be here and to see so many old friends.
    I must say, having been the climate negotiator for the 
United States from 1993 to 1997, the idea that there would be 
eight U.S. Senators showing up for a climate hearing is 
absolutely wonderful. At that point, we could get no attention, 
you'll remember, or very, very little attention, to the issue, 
with the exception of a few of you, and this is great.
    I thought, if I might put my statement in full----
    Senator Kerry. The full statement will be----
    Senator Wirth [continuing]. In the record, Mr. Chairman----
    Senator Kerry [continuing]. Put in the record for 
everybody. If you want to summarize, then we----
    Senator Wirth. I just would make three points that might be 
helpful to the committee. The first relates to Bali. Let me go 
back to the quote that Senator Nelson read from my testimony, 
which was a quote from Yvo de Boer, who is the executive 
secretary of the Framework Convention. Bali is a meeting not of 
substance, but of process. Where you all can be really helpful 
is in lowering expectations for Bali; this is not a meeting 
that's going to decide on targets, it's not going to decide on 
finance, it's not going to decide on the substance of the 
climate issue--it's a process meeting. And lots of people, 
including lots of political people, lots of press people, lots 
of NGOs, are steaming into Bali with enormous expectations 
about what's going to happen. This is a process meeting, and 
you all can be very helpful, it seems to me, at reflecting that 
and helping to lower expectations about what Bali does.
    We don't want the success of Bali to be termed, ``Oh, 
nothing happened, it was just another talkfest, they just 
talked process.'' Well, that's what it's designed to do, to set 
up a process. And I would say, while I've been critical of what 
the administration's done related to climate, what Paula 
Dobriansky laid out today has got it right. If they do what 
they say they're going to do in the administration and support 
that agenda, that'll be great, and we'll get in and out of Bali 
with a successful venture.
    The second item that might be helpful, Mr. Chairman, would 
be to reflect upon the Senate Observer Group, of which you were 
a part in 1992, and which is going to be extremely important 
for the long-term success of the climate negotiations. These 
negotiations--and Jonathan Pershing, at the end of the table 
here, was deeply engaged in them--are going to be extremely 
difficult, very, very hard, and very, very complex. Kyoto was 
tough enough. This is going to be even harder. And what happens 
in 2008-2009, with an enormous amount of material, very 
complicated material, how to order that material and how to 
explain that material, the Senate Observer Group can be 
extremely helpful in coming together to understand what has to 
be done, and then helping to explain it.
    Now, I cite that particularly out of personal experience in 
the fact that we failed dramatically, going into Kyoto, to have 
the kind of communication that was necessary between the 
administration and the negotiation process and the Senate. 
There was a total gap. There was almost no communication at 
all. And that occurred for a lot of very complicated reasons. 
Someday somebody will tell that story. It's not a very pretty 
story. But that's what did happen. And the result was the 95-
to-nothing vote, or whatever it was, which you point out was 
not a pro-or-con climate vote, it was really a vote on the 
process and a misunderstanding--nobody really knew what had 
happened, and there had been no groundwork laid leading up to 
Kyoto. That was a very, very big mistake. We would be very 
happy to work with you and others in establishing what could be 
done, how the Senate Observer Group can be helpful, and working 
that along--I think it's got to be an inside-outside job. I 
know there are a lot of people on the private side who would be 
very pleased to work with the Senate on that; it's a very big 
job that you have in helping this to happen and helping the 
negotiations in 2008-2009, when we really get to the 
substance--in helping those negotiations.
    The third point that I would make relates to the substance 
of the negotiation. The framework, which is now broadly agreed, 
is that the substance will have four pathways, or four pots, 
and they've been referred to today. Senator Corker was talking 
about mitigation, which is the first, and probably the most 
difficult. The second is adaptation--that is: How are we going 
to respond and adapt to what we've already built into the 
system, and anticipate what's coming down the line? The third 
is technology, which is just a piece of low-hanging fruit, 
waiting, it seems to me, for very aggressive congressional 
action. And the fourth is the issue of finance, which loops 
back around to mitigation. You know, you have to, Senator 
Corker, put a price on carbon. And when you put a price on 
carbon, the way those funds get distributed gives you the 
opportunity then to finance a number of the things that have to 
be done. And Richard Sandor, who knows an enormous amount about 
this, will be next on the agenda.
    But these four pathways, these four packages, each deserve 
attention and understanding in this international context. And 
the single most important part running all the way through that 
is a phrase that was referred to by Secretary Dobriansky, but 
which demands a lot of attention, and that's the idea that we 
all have responsibilities, but they are differentiated 
responsibilities. Common, but differentiated. Explaining to 
people that we all have responsibilities in working on the 
climate issue, but those are differentiated. Some can do more 
right now than others; some have a responsibility to do more 
right now than others.
    During Kyoto--and this is the final point that I would 
make--we were successful in two out of the three procedural 
pieces that we wanted to get done. The first was trading. 
Europeans were adamantly opposed to trading, and we got them 
over the ``want to'' line, and they agreed to do trading, and 
they're now, the world's strongest advocates for trading.
    The second one was sinks--that we should be talking about 
sinks. And there was great resistance to that. That is now well 
understood to be terribly important, particularly in the 
context of deforestation.
    The third, which we were unsuccessful on, was the point 
that you were raising, Mr. Chairman, and that's: How do we give 
others credit for what they're already doing and get them 
onboard as a partner? China is the perfect example, and I cite, 
in my testimony at some length, how we ought to be working with 
China as a partner in this negotiation, not viewing them as the 
enemy, not viewing them as somebody that we are going to be 
fighting with; but, rather, working to figure out how, with 
what they've already done on mileage standards, what they've 
already done on efficiency and so on, they get credit for what 
they're already doing, and slowly but surely, just as we're 
going to lead in some ways, they are going to have to lead in 
other ways as a model for the rapidly developing world, in 
particular. That should be a positive relationship, and not a 
negative relationship. And, again, what you all say, from your 
perspective on this committee with this responsibility and who 
you are as members of the U.S. Senate, the way in which you 
talk about ``common, but differentiated,'' and bring them 
onboard, is going to be extremely important. And that will set 
a tone, as well, for what the United States does in 2008 and 
2009, and, I think, will be extremely important for the outcome 
of these negotiations.
    Those are three summary points that I would make, Mr. 
Chairman. I hope that's helpful. And we look forward----
    Senator Kerry. Very helpful.
    Senator Wirth [continuing]. To working with you.
    Thank you.
    [The prepared statement of Senator Wirth follows:]

Prepared Statement of Hon. Timothy E. Wirth, President, United Nations 
                       Foundation, Washington, DC

    Thank you, Mr. Chairman, for inviting me to testify and for the 
outstanding leadership you have shown on this issue for many years.
    Climate change and the proliferation of nuclear weapons are the 
most dangerous challenges confronting humanity; at the United Nations 
Foundation we are deeply engaged with working toward solutions of the 
climate crisis, both in the U.S. and globally. The other major 
institution funded by Ted Turner, the Nuclear Threat Initiative, 
chaired by former Senator Sam Nunn, is dedicated to finding solutions 
to the nuclear issue.
    We particularly welcome the remarkable leadership that is being 
shown by United Nations Secretary General Ban Ki-moon, who has made 
climate change one of his top three priorities, and is relentlessly 
emphasizing the importance and urgency of action around the world. This 
week the Secretary General is traveling to Valencia, Spain, for the 
release of the synthesis report of the Intergovernmental Panel on 
Climate Change (IPCC). This report will sum up the findings of the 
three IPCC working groups, whose work has been released over the course 
of this last year. The clarity and forcefulness of this Fourth 
Assessment Report and its three important predecessors have clearly 
described the state of the science, and the consensus on the need for 
urgent action. The IPCC represents the U.N. system at its best and well 
deserves the Nobel Peace Prize that it is sharing with former Vice 
President Al Gore.
    The United Nations Framework Convention on Climate Change (UNFCCC), 
signed in Rio in 1992 by President George H.W. Bush and immediately 
ratified by the U.S. Senate, defined the treaty's objective as 
``stabilization of greenhouse gas concentrations in the atmosphere at a 
level that would prevent dangerous anthropogenic interference with the 
climate system.'' The Kyoto Protocol and the negotiations next month in 
Bali represent the world's continuing efforts to implement the 
Framework Convention and make it effective. The first commitment period 
under the Kyoto Protocol comes to an end in 2012, and the world's 
urgent task is to negotiate what comes next--preferably a new and 
comprehensive global agreement that puts us on a path to achieve the 
Framework Convention's objective.
    The negotiations leading to the 1997 Kyoto agreement were prolonged 
and extremely difficult, and our ambitions then were relatively modest 
compared to the challenge we face today. It will therefore be even more 
difficult and complex to reach agreement this time--but world opinion 
has shifted since 1997 with regard to the urgency of action and the 
scale of the threat, and we are optimistic that common ground can be 
found. To have an updated treaty implementation agreement in place by 
2012, however, we need to complete negotiations by the end of 2009, and 
allow time for ratification and implementation. To reach a new 
agreement by the end of 2009, we have to start immediately, and that is 
the objective of Bali: Not to conclude any deals, but to agree on a 
process and timetable that can be completed by the 2009 and 2012 
deadlines. Bali is a ``process'' meeting; its success will be measured 
by the consensus reached on process and timetable.
    Together with the Club of Madrid--a group of 66 democratic former 
heads of state and government--the United Nations Foundation this year 
convened a distinguished task force that we called ``Global Leadership 
for Climate Action,'' comprising former heads of government and other 
leading figures from 20 countries. The objective of this diverse group 
(facilitated by the extremely effective former CEO of the Global 
Environment Facility, Mohamed El-Ashry) was to develop and propose the 
outlines of a broadly acceptable global climate agreement. The 
resulting report, ``Framework for a Post-2012 Agreement on Climate 
Change,'' has been warmly received in international circles, starting 
with the G-8 Gleneagles Dialogue in Berlin in September. This very 
useful document, which we commend to your attention (and which I wish 
to include in the record), breaks the complex subject of climate change 
down into four key areas or ``pathways'' to agreement: Mitigation, 
adaptation, technology, and finance. We recommend that parallel 
negotiations proceed along each of these pathways during 2008 and 2009, 
in order to bring the world together on a new agreement and to make 
further progress in implementing the 1992 climate treaty. We are 
encouraged that our suggested framework--the four pathways--have become 
the almost universally agreed method of organizing the many complex 
issues that contribute to the substance and politics of the climate 
issue. We were further encouraged that this general framework helped to 
organize the Secretary General's high-level session on climate at the 
U.N. in September, and appears to enjoy broad support as we prepare for 
Bali.
    The substance of the debate over climate will not be resolved in 
Bali next month. Bali will be a success if all the engaged countries 
devise, agree upon and embark on a process that leads to a 
comprehensive new agreement for next steps in implementing the climate 
treaty. Yvo de Boer, the Executive Secretary of the UNFCCC, put it 
succinctly last week when he said: ``Bali needs to launch a negotiating 
agenda, decide that negotiations need to begin on a post-2012 climate 
change policy, launch that process formally, decide what the main 
elements that need to be negotiated are, set a timetable for 
negotiations, and like every good timetable, set an end date . . . The 
end date should be 2009.''
    Ultimately, the agreement which must be negotiated in 2008 and 2009 
must be comprehensive. It should include all countries, all sectors, 
all sources and sinks, mitigation as well as adaptation, technology 
development and sharing, and adequate and innovative finance 
mechanisms. However, ``comprehensive'' does not mean ``one size fits 
all.'' Targeted agreements--for example, on industrial energy use, 
energy efficiency, renewable energy, and technology cooperation--should 
be encouraged and incorporated within a new comprehensive agreement, 
and these agreements could encompass a much broader array of countries 
than those who immediately commit to an emissions cap. Sectoral 
agreements--also developed within the global U.N. agreement--should 
also be encouraged: Autos, cement, steel, and utilities should be on 
everyone's early lists.
    The Framework Convention established the principle that countries 
should address the climate challenge ``on the basis of equity and in 
accordance with their common but differentiated responsibilities and 
respective capabilities.'' Developed countries should take the lead 
because over many years they have contributed the most to the buildup 
of greenhouse gases in the atmosphere. Meaningful engagement of 
developing countries, especially the rapidly industrializing economies, 
is needed also. But requiring all countries to achieve the same 
percentage reduction in the same time period would be unfair, and 
frankly impossible. The developed countries put the carbon into the 
atmosphere to start with--we were the first to use the atmosphere as 
our carbon garbage dump. The effects of our dumping are now being felt, 
and our task is to change our habits and help the world to adapt to the 
problems we largely have created, while encouraging others--like China 
and India--to avoid our bad habits and embark over time on the same 
low-carbon path that we should be pursuing now.
    This key issue--who has what responsibility, and when do 
obligations kick in--is the central issue in the climate negotiations--
in Bali and beyond--and it will also be critical to the future Senate 
ratification of any new climate protocol. We must be flexible enough to 
recognize and accept the value of diverse approaches to the climate 
challenge.
    For example, China may not accept an immediate cap on its 
emissions, but should be encouraged and credited with the important 
actions it has already taken: Setting a target of improving its energy 
efficiency by 4 percent per year, imposing fuel economy standards that 
are stricter than those of the U.S., and moving to double its renewable 
energy capacity (to 15 percent) by the year 2020. Those steps will 
significantly reduce Chinese emissions in real terms, while putting 
China on a path toward a lower carbon economy. Like the U.S., China is 
learning how to cope with the looming climate crisis, but unlike the 
U.S., China has made relatively little historic contribution to the 
level of carbon in the atmosphere. Like the U.S., China is a global 
leader, and in dealing with the climate crisis, should become our 
partner, not our adversary. The U.S. can help to lead in many areas: 
Technology, economic transformation, sectoral modernization. China can 
help to lead in others, serve as a model and challenge, especially to 
others in the rapidly developing world, and together we can demonstrate 
that the climate crisis can be an opportunity, and reflect everyone's 
self-interest.
    Mr. Chairman, this committee (and the Senate Observer Group, which 
I hope will continue to work together well after the climate 
negotiations in Bali) can make a number of very significant 
contributions:

   You can help your colleagues, the administration, the press 
        and the country to understand the issue of equity and 
        responsibility that I have just discussed. How we implement the 
        key treaty commitment ``Common but Differentiated'' will be 
        central to the success of our efforts. This will require 
        patience, understanding, diplomacy, and time, as well as a lot 
        of negotiation, and you can help.
   You can also help to clarify the context of the climate 
        negotiations. Of special note are two elements:

      1. The state of science and the fact that the debate is over 
        about man's effect on the climate. The questions now are how 
        much, where, how fast, and of course, what do we do next?
      2. Pricing carbon: The sooner we get agreement on pricing 
        carbon--the atmosphere should no longer be treated as a free 
        garbage dump--the more rapidly we can make progress on the 
        complex negotiation that lies ahead.

    Finally, let me briefly outline some of the key, immediate issues 
along the pathways for the negotiation, and again commend to you the 
framework which we have developed in cooperation with the Club of 
Madrid:

   Mitigation: In the area of mitigation, of special concern 
        and opportunity is the treatment of forests, an issue of the 
        greatest importance for the developing world. Will countries be 
        rewarded for protecting the great carbon sinks in their natural 
        forests, for replacing forests and planting new ones? How can 
        we use carbon credits without destabilizing the carbon markets?
   Adaptation: Since there is enormous inertia in the climate 
        system, significant effects of our climate-forcing pollution 
        are inevitable and largely irreversible. The world will have to 
        adapt to a changed climate, and the poorest countries will be 
        hardest hit, with the least resources to cope. New drought-
        resistant crops will be needed; so will new methods of storing 
        and using water efficiently. How will rich countries step in to 
        help?
   Technology: Technology development and deployment is 
        essential to reducing carbon emissions at an acceptable cost. 
        Yet U.S. and global spending on energy research and development 
        is a small fraction of what it was more than 25 years ago. The 
        United States Government should make a major commitment to 
        restoring RD&D investment--an immediate doubling or 
        quadrupling, especially to accelerate the deployment of high-
        priority technologies in such areas as carbon capture and 
        sequestration, second-generation biofuels, and a modernized 
        electric power system. How can the U.S. and others collaborate 
        effectively with developing countries on the development and 
        deployment of new sustainable energy technologies?
   Finance: The world will not transition to a new system of 
        energy technologies without massive investment, in the 
        trillions of dollars over the next 30 years, and how we price 
        carbon is fundamental. Further, with the right public policy 
        signals, the private sector will be central, and the public-
        private partnerships will be indispensable. Private investors 
        are unlikely to finance protection of the shoreline and other 
        critical infrastructure against rising sea levels, and will be 
        cautious about investing in sustainable energy development in 
        the poorest countries. But private expertise, innovation, and 
        technique will be absolutely essential. What combination of 
        innovative finance, carbon credits, and direct assistance will 
        catalyze the most rapid progress?

    Leadership by the United States remains central, and the most 
important step we can take is at home--by putting a price on carbon, 
either through a cap-and-trade system or through a carbon tax. The 
progress on the Lieberman-Warner bill is extremely heartening in that 
regard. It is important to note that the purpose of a price on carbon 
is not to bring about higher energy costs to consumers. Rather it is to 
set the rules of the game in such a way that clean technologies can 
compete with dirty ones, and indeed, over time, out-compete them. This 
will lead to a great wave of innovation, investment, economic 
development and job creation--which the U.S. has historically done 
better than anyone in the world.
    For many years this committee has promoted U.S. reengagement in the 
global climate negotiations. Constructive reengagement will change the 
dynamics of the discussion and create the basis for success. Now the 
committee, and the Senate more broadly, needs to prepare for that 
success by setting out clear and realistic expectations (on a 
bipartisan basis) for next steps on implementing the climate treaty, so 
that a new agreement can be quickly ratified and implemented by the 
United States. These negotiations will certainly continue at least 
until the end of 2009, and your guidance and political judgments will 
be extremely important and valuable. Our negotiators must have a clear 
understanding of what can be delivered, and early cooperation is very 
important.
    Mr. Chairman, hearings like these, and your leadership and 
engagement on this subject in Bali and beyond, are essential steps in 
that process, and we thank you for it.

    Senator Kerry. Well, we look forward to discussing it, but 
that's very, very helpful. Thank you.
    Mr. Sandor.

STATEMENT OF RICHARD SANDOR, CHAIRMAN AND CEO, CHICAGO CLIMATE 
                     EXCHANGE, CHICAGO, IL

    Dr. Sandor. Yes; thank you, Mr. Chairman, it's a pleasure 
to be here.
    And I'd like to share with you, if I can, some of the 
experiences that we've had at the Chicago Climate Exchange. 
Many of you may not know what the organization is, so let me 
share a few things about it.
    The Chicago Climate Exchange (CCX) is a financial 
institution that administers a cap-and-trade, allowance-and-
offset system that is legally binding, but voluntary. Ten 
percent of Fortune's top 100 companies belong--Ford, Motorola, 
Bank of America, Safeway, et cetera. Seventeen percent of the 
Dow Jones Industrial Average belongs to the exchange--IBM, 
DuPont, Intel, United Technologies. Twenty percent of the power 
companies belong including AEP and Allegheny Energy. In your 
State, Senator Nelson, TECO is a member. There are CCX members 
located in every state represented by the members of this 
committee. Together, these emitters constitute a bigger 
allocation of emissions than the country of Germany. CCX 
members make up 16 percent of the United States large 
stationary sources of greenhouse gas emissions.
    In addition to those corporate members, we have others. In 
your State, Senator Kerry, we have the first university in 
America to join CCX--Tufts. We're proud to have the Lugar Stock 
Farm as a member. Other members include Tennessee Timber 
Consultants, a forestry project aggregators. Miami Dade County 
and cities from Chicago all the way to Melbourne, Australia, 
and States like New Mexico and Illinois have all joined. All in 
all, CCX membership numbers close to 400. The CCX market is 
more than 25 percent the size of the entire carbon emissions 
market in the EU. We are independently audited by the NASD--
National Association of Securities Dealers--now called FINRA--
Financial Industry Regulatory Authority)--which originated from 
the Maloney Act of 1938, to be the self-regulatory organization 
for the securities world.
    I might mention to you that we are an international 
organization. We have reforestation projects from Costa Rica. 
We have seven Brazilian members, all of which, like Aracruz, is 
a $7 billion New York Stock Exchange company, have taken on the 
CCX membership commitment to reduce their greenhouse gas 
remissions by 6 percent by 2010 even though Brazil is not 
required by international treaty to mandate emissions cuts.
    From 2003 through 2006, our members were committed to make 
a 4-percent cut in their emissions. They've actually achieved a 
12-percent reduction, so we're way ahead of schedule.
    The CCX program includes everything from German coal mine 
methane, to AGL, the largest utility in Australia, to five 
Chinese, five Indian, and one Chilean member. All of this adds 
up to what we think is a substantial group of members.
    Most recently, the House of Representatives of the United 
States joined CCX, and it offset a portion of the emissions 
from the operation of the House. We conducted a reverse auction 
for the House that yielded a basket of offsets from U.S.-based 
coal mine methane, soils, and forestry projects.
    Also, our progress has not gone unnoticed in the developing 
world. We were surprised, most recently, when we were 
approached by Tata Motors of India to conduct a dollar-based 
auction of certified emission reductions that it had tried, 
unsuccessfully to sell in Europe. Tata, if you don't know, is 
the Indian equivalent of General Motors. It's that country's 
largest automaker. We did conduct the auction, with a week's 
notice, and were 13 times oversubscribed.
    The market is here today; the capital is here. And we are 
exporting our expertise. We also run--just for your 
information, Senators Kerry and Tim Wirth, who inspired many 
things from what you did back in the eighties--we run the only 
transparent regulated market for sulfur dioxide emissions under 
the U.S. Acid Rain Program. Trading volume has been $3 billion 
year to date, up from $10 million 2 years ago. We also run a 
mandated NOx futures market. And I think what may 
surprise some of you, that the United States, the Chicago 
Climate Exchange, actually began the European Climate Exchange, 
which, of nine exchanges in Europe, is the largest. We'll trade 
about 30 billion dollars' worth of carbon this year in Europe.
    So, we've exported our trading technology and our capital 
market expertise. We also have a joint venture in Canada with 
the Montreal Bourse to operate the Montreal Climate Exchange, 
and we're looking at a similar effort in India. Our India 
advisory committee there is headed by Rajendra Pachauri, of the 
IPCC. And we're making a very strong effort in China, as well.
    In conclusion, from the experience that we've had, both 
with the sulfur market and the carbon market, this is all not 
very difficult, it's not von Heisenberg's Uncertainty 
Principle. You put them up on a screen, and you buy them and 
sell them. You monitor and verify them, as we do with the 
million acres of Nebraska, farmland enrolled in our Ag solids 
program. You take an NASD and you audit the emissions from all 
39 of Ford's North American plants. It's doable. And, not only 
that, as Senator Wirth just said, we put out a price signal. 
We're seeing inventors out of MIT and other universities who, 
for a price signal of $2 to $3 a ton, are being motivated to 
develop new mitigation technologies.
    The U.S. can take the leadership role here. We have the 
financial technology, and the price discovery mechanism that 
will spawn the most cost-effective ways to reduce greenhouse 
gas emissions.
    Thank you.
    [The prepared statement of Dr. Sandor follows:]

Prepared Statement of Dr. Richard L. Sandor, Chairman and CEO, Chicago 
                     Climate Exchange, Chicago, IL

    Senator Kerry, Senator Lugar, and members of the committee, I want 
to thank you for your invitation to be with you today. I congratulate 
your leadership on the complex problem of climate change, which 
presents both deep challenges and wide possibilities.
    Today the committee is taking up the topic of the United States 
role in the international negotiations on climate change and how this 
country can resume its leadership on this critical issue. First, it is 
incumbent upon the committee to know that a functioning and successful 
cap-and-trade system already exists in the U.S. The Chicago Climate 
Exchange (CCX) along with leading U.S. economic enterprises, cities, 
states, counties, farm organizations and others are using a voluntary 
but legally binding cap to structure their energy use, enhance their 
strategic economic planning, and most importantly reduce their 
greenhouse gas emissions.
    To date, CCX members have reduced their emissions, on average, by 
12 percent beyond their annual commitments, representing more than 180 
million tons of greenhouse gas reductions in the first four compliance 
years of our program. On the eve of the Bali negotiations, the CCX 
experience is extremely relevant.
    To flesh this out, I will report to you on the work of the Chicago 
Climate Exchange (CCX) family, the world's only global emissions 
reduction and trading system handling all six greenhouse gases. CCX had 
its birth in the U.N. process in 1992 and operates worldwide in both 
voluntary and mandatory regulatory frameworks. CCX and its members are 
securing actual greenhouse gas reductions now, using emissions trading, 
a critical financial mechanism, in a system that is designed to meet 
the needs of all emerging policies, including the post-Kyoto framework 
that will be discussed at the forthcoming Bali negotiations
    Membership in CCX now numbers in excess of 370 and represents the 
leading edge of industry, municipal and state government, universities, 
and nonprofit organizations. Our members include:

   Twenty percent of the largest CO2 emitting power utilities 
        in the U.S. including American Electric Power, Reliant, 
        Allegheny Energy and DTE.
   Seventeen percent of the companies making up the Dow 
        Industrial Index, including DuPont, Intel, IBM, and United 
        Technologies.
   Ten percent of the Fortune 100, including Ford Motor 
        Company, Bank of America, Motorola, Safeway, and International 
        Paper.
   Six U.S. cities including Chicago and Portland, Oregon.
   Three counties, including King County in Washington, 
        Sacramento in California, and Miami-Dade in Florida.
   The States of New Mexico and Illinois.
   Universities like Tufts, Michigan State, Minnesota, Iowa, 
        Oklahoma, and Idaho.
   Associate members including architectural firms like Mithun, 
        law firms like Sullivan and Cromwell and Foley and Lardner and 
        NGOs like the Rocky Mountain Institute.
   Hedge funds, banks, and professional commodities traders 
        that provide liquidity in our markets.

    And, the United States House of Representatives is a CCX Exchange 
Participant. The House is using the CCX offsets portfolio as a source 
of verified U.S.-based greenhouse gas mitigation project credits to 
help it achieve ``carbon neutrality,'' as part of its Greening the 
Capitol initiative launched in the spring of 2007.
    Members join CCX for disparate reasons, but they all share one 
motive which is to better master their emissions data and gain early 
mover benefits with price discovery for carbon, and all aspects of risk 
mitigation, includng financial, operational, and reputational.
    The baseline of emissions under the CCX cap is currently 540 
million metric tons, which is greater than the National Allocation of 
Germany, the largest economy participating in the European Union's 
emissions trading scheme. The current CCX baseline represents more than 
16 percent of the total large stationary sources of greenhouse gas 
emissions in the United States. This means that the U.S. has more 
emissions under management through CCX than any other country with an 
active cap-and-trade system.
    The CCX Offsets Program is successfully rewarding emissions 
mitigation through sustainable farming and forestry, while also 
providing a new income source for U.S. agriculture. Entities such as 
the Iowa Farm Bureau and the National Farmers Union are leading the way 
in building the infrastructure for our agricultural offsets program. To 
date, more than 2 million acres of conservation tillage and grassland 
in more than 20 States and the Canadian Province of Saskatchewan have 
been registered, verified, and sold through the Exchange. From 2005 to 
2006, farmers earned more than $3 million from the sale of CCX Carbon 
Financial Instruments. Tonnage enrolled under the CCX agricultural 
methane program went from 24,100 tons to 207,200 tons during the same 
period.
    These offsets provide a least cost avenue for society to reduce 
greenhouse gas emissions in addition to enhancing farm profitability 
and income diversification. American agricultural producers are taking 
a leadership role in promoting long-term sustainability of U.S. 
agricultural soils through the CCX program. Earlier this year, the CCX 
Offsets Committee approved protocols for rangeland management soil 
carbon offsets, which are now being registered on the Exchange. A 
member of this committee, Senator Richard Lugar, has registered 
reforestation credits from trees planted on his family farm in Indiana, 
and is setting an example to many other farmers for turning otherwise 
unproductive land into acreage that provides the important 
environmental service of carbon sequestration.
    It is also important to note that the potential for offsets coming 
from coal mine and coal bed methane is substantial. More than 7 million 
tons of captured methane from coal mines has been registered on CCX to 
date. Coal mine methane capture not only reduces greenhouse gases but 
can contribute to the safety of miners.
    CCX is also pleased to inform the committee that it is supported by 
the U.S. Department of Agriculture to help expand the CCX agricultural 
offset program. Further research and expansion on agriculturally based 
greenhouse gas mitigation strategies can provide new sources of revenue 
for America's farmers, who are providing bona fide environmental 
services. These revenues can help minimize the need for additional 
subsidies and lower the tax burden required to finance agricultural 
security while encouraging innovative practices to address climate 
change.
    CCX Member operations and Offset Projects can be found in every 
member of this committee's home state as well as in every other state 
in the U.S., and they span the globe as well. In the Annex I countries 
of Canada and Australia, CCX members include Abitibi-Consolidated, 
Manitoba Hydro, Tembec, AGL (the largest power producer in Australia), 
and the city of Melbourne. In addition there are CCX registered Offset 
Projects in Canada and New Zealand as well as projects outside of the 
Kyoto mechanisms in the country of Germany.
    In the Non-Annex I countries of Brazil and Chile, the New York 
Stock Exchange listed, Aracruz ($7.21 billion market cap) and seven 
other corporations have joined as members, taking on the same reduction 
commitments as our U.S., Canadian, and Australian members. CCX member 
Ford Motor Company has included all of its Mexican operations, along 
with its U.S. and Canadian operations in its reduction commitment. And 
Motorola recently announced that it will be including all of its global 
facilities in its reduction commitment beginning this year. CCX's 
portfolio of offsets include projects in the Non-Annex I countries of 
China, Costa Rica, India, and Mexico.
    CCX members execute legally binding commitments to meet, at a 
minimum, an emissions reduction goal of 6 percent below baseline by 
2010.\1\ Members who exceed their reduction commitments may sell 
allowances; those who do not make the required cuts must buy allowances 
to come into compliance. CCX rules require that all emission baselines, 
annual reduction commitments and Offset Projects undergo a standardized 
third party audit by the Financial Industry Regulatory Authority 
(FINRA) \2\ and authorized experts. This is the only third party 
standardized audit system for greenhouse gas emissions reductions 
operating in the United States at this time.
---------------------------------------------------------------------------
    \1\ A member's baseline is calculated as: (i) Its average emissions 
over the period 1998-2001; or (ii) its total emissions in 2000.
    \2\ FINRA was formerly known as NASD the leading financial 
regulator in America and created by an Act of Congress in 1938.
---------------------------------------------------------------------------
    CCX members report that the baselines, audits, and annual 
commitments represent concrete goals that help them focus on internal 
efficiencies and attendant financial opportunities. They have reduced 
their emissions through increased energy efficiency, expanded use of 
renewable fuels, and realization of low-cost reductions in non-CO2 
greenhouse gases through use of direct abatement equipment. Many 
members have exceeded their reduction targets. As an important aside, 
another benefit of the price discovery mechanism provided by an 
organized market is the ability to spur inventive activity. Developers 
of various renewable energy technologies including biodiesel production 
and anaerobic manure digesters have been able to raise capital from the 
investor community after factoring in CCX prices in their business 
plans.
    CCX has built emissions trading markets under every possible 
regulatory framework. In the European Union's Kyoto-driven emissions 
trading program, our sister exchange, the European Climate Exchange 
(ECX) trades more than $130 million in CO2 emissions contracts daily. 
More than 795 million metric tons of CO2 reductions have been traded on 
ECX this year to date with more than 1.3 billion tons traded since ECX 
launched in 2005. Transactions on ECX represents between 80 and 90 
percent or all exchange-based trading in the EU trading scheme.
    It is important to note that linkages already exist between the 
European and U.S. carbon trading systems. In 2006, CCX member Baxter 
International transferred emissions reduction allowances earned by its 
EU-regulated Irish facility into its CCX account in order to meet its 
compliance requirements under the CCX program, thus demonstrating the 
ability to create a compliance market that crosses international 
borders.
    In Canada, CCX is in a joint venture with the Montreal Bourse, that 
country's leading derivatives exchange to operate the Montreal Climate 
Exchange (MCeX) which will trade emissions reduction contracts under 
that country's Kyoto program. MCeX will launch its first contract in 
early 2008.
    It is significant, and ironic to note that American ingenuity and 
financial know-how are being exported abroad. Despite the absence of a 
mandated carbon constraint here at home, U.S. financial services 
provide the infrastructure for emissions trading in the Kyoto-driven 
cap and trade market.
    Through its CFTC regulated subsidiary, the Chicago Climate Futures 
Exchange (CCFE), CCX has also created a market for SO2 and NOx 
emission allowances regulated under the Clean Air Act Amendments of 
1990. That market is now the central point for SO2 price discovery in 
the U.S. Acid Rain Program.
    Through CCX and its affiliated exchanges, the financial, capital, 
and regulatory structures needed for an internationally linked carbon 
trading system are well advanced. The effectiveness of cap and trade is 
being demonstrated every day by CCX members, now across the globe. The 
environmental and economic benefits being generated are of national and 
global significance. There are extensive opportunities for the U.S. to 
leverage global linkages, and we believe we have pioneered pathways of 
engagement for all nations to become involved in meaningful greenhouse 
gas reduction using flexible market mechanisms.
    CCX plans to forge ahead with its expansion and development and is 
ready to operationalize and facilitate any legislation passed in the 
United States.
    We are at the disposal of the Congress to provide advice or answer 
any further questions.

    Senator Kerry. Thank you very much, Mr. Sandor, it was very 
helpful.
    Mr. Pershing.

STATEMENT OF DR. JONATHAN PERSHING, DIRECTOR, CLIMATE, ENERGY, 
 AND POLLUTION PROGRAM, WORLD RESOURCES INSTITUTE, WASHINGTON, 
                               DC

    Dr. Pershing. Thanks very much.
    I'm Jonathan Pershing. I'm the director of the Climate, 
Energy, and Pollution Program at the World Resources Institute, 
which is a nonpartisan think tank here in Washington, but we 
have partnerships in over 70-odd countries around the world, 
did a lot of work on the climate-change issue, among others.
    I wanted to just make a few points to try to summarize my 
written testimony, which I've submitted.
    The first one, I think, is one that was made by almost 
everyone who spoke, which is about the urgency of the problem. 
And I think we can't understate that. And, in fact, that adds 
to a sense of the importance, not only of this meeting, but of 
the next couple of years. Unless we move forward really 
aggressively, the problem is really beyond our control.
    The second point I want to make is the need for U.S. 
leadership. And I think that, at the moment, the United States 
has got about 5 percent of the world's population, give or 
take; some 28 percent of the emissions that have entered the 
atmosphere. So, it's even more than a quarter. That's an 
historical total, but we also have technology, we have economic 
capacity. Richard Sandor spoke about the market expertise that 
we bring. So, we can do an enormous number of things if we put 
our mind to it. And the point is that we're, so far, not, 
apparently, doing that, the level we'd like to see.
    I would think that, therefore, one of the most important 
things that you could do would be to think about legislation. 
And, to a certain extent, what you bring to Bali and the 
methods that you carry about the willingness to enact 
legislation will perhaps be the most powerful message that you 
carry.
    I note that we are still operating in a multipolar world. 
It's not what it was when I first began working in this 
negotiation, and I, speaking on behalf of the United States, 
sat next to the Union of Social Soviet Republics. They were 
right next to us at that point. Now they've moved well down the 
ranks, and you sit next to Russia; it's a very different 
dynamic, and we speak to China much more than we speak to our 
immediate neighbors, who are the United Kingdom. That dynamic 
has fundamentally shifted how we need to interact in this 
global set of activities.
    China, in particular, which is, I think, a considerable 
focus, as it should be--they've now assumed the position atop 
the pyramid as the world's largest emitter--China should be a 
focus, but China will not act just because we say so. China 
might act because we do things on our own. China will certainly 
act because of its own interests. And those interests clearly, 
in my mind, reflect the things that you, Senator Kerry, 
mentioned. It's the questions of energy security. China is 
expected to import huge shares of its oil by the end of this 
decade. It will affect local pollution. You can hardly breathe 
the air in some of the cities. It will reflect water and water 
damages. It will also reflect climate change. Those things will 
drive China, and we can bring to them our information and our 
data and our expertise.
    Of course, developed countries have indicated they are 
prepared to move forward--but developing countries have 
indicated they are not--through a binding commitment. And so, 
we need to find other approaches. We need to recognize the fact 
that the population of China, four times our own, has only one-
fifth the per capita income, one-fifth the total emissions. 
It's not a quid pro quo and an even exchange between one and 
the next, but there are lessons to learn and lessons to 
exchange.
    I'd like to make the point that Richard Sandor made, that 
the markets will be enormously powerful. It will raise huge 
sums of money that we can distribute for things like 
adaptation, for things like technologies, for the mitigation 
obligations and the development needs of the least advantaged. 
But they don't work for everyone. We need strong institutions. 
We need strong compliance mechanisms. It is not a one-size-
fits-all equation. A trade with all countries is not the 
equivalent of a trade with the United States, and those 
countries that do not have these institutions have to be 
treated in a somewhat different way.
    Finally, I want to say something about adaptation. I think 
that was the comment that Senator Murkowski made, and others 
here on your committee have certainly reflected on. At the 
moment, according to the World Bank, there are about 2 billion 
people in countries affected by climate disasters in the 1990s 
alone. That's a staggering number. It's likely to go up by 
perhaps as many as doubling, just in this decade. We have the 
best projections of the IPCC that include things like sea-level 
rise, but they also include consequences like heat and drought, 
include consequences like forest fires, and they include 
consequences like pests. We have to move forward on those kinds 
of tasks.
    So, finally, Senator, what might you bring to Bali, and how 
do you think about all of these in the context of a Bali 
agreement? I would say just a few things. The first one, we 
need a mandate. And I would agree with Senator Wirth, the 
mandate that was laid out is really not a bad one. The question 
really is: How will we carry it forward? But it is a process 
meeting, and a mandate is critical.
    The second thing is, it does have to incorporate both 
developed and developing countries. And, from that perspective, 
I would strongly urge that we not insist on exact equality, but 
we insist on equity. And that means a balance.
    The third thing is, we must address deforestation. Close to 
20 percent of the total emissions, collectively, are from 
forests. If we don't address that, not only will we not have 
any forests or biodiversity in Indonesia or Brazil, we have a 
huge problem.
    And, finally, we need to have systems for adaptation to 
help those vulnerable populations to move forward.
    It's a pretty daunting task. The first step, though, is 
very manageable. And if we take this one step at a time, I 
certainly believe we can get there in a cooperative spirit, 
which I think you're trying to lay out. And I think that you 
and the Senate delegation that comes to Bali could be 
enormously effective at making that case.
    Thank you.
    [The prepared statement of Dr. Pershing follows:]

Prepared Statement of Dr. Jonathan Pershing, Director, Climate, Energy, 
    and Pollution Program, World Resources Institute, Washington, DC

    My name is Jonathan Pershing, and I am the Director of the Climate, 
Energy and Pollution Program at the World Resources Institute. The 
World Resources Institute is a nonprofit, nonpartisan environmental 
think tank that goes beyond research to provide practical solutions to 
the world's most urgent environment and development challenges. We work 
in partnership with scientists, businesses, governments, and 
nongovernmental organizations in more than 70 countries to provide 
information, tools, and analysis to address problems like climate 
change, the degradation of ecosystems and their capacity to provide for 
human well-being.
    I am very pleased to be here to speak to what I consider the most 
pressing environmental issues faced by the world--and to what I 
consider a major opportunity for the United States to assume a role of 
international leadership.
    In this testimony, I would like to make a number of key points, 
each of which I will expand on below:

          1. Emissions are rising much faster than we thought, the ice 
        is melting decades sooner than we expected.
          2. The world urgently needs the leading emitters--
        particularly the U.S. and China--to find a basis for agreement 
        and action. To do so, the U.S. itself must take real and 
        immediate steps to reduce emissions.
          3. The U.S. must recognize we are operating in a multi-polar 
        world. We can lead, we can help, but we can't dictate to other 
        great powers. China will act for its own interests.
          4. China, India, and Brazil are changing their views, and we 
        must negotiate agreements that help all achieve national goals, 
        even if the means to reach these differ from ours.
          5. There will be a huge global market for low carbon goods 
        and services, and we must compete for it. Countries that do not 
        adopt policies to reduce emissions will not compete 
        effectively.
          6. Markets will promote the development and support the 
        penetration of new technologies. A robust governmental 
        framework is needed to ensure technology development is focused 
        on priority needs.
          7. We are unfortunately starting late and we are not likely 
        to avoid all climate damages. The world must agree to address 
        the problem of the neediest and most vulnerable.

    If we start in on an agreement on these issues at the forthcoming 
U.N. Climate Convention meeting in Bali next month, we will indeed be 
setting out on a path to success. If we do not, and instead continue to 
argue for caution and inaction until we have ``more information,'' the 
world will be a much different, and much less hospitable place.
                   the challenge is large and urgent
    The Earth is warming, primarily due to human activities. Fossil 
fuels (in spite of their contribution to huge increases in human 
productivity and great improvements in human well-being), together with 
significant deforestation, have been the most important causes of 
global warming. The buildup of carbon dioxide and other greenhouse 
gases (GHGs) is accelerating, and unless we act very soon to control 
emissions warming, will rise to very dangerous levels. This is no 
longer a problem only for our children, but increasingly for the 
present generation.
    In February 2007, the Intergovernmental Panel on Climate Change 
(IPCC--the official science process endorsed and supported by the 
world's governments and in which the United States was an active 
participant) released its most recent scientific report. The report 
states that it is ``unequivocal'' that Earth's climate is warming, and 
confirms that the current atmospheric concentration of carbon dioxide 
and methane, two important GHGs, ``exceeds by far the natural range 
over the last 650,000 years.'' Further, the IPCC concludes that it is 
now ``very likely'' (greater than 90 percent probability) that GHG 
emissions from human activities have caused ``most of the observed 
increase in globally averaged temperatures since the mid-20th 
century.''
    Indeed, the impacts of warming have become increasingly evident. 
Sea ice in the Arctic was at a record low this summer, and Greenland's 
massive ice sheet is receding--far faster even than predicted in the 
IPCC report released prior to this summer's unprecedented melting. 
Glaciers are rapidly shrinking from the Rockies to the Alps. There have 
been fatal heat waves in Northern Europe and extensive droughts in the 
Western U.S., Australia, and in the Amazon. Farmers and hunters across 
the United States report changing growing seasons and changing bird 
migration. If we already see these kinds of impacts with only about 0.6 
+C (1 +F) of warming, the nature of future damages, with temperatures 
ranging to 2 +C and higher, are likely to be catastrophic.
    The IPCC also gave us a clear sense of the emissions reductions 
required to limit the damages--and a timeframe in which to achieve 
them. The IPCC suggests that world emissions must peak within the next 
10-15 years and then decline globally by as much as 50-85 percent below 
2,000 levels by 2050 if we wish to see global average temperatures 
remain below two degrees of warming. Furthermore, global emissions must 
be stabilized by 2035.
               the u.s. must lead with a domestic policy
    The warming occurring today is the result of greenhouse gases 
emitted over the past half century. The United States, with 4.6 percent 
of the world's population, has contributed 28 percent of the emissions 
currently in the atmosphere. Our strong economic growth in the 20th 
century was fueled by fossil fuel technologies we invented. And it is 
clear that today the U.S., with the most advanced economic and 
technological resources and capacity, must take the lead in 
transforming the global economy to a new, low-carbon future. We cannot 
expect the rest of the world to act if we do not--or expect countries 
with per capita incomes one-tenth our own to lead if we will not.
    The emissions limits we set for the U.S. matter. Action by the U.S. 
will be seen as the benchmark against which other countries will 
measure their commitments. The U.S., with its historical responsibility 
for the current buildup of greenhouse gases in the atmosphere, will 
continue to be a key contributor to temperature rise--even as other 
countries may pass us in annual emissions. With our European allies 
committing to align with the science in their proposal for a 20-to-30-
percent reduction in greenhouse gas emissions by 2020 (and a European 
Parliament recommendation of a 50-percent cut in global emissions by 
2050, identical to the reduction proposed by both Japan and Canada 
during last year's G-8 discussions), the U.S. role will be pivotal if 
we are to have concerted OECD action and leadership to advance the 
efforts of all countries to take action.
    U.S. legislation must put a clear and specific limit on aggregate 
emissions and achieve the emissions-reduction target at the least 
possible cost. The cap establishes certainty as to the total amount of 
emissions that will occur under the program. The cap must be broad, 
including as much of the economy as possible, so as to achieve the 
greatest efficiency. It must have stringent emissions reductions 
targets, and include a range of complementary policies to reduce 
emissions from sectors outside of the cap. In parallel, the U.S. must 
adopt complementary measures to promote new technology, to assure that 
we have a complete monitoring and reporting system, and to begin to 
develop national adaptation programs to protect vulnerable people and 
ecosystems.
              structuring a global climate change solution
    U.S. action alone will not be enough to reduce global emissions to 
the extent required, although it is widely understood that without 
timely and aggressive U.S. action, a successful international agreement 
on climate change will be impossible. A number of key elements are 
required to adequately address the problem of global climate change, 
and will be critical ongoing aspects of international negotiation: (1) 
International GHG markets; (2) developing country actions; (3) 
mechanisms to promote technology development and penetration; (4) 
minimizing deforestation; and (5) addressing vulnerability to climate 
change, and taking necessary steps for adaptation. Each is discussed 
below.
    1. GHG markets.--For countries that have the technical and 
institutional sophistication to embrace them, greenhouse gas markets 
are a powerful driver for change. The United States is discussing (at 
least in Congress and at the State level) adopting a cap-and-trade 
mechanism. Europe has already implemented one. Other key partners such 
as Canada, Australia, and New Zealand are poised to do so.
    Markets are demonstrating success. Their key features--capping 
emissions and creating a price that stimulates investment--are both 
observed in the European case. Emissions in that market have risen at 
rates significantly below those of the U.S. (see figure 1), while 
investment decisions, particularly in the power sector, appear to be 
shifting to technologies with a lower carbon footprint in reaction to a 
price signal that is currently approximately 23=/ton of CO2\1\.
---------------------------------------------------------------------------
    \1\ For European emissions trading system prices, see http://
www.europeanclimate
exchange.com; 23.84=/ton of CO2 is the price for a December 2102 
settlement as of November 8, 2007.
---------------------------------------------------------------------------
    Contrary to the mythology sometimes heard in Washington, the EU's 
emission trading system (EU ETS) has been a striking success. The 
period 2005-07 has been a trial first phase, and has certainly had its 
teething troubles, but even during this period MIT researcher Denny 
Ellerman estimates that it will lead to between 50 and 200 million tons 
of CO2 emission reductions.\2\ Given the speed and complexity of the 
system's implementation, this is an extraordinary success by any 
measure.
---------------------------------------------------------------------------
    \2\ D. Ellerman and B. Buchner, ``Over-Allocation or Abatement? A 
Preliminary Analysis of the Eu Ets Based on the 2005 Emissions Data,'' 
Fondazione Eni Enrico Mattei, November 2006.
---------------------------------------------------------------------------
    It is true that some design errors were made--and certain operating 
constraints existed that lead to unavoidable, negative outcomes. For 
example the pilot phase of the system did not allow carrying forward 
emissions allowances to subsequent periods--rendering the value of each 
allowance worthless instead of acting as an incentive to early action. 
The erratic release of information about the regime led to considerable 
price spikes--mistakes that could have been avoided with a more 
transparent system (and one that was in place and fully functioning 
prior to the start of trading). Finally, the initial allocation of 
allowances (distributed at the national level, and largely a function 
of the legal autonomy of Member States within the union) provided 
companies in some countries with excess tons--leading to both windfall 
profits and to a devaluation of the currency. Each of these problems 
can be (and is being) addressed in the subsequent phases of the 
program. The EU is increasing transparency, providing for banking 
allowances to future periods, auctioning an increasing share of the 
allowances and tightening the caps; this will address most of the 
regimes shortcomings. We in the U.S.--and others around the world--are 
in a position to learn from the EU's mistakes and avoid them ourselves 
as we adopt our own programs.


    There is not a ``one-size-fits-all'' policy for climate change; 
while markets are critical components of a successful regime, not all 
countries are prepared to adopt or implement a cap-and-trade market 
mechanism. Among the prerequisites are a robust legal system that 
respects property rights and can ensure the integrity of any emissions 
transactions, a comprehensive and rigorous emissions reporting and 
monitoring regime, and a strong commitment to ensuring the 
environmental integrity of the trading system. Such criteria are not 
yet met by too many countries. In particular, countries such as Russia, 
as well as others in Central Europe and Asia are not yet able to 
demonstrate with confidence that their emissions records or legal 
compliance systems are adequate to allow them to trade in a global GHG 
market. Without confidence in such globally traded allowances, we run 
the risk of undermining the environmental integrity of the entire 
global regime. For these countries, as well as other large developing 
countries, a full emissions trading program may not be the best 
solution--although participation in global markets, including through 
``offset programs'' like the Kyoto Protocol's Clean Development 
Mechanism (CDM) or ``Joint Implementation'' may be possible. 
Understanding this potential shortcoming, it is clear that one of the 
long-term goals of the international effort should be to help develop 
the proper underpinnings for a global market.
    The CDM itself is also facing difficulties, although it has 
generated significant reductions. To date, there have been more than 
2,600 CDM projects proposed, of which only 844 are registered \3\ (a 
consequence of both poor methodological development as well as the 
nature of the overburdened approval process). These 844 projects over 
their lifetimes should save 1,080,000,000 tons--a level that already 
outstrips demand under the commitments for developed country parties in 
under the Kyoto Protocol. Approximately 80 percent of the annual 
project credits come from only 4 countries (China, India, Brazil, and 
South Korea); see figure 2. Along with some uncertainty in the 
integrity of offset credits, this supply/demand ratio as well as limits 
on the amount of international offset credits Europe will accept for 
internal compliance has led to a lower price for Certified Emission 
Reductions (CERs). While European emissions allowances sold for an 
average of about $23/ton through 2007, offsets sold for less than $11/
ton.\4\ The relatively low price and lower volumes has also led to only 
modest funds being available for the kinds of major energy 
infrastructure projects that might significantly reduce emissions. 
According to a 2007 World Bank/IETA study,\5\ to date, the total of all 
CDM projects has only been $5 billion. Such prices and volumes are 
substantially below the costs of supporting potentially critical new 
technologies, such as carbon capture and storage, which would be 
required to neutralize emissions from the rapidly growing GHG footprint 
in the developing world.
---------------------------------------------------------------------------
    \3\ See the UNFCCC CDM Web site at: http://cdm.unfccc.int/
Statistics/index.html.
    \4\ See the World Bank/International Emissions Trading 
Association's ``State and Trends of
the Carbon Market'' 2007, http://carbonfinance.org/docs/
Carbon_Trends_2007-_FINAL_-_
May_2.pdf.
    \5\ Ibid.
    
    
    Resolving conflicts over the CDM (or its successor) will be a key 
feature in the ongoing post-Kyoto discussion, and a central topic at 
the Bali negotiations. Concerns remain high that projects may not yield 
``real, measurable, and verifiable'' reductions that would be 
``additional'' to those that would have occurred in the absence of the 
project. At the same time, the burden of proof regarding project 
eligibility for inclusion into the CDM process is onerous, and may turn 
many good (albeit sometimes small) project proposals away, further 
widening the gap between projects undertaken in the poor smaller 
countries and those in the more capable larger countries.
    2. Developing country actions.--To address the global climate 
change problem, major emitters from the developing world will have to 
bring serious actions to the table. Countries such as China, India, 
Brazil, and Indonesia are among the world's largest emitters, although 
both cumulatively and on a per capita basis, they remain much lower 
than the U.S. (see table 1 and 2).\6\ Climate policy cannot ultimately 
succeed without these countries, any more than it can without America 
or the rest of the developed world. However, there is room for 
optimism: in many cases these countries are already taking serious 
action--more so, in some ways, than the U.S.
---------------------------------------------------------------------------
    \6\ Unfortunately, adequate, up-to-date information on GHG 
emissions from all countries is missing; while CO2 data is available 
for 2005, six gas data is only available for 3 years: 1990, 1995, and 
2000. It remains difficult to properly assess recent development in 
non-CO2 gas emissions or to assess policy effectiveness in the absence 
of such data.

                  TABLE 1.--GREENHOUSE GAS EMISSIONS OF THE 20 LARGEST EMITTING COUNTRIES, 2000
----------------------------------------------------------------------------------------------------------------
                                                                                     Percent     Tons C
                            Country                                 MtC      Rank    of world     per      Rank
                                                                                      total      person
----------------------------------------------------------------------------------------------------------------
United States of America.......................................    1,765.5     (1)      15.65        6.3    (14)
China..........................................................    1,341.7     (2)      11.89        1.1   (122)
European Union (25)............................................    1,288.5     (3)      11.42        2.8    (53)
Indonesia......................................................      837.3     (4)       7.42        4.1    (24)
Brazil.........................................................      606.3     (5)       5.37        3.5    (38)
Russian Federation.............................................      537.6     (6)       4.77        3.7    (33)
India..........................................................      504.6     (7)       4.47        0.5   (163)
Japan..........................................................      370.1     (8)       3.28        2.9    (50)
German.........................................................      276.6     (9)       2.45        3.4    (40)
Malaysia.......................................................      233.5    (10)       2.07       10.2     (4)
Canada.........................................................      204.3    (11)       1.81        6.6    (12)
United Kingdom.................................................      179.3    (12)       1.59        3.0    (47)
Mexico.........................................................      169.9    (13)       1.51        1.7    (93)
Italy..........................................................      144.4    (14)       1.28        2.5    (67)
Korea (South)..................................................      142.0    (15)       1.26        3.0    (45)
France.........................................................      139.8    (16)       1.24        2.4    (69)
Myanmar........................................................      138.8    (17)       1.23        2.9    (51)
Australia......................................................      135.2    (18)       1.20        7.1     (9)
Iran...........................................................      132.1    (19)       1.17        2.1    (75)
Ukraine (1)....................................................      131.6    (20)       1.17        2.7    (61)
----------------------------------------------------------------------------------------------------------------
Source: WRI, Climate Analysis Indicators Tool, http://cait.wri.org.


                 TABLE 2.--2005 DATA, CO2 EMISSIONS ONLY
------------------------------------------------------------------------
                                     National                 Per capita
                                      total       Percent     emissions
             Country                (millions      Total       (million
                                     tons C)                   tons C)
------------------------------------------------------------------------
United States....................     5,956.98         24.3        20.14
China............................     5,322.69         21.7         4.07
Russia...........................     1,696.00          6.9        11.88
Japan............................     1,230.36          5.0         9.65
India............................     1,165.72          4.7         1.07
Germany..........................       844.17          3.4        10.24
Canada...........................       631.26          2.6        19.24
United Kingdom...................       577.17          2.4         9.55
Korea, South.....................       499.63          2.0        10.27
Italy............................       466.64          1.9         8.03
Iran.............................       450.68          1.8         6.96
South Africa.....................       423.81          1.7         9.56
France...........................       415.27          1.7         6.59
Saudi Arabia.....................       412.35          1.7        15.61
Australia........................       406.64          1.7        20.24
Mexico...........................       398.25          1.6         3.75
Spain............................       387.11          1.6         9.60
Brazil...........................       360.57          1.5         1.94
Indonesia........................       359.47          1.5         1.57
Ukraine..........................       342.57          1.4         7.30
------------------------------------------------------------------------
Source: DOE EIA, http://www.eia.doe.gov/environment.html.

    WRI maintains a database of national climate change policies in key 
developing countries to supplement a compendium of energy related 
policies in OECD countries maintained by the International Energy 
Agency.\7\ Policies range widely, from those designed to promote 
alternative fuels or transport (e.g., the Brazilian ethanol program) to 
those that promote energy efficiency and conservation in the top 1,000 
companies in China. The effectiveness of national policies can be seen 
in the fact that the CO2 intensity of major developing country 
economies is declining--in some cases (e.g., China), even faster than 
in the U.S. (see figure 3). National circumstances continue to be 
hugely influential: In Brazil, for example, new energy demand has 
largely been met by natural gas, which, while the least CO2 intensive 
of any fossil fuel, generates enormously more CO2 than does the zero-
emitting hydro-power that it has supplemented.
---------------------------------------------------------------------------
    \7\ The WRI database, which includes policies from Argentina, 
Brazil, China, Costa Rica, India, Indonesia, Iran, Malaysia, Mexico, 
Nigeria, Pakistan, Philippines, Sauda Arabia, Singapore, South Africa, 
South Korea, Thailand, and Turkey can be found at: http://cait.wri.org/
sdpams/search.php. The IEA database, with information focused on IEA 
member countries as well as limited information on policies adopted by 
several developing countries, can be found at:
http://www.iea.org/textbase/pm/.


    The international framework must include a structure to allow these 
actions to be recognized and reviewed. This was missing from the Kyoto 
Protocol, and will need to be added. A number of options exist to 
promote such developing country efforts. One of the most prominent 
focuses on the concept of ``Sustainable Development Policies and 
Measures'' or SD-PAMS.
Sustainable Development Policies and Measures (SDPAMS)
    For many developing countries, the highest priorities are major 
domestic problems: Health, access to electricity, clean air and water, 
and a growing economy. The SDPAMs approach starts from the premise that 
these policies can be implemented in a way that simultaneously reduces 
GHG emissions.
    Two examples help illustrate the point:
    (1) Energy security and climate: Meeting energy needs is a growing 
concern not only for the U.S., but also for China, India, and others. 
China is expected to import 75 percent of the oil it consumes by 2030. 
Any policy that reduces its demand may have enormous benefits. Thus, 
fuel efficiency standards, or efforts to switch from oil/diesel 
electric generation to renewable energy or nuclear power would be 
valuable. Each of these would also lead to a reduction in associated 
GHG emissions. China, acting on the basis of an energy security 
constraint, could also mitigate its climate footprint. Of course, not 
all security measures would necessarily be beneficial: If China 
increases its coal liquefaction program without CO2 sequestration, its 
emissions would rise precipitously, even though its energy security 
problems might be diminished.
    (2) Clean air and climate: Another serious problem facing many 
cities in the developing world is increasing air pollution. As vehicle 
traffic increases and dirty industry and power generation grow, air 
quality declines, with related consequences for human health and 
welfare. Solutions to promote clean air--switching from coal to gas, 
increased automobile efficiency, improved mass transit, and process 
standards for industry can all improve the local pollution problem 
while simultaneously reducing the GHG footprint.
    A successful SDPAMS approach will need to be country specific, and 
issue specific. It will need to build on the domestic priorities, and 
find synergies between development agendas and climate. This will 
require technical inputs on the U.S. Government side from agencies like 
DOE, EPA, DOC, and AID, and on the private sector side from both 
multinationals and from small- and medium-sized enterprises. Congress 
will need to create systems to encourage such engagement--and push the 
State Department, DOC, and USTR to open opportunities for trade 
relationships so that markets in such new technologies and systems can 
be easily developed and exported.
    Developing countries, too, will support such an approach--but it 
must meet both their local development needs and business interests. 
The U.S. (and OECD) role in promoting SDPAMS is central. It will mean 
working to create fair trade agreements in new technologies, and will 
likely lead to increased competition for the manufacturers of such low-
cost technological solutions. Historically, U.S. companies have done 
well in such markets; we need to develop the skills to do well in this 
new world of environmental technology, too. However, this market will 
develop whether or not we participate. The issue for the U.S. is 
whether we will play ``catch-up'' as we have done for many of the 
telecoms and automotive applications that were invented in the U.S. but 
built elsewhere, or whether we will be market leaders, with the 
concomitant economic wealth creation that such leadership brings.
    None of this global developing country engagement effort will come 
cheaply. According to information presented by UNFCCC Executive 
Secretary Yvo de Boer at the ``Dialogue on Long-Term Cooperative 
Action'' held in Vienna--August 28, 2007, the additional estimated 
investment and financial flows needed in 2030 is large compared with 
the funding currently available under the Convention and the Kyoto 
Protocol, but small in relation to estimated GDP (0.3 to 0.5 percent) 
and global investment (1.1 to 1.7 percent) in 2030. De Boer suggested 
that mitigation measures needed to return global GHG emissions to 
current levels in 2030 would require additional flows between $200-$210 
billion in 2030, while additional flows needed for adaptation in 2030 
amount to several tens of billions of dollars.\8\
---------------------------------------------------------------------------
    \8\ See Yvo de Boer, ``Investment and Financial Flows to Address 
Climate Change,'' 2007
http://unfccc.int/files/cooperation_and_support/financial_mechanism/
application/pdf/presentation_yvo.pdf.
---------------------------------------------------------------------------
    The UNFCCC, in a paper analyzing the technologies and the need for 
investment to implement those technologies, suggests the potential for 
emissions reductions is very large--and that only a small fraction is 
being undertaken through the existing offset projects (see figure 4).


    It is clear that this funding will be incremental to what is 
already expected to be spent on energy and infrastructure over the next 
several decades. Both national governments and the private sector will 
play a key role in raising and directing these financial flows. Thus, 
there is a critical role or the U.S. in ``greening'' the financial 
sector--including not only private equity incentives, but also more 
direct prodding of the multilateral development banks--and the creation 
and funding of new international mechanisms. This is further discussed 
below, in the section on technology development and penetration.
    One additional point might be made with respect to developing 
country engagement: Trade measures to compel action may backfire on the 
U.S. It is generally assumed that major developing countries are much 
less efficient in their use of energy than the United States and other 
developed nations, and that production in those countries generates 
greater emissions. Thus, it has been proposed that the U.S. impose 
border tax adjustments or other trade measures to assure U.S. industry 
is not competitively disadvantaged. For the economy as a whole, the 
U.S. may well be more efficient. However, in some important sectors in 
which U.S. industry competes with developing country producers it is 
not the case. For instance, in aluminum production the most efficient 
plants are in Africa, with U.S. and EU producers the least efficient, 
largely because their capital stock is the oldest. Conversely, U.S. 
steel production is low in emissions because it uses scrap metal rather 
than iron ore as a feedstock. If foreign competitors started bidding up 
scrap prices in response to carbon constraints the competitive 
advantage of U.S. producers could disappear. This is worth bearing in 
mind as we consider trade measures aimed at less efficient producers in 
global markets. Such measures do not always favor U.S. producers, and 
in some cases more cooperative action may be possible in specific 
sectors.
    3. Technology development and penetration.--There is a widespread 
consensus that solving the climate change problem will require the 
development and rapid penetration of new technology. Innovation will be 
needed in all sectors--and appropriate policies will be required to 
ensure rapid diffusion.
    While there will be some costs to this technology development and 
diffusion pathway, there will also be enormous opportunities: The new 
technologies in a low-carbon world represent a major new set of 
markets. The Clean Energy Trends report \9\ estimates that the markets 
for renewable and hydrogen technologies will have quadrupled from $55.4 
billion today to more than $226 billion in 2016. These include:
---------------------------------------------------------------------------
    \9\ For a full report, see the Clean Energy Trends report at http:/
/www.cleanedge.com/reports
trends2007.php.

   Global biofuels market: $20.5 billion (2006)--$81 billion 
        (projected 2016);
   Wind power market: $18 billion (2006)--$60.8 billion 
        (projected 2016);
   Solar PV market: $15.6 billion (2006)--$69 billion 
        (projected 2016);
   Fuel-cell and hydrogen market: $1.4 billion (2006--$15.6 
        billion (projected 2016).

    Fundamental to the development of any new technology is the 
confidence that there is a market for it; and this principle applies 
equally to the low-carbon energy technologies needed to fight climate 
change. Those that present ``technology approaches'' as an alternative 
to a market-building mechanism such as cap and trade present a false 
dichotomy: A cap-and-trade system, if adopted, will be by far the most 
important driver of new low-carbon technologies. Without it, other 
technology-based efforts are likely to have minimal effect. It is 
recognition of this reality that a group of America's most prominent 
corporations united with leading NGOs in January 2007 to call for 
mandatory carbon limits in the United States.\10\ Leadership in climate 
policy is not just about moral responsibility: It also places 
innovative U.S. companies at the heart of these new markets.
---------------------------------------------------------------------------
    \10\ See U.S. Climate Action Partnership: ``A Call for Action.'' 
http://www.us-cap.org.
---------------------------------------------------------------------------
    Targeting specific technologies is made more challenging by the 
large range of options. Figure 5 shows one analysis of the technologies 
that can contribute to reducing emissions. As is apparent, in some 
cases these can entail costs of more than =40/ton, while in others 
there is the potential to both reduce emissions and save money through 
implementation (often through removing a range of nontechnical 
barriers).


    There are a number of complementary measures that can help bring 
new technologies to the market. Three deserve highlighting: Research 
and development; precommercial demonstration; and funds and related 
mechanisms to transfer technology to poorer countries.
Boosting R&D
    Energy technology development is, according to the U.S. 
Administration, a ``high-priority national need.'' Certainly the 
concerns raised by climate and energy security concerns would support 
this assessment. But despite this, federal funding for energy research 
has been steadily falling since 1980. Federal funding for energy R&D 
has hovered between $2.31 billion and $3.45 billion for the past 20 
years,\11\ compared to recent expenditures exceeding $20 billion for 
medical science, for instance (see figure 6).
---------------------------------------------------------------------------
    \11\ TEA ``Energy R&D Database'' http://wiww.iea.org/RDD/
ReportFolders/ReportFolders.aspx.


    Nor is this a uniquely American phenomenon. A recent survey of 11 
of the biggest energy R&D funders \12\ demonstrated that energy R&D 
spending worldwide has indeed stagnated (See Figure 7). In every 
country surveyed, the ratio of energy R&D to GDP declined significantly 
between 1975 and 2003.\13\
---------------------------------------------------------------------------
    \12\ U.S., Japan, Canada, Denmark, France, Germany, Italy, the 
Netherlands, Spain, Sweden, and the U.K.
    \13\ Runci, Paul. 5005. ``Energy R&D Investment Patters in IEA 
Countries: An Update.'' Pacific Northwest National Laboratory/Joint 
Global Change Research Institute Technical Paper PNWD-3581.
---------------------------------------------------------------------------
    One argument for reducing government R&D is that it allows the 
private sector to step into its place. However, private sector spending 
on energy has actually fallen: It is now around a quarter of the 1985 
level in absolute terms.\14\
---------------------------------------------------------------------------
    \14\ American Association for the Advancement of Science (AAAS). 
2006. ``A Guide to R&D Funding Data.'' http://www.aaas.org/spp/rd/
guide.htm.


Precommercial demonstrations: Bridging the ``valley of death''
    Between the research and development phase and the full 
commercialization of a technology there is a need for commercial scale 
demonstrations. Particularly for large, capital-intensive technologies 
private investors tend to shy away from being the first in class. On 
the other hand, such commercial-scale demonstrations can be expensive, 
and require judgment from governments as to when to withdraw from the 
market and let the private sector take over. This gap is sometimes 
referred to as the ``valley of death'' in technology development.


    In the case of many technologies there remains a significant role 
for government to partner with private sector players to build 
demonstration projects. In some cases technologies suffer from high 
perceived risks, and demonstration projects can reassure investors that 
might otherwise shy away from large, capital-intensive technologies 
that lack a proven track record. In addition, some technologies will be 
needed under significant carbon constraint but will not be developed 
until that constraint is clearly impending.
    For instance, Integrated Combined Cycle Gasification (IGCC) is a 
relatively novel technology for power generation from coal and other 
feedstocks. Since it produces a flue gas that is high pressure and CO2-
rich, it is expected to play a major role in the implementation of 
carbon capture and storage (CCS). However, in the absence of adequate 
incentives for CCS it is less attractive than alternatives. Although it 
emits very low levels of criteria pollutants, without CCS it is no more 
efficient than other modern technologies such as ultra-supercritical 
pulverized coal (USCPC), costs roughly 20 percent more to build, and 
suffers from a limited track record and perceived reliability problems. 
Establishing a track record for this technology has the potential to 
accelerate the eventual implementation of CCS. The FutureGen project 
\15\ is one example of government and private sector partnership in 
producing demonstration projects, but the IEA argues \16\ that at least 
10 such demonstrations will be necessary, costing from $500 million to 
$1 billion each.
---------------------------------------------------------------------------
    \15\ FutureGen Alliance, http:/www.futuregenalliance.org/.
    \16\ International Energy Agency (2006). Energy Technology 
Perspectives: Scenarios and Strategies to 2050. International Energy 
Agency, Paris. p. 199.
---------------------------------------------------------------------------
Fund technology deployment and transfer
    As in other areas, the U.S. to date has been longer on rhetoric 
than performance in establishing funds for technology, and we still lag 
behind some of our international partners. However, some technology 
funds do have active U.S. involvement, and in some cases leadership. 
The following are some examples of existing funds:

   U.S. Methane to Markets Partnership aims to advance cost-
        effective, near-term methane recovery and to promote the 
        ``clean'' energy sources. The total leveraged funding from the 
        private sector, partner countries, and international financial 
        institutions exceeds $261 million.
   The ProRETT (Promotion of Renewable Energy Technology 
        Transfer) project, developed by the EU, was open to EU member 
        countries or observer countries. The funding for renewable 
        energy is currently at =2.9 billion ($4.25 billion) over the 7 
        years of the research framework period.
   GEEREF (Global Energy Efficiency and Renewable Energy Fund) 
        is aimed at accelerating the transfer, development, and 
        deployment of environmentally sound technologies and helping to 
        bring secure energy supplies to people in poorer regions of the 
        world and protecting against climate change and air pollution. 
        The basis of the initial funding is set at =100 million ($145 
        million) for global coverage, with the aim of leveraging much 
        larger amounts.
   The international clean technology fund proposed by the U.S. 
        will aim to help developing nations harness the power of clean 
        energy technologies. The initial proposal was made just before 
        the G-8 summit in Germany this year and is to be structured 
        around government contributions to help finance clean-energy 
        projects in developing countries. At present the fund has no 
        dedicated resources.

    These funds are still small compared to Official Development 
Assistance (ODA), which in 2006 amounted to about $103.9 billion. It is 
interesting to note that the U.S. is a large donor in absolute terms, 
spending $22.7 billion in 2006, but small in proportion to the size of 
its economy. ODA accounts for just 0.17 percent of Gross National 
Income, the second lowest percentage after Greece.


    It is clear that the UNFCCC negotiations will provide a forum for 
only one subset of the technology discussions. In particular, all 
countries may be prepared to discuss options for the transfer of 
technology to least developed nations on a preferential basis. However, 
for the larger discussion on technology development and diffusion, 
there will be a need to promote more robust markets, as well as 
cooperative R&D programs. These may be facilitated through language in 
the UNFCCC, but ultimately will be successful more through bilateral 
efforts by governments, supported by private sector engagement.
    4. Forestry.--Forests, and in particular tropical forests, play an 
important role in the global carbon budget because they can be either 
sources or sinks of atmospheric carbon. Annual emissions from land-use 
change (mainly through deforestation and degradation in tropical 
developing countries) account for approximately 20-25 percent of the 
total anthropogenic emissions of greenhouse gases.\17\ The top 20 
countries ranked according to forest emissions are listed in Table 3. 
It should be noted that estimates of the magnitude of these emissions 
are highly uncertain due to several reasons such as a lack of 
resources, lack of standard methods, lack of capacity at national 
levels, and lack of data.
---------------------------------------------------------------------------
    \17\ See UNFCCC, http://unfccc.int/files/methods_and_science/
lulucf/application/pdf/part_i_
scientific_issues.pdf.
---------------------------------------------------------------------------
    However, broadly speaking, accurate satellite data and careful 
ground-truthing can yield considerable accuracy for forest cover 
CO2.\18\
---------------------------------------------------------------------------
    \18\ Ibid. While the UNFCCC paper cites an accuracy of 95 percent, 
this is a theoretical number that does not include either soil carbon 
or more importantly, forest degradation, which in Indonesia and the 
Brazilian Amazon, may reduce carbon by 20-25 percent.

 TABLE 3.--TOP 20 COUNTRIES RANKED BY EMISSIONS FROM LAND USE CHANGE AND
                                FORESTRY
------------------------------------------------------------------------
                                                 Emissions    Non LUCF-
                    Country                      from LUCF    Emissions
                                                   (MTC)        (MTC)
------------------------------------------------------------------------
Indonesia.....................................        699.5         80.8
Brazil........................................        374.5         91.9
Malaysia......................................        190.7         33.3
Myanmar.......................................        116.1          2.6
Congo, Dem. Republic..........................         86.6          0.4
Zambia........................................         64.3          0.5
Nigeria.......................................         53.1         21.6
Peru..........................................         51.1          7.7
Papua New Guinea..............................         39.8          0.7
Venezuela.....................................         39.3           38
Nepal.........................................         33.7          0.9
Colombia......................................         28.9         17.3
Mexico........................................         26.5          105
Philippines...................................         25.9         20.5
Cote d'Ivoire.................................         24.9          1.9
Bolivia.......................................         22.9          3.3
Cameroon......................................         21.1          1.9
Canada........................................         17.6        144.4
Madagascar....................................         16.5          0.6
Ecuador.......................................           16          6.3
------------------------------------------------------------------------
Source: WRI, CAIT.

    Given the scale of the total forest-related emissions, as well as 
their importance to a number of key developing country parties, there 
is an increasingly strong momentum in favor of including reductions of 
emissions from deforestation and degradation (REDD) in a post-2012 
climate agreement. Although there remain considerable uncertainty as to 
what form the REDD inclusion will take, the most prominent proposals 
depend on large-scale financial transfers through the international 
carbon markets in which forest commitments are taken at the national 
level (referred to as a national level crediting approach for REDD).
    However, a number of other approaches also exist, and are likely to 
be considered, including relying exclusively on national forest 
regulation--perhaps with additional support from international 
financial aid mechanisms and bilateral donor assistance; or relying on 
expansion of the project-based carbon offset programs to include 
forestry (a reversal of current decisions under the UNFCCC that exclude 
REDD projects from the CDM).
    The World Bank is currently strongly pushing the national crediting 
approach. The Bank is planning to launch a Forest Carbon Partnership 
Facility at the Bali session, and has dedicated $300 million to that 
end.\19\ The Bank has recognized the potential pitfalls of such an 
approach, and is in large measure focusing its pilot effort on 
addressing the readiness of countries to participate in such a program 
as well as the methodological and technical problems in the GHG 
accounting and approval.
---------------------------------------------------------------------------
    \19\ Under the current World Bank proposal, approved by the Board 
but not yet implemented, $100 million would be used to help countries 
prepare for participation in a REDD market mechanism, and $200 million 
would be used to pilot REDD projects.
---------------------------------------------------------------------------
    Among the most central of these for climate change is the problem 
of leakage: Displacement of activities from one place to another, often 
outside the jurisdiction of the project implementer (or even the 
country itself).\20\ While some have argued that leakage is solved by 
setting a cap at the national level, this may be incorrect. While 
displacement of activities within a country are largely captured 
through national approaches, where the demand for timber and other 
forest products is a principle driver of deforestation, international 
leakage is very likely to be close to 100 percent. As demand within 
both developed and emerging economies increases, it is likely that 
supply will simply shift to less controlled jurisdictions.
---------------------------------------------------------------------------
    \20\ While the Bank has noted the importance of the leakage issue, 
it will not address the problem through its Forest Carbon Partnership 
Facility.
---------------------------------------------------------------------------
    At present, it does not appear likely that any of the UNFCCC 
mechanisms in isolation could completely halt deforestation. A solution 
is likely to require a policy structure that focuses less on aggregated 
deforestation rates and instead provides support for projects, 
programs, and policies in specific areas--as well as projects that 
specifically help promote development (the central priority for 
forested countries and regions). Some of the options available include 
carbon market driven policies such as an enhanced CDM structure, under 
which requirements for measures to prevent leakage could be imposed. 
The SDPAMS model (discussed above) could also prove to be an excellent 
solution, both in terms of building capacity and targeting the actual 
drivers of deforestation.
    It is clear that any effective mechanism to protect and manage 
tropical forests will require significant levels of funding. A U.S. 
policy should thus focus on:

   Recommending to donor and forest countries the testing of a 
        broader range of policy options than just the national 
        crediting approach between now and 2009.
   Working with the multilateral development banks and 
        bilateral lenders to ensure that only a high-quality national 
        crediting approach that links REDD projects with demand 
        reduction efforts in order to reduce leakage moves forward.
   Seeking to build consensus in Bali of the need for a 
        forestry component of the post-2012 agreement to not only 
        address deforestation from a climate perspective, but also to 
        incorporate the nonclimate benefits of forest protection, 
        including for biodiversity, local environment, and development 
        purposes.

    Implementing this policy will require both considerable and 
sustained political will and resources.
    5. Adaptation to the Effects of Climate Change.--According to the 
World Bank, nearly 2 billion people in developing countries were 
affected by climate-related disasters in the 1990s, and the rate may 
double this decade (see figure 10). People in developing countries are 
more than 20 times as likely to be affected by such disaster as those 
in the developed world.


    Unfortunately, our best projections suggest we are not likely to be 
on a path that will keep our climate unchanged. This will require 
adapting to the changes we cannot avoid.
    A critical question for developing adaptation policy is whether (in 
any given circumstance) climate change will be slow and incremental or 
fast and large scale. If the former, we can and must develop a 
resilience to change that will enable us, collectively, to cope. Thus, 
we can work so that we can manage a drought that occurs every 10 years 
instead of every 12, or a change in rainfall that leads to 10 percent 
less water, or an increase in the disease vectors for malaria, or the 
need to create corridors in addition to parks to protect diversity. In 
these cases, we need to do a bit more of what we are now doing: More 
careful husbandry of scarce resources, more medicines, and better 
planning.
    On the other hand, if climate really leads to a step change or 
significant discontinuity, an incremental adaptive strategy may be 
counterproductive. A potentially catastrophic example of this may be 
the city of Lima, Peru: If, as predicted, the glacier that waters the 
city is melted in 25 years, the city does not have an incremental 
option--small savings in water will be inadequate. Instead, they need 
to accept a major change: Leave town, begin massive desalination 
operations, or commence large scale shipping of water into the city.
    Clearly, to cope, there will also be a need for massively increased 
efficiency, and perhaps in the near term, some shifting away from water 
intensive activities. But over the longer term, these changes will not 
suffice. The Lima scenario paints a picture less of resiliency than of 
paradigm change.
    A third set of circumstances may occur, in which science is unable 
to reliably predict whether we face incremental or step change. In 
these circumstances, the core task of adaptation is not to plan for 
specific new impacts, but to learn to cope with uncertainty. This calls 
for investment in robust processes for processing information, making 
decisions, and responding to the unexpected. The ``adaptive'' policies 
and institutions that make such investments effective have yet to be 
designed, and need substantial creative thought and analysis.
    Decisions on how to spend adaptation money thus face the question: 
``What are we trying to adapt to?'' Wasting money on incremental change 
that could be spent on relocating populations must be avoided; 
conversely, if incremental shifts are adequate, huge societywide 
programs would be equally foolish. And if science cannot predict with 
certainty when we face incremental or step change, measures are needed 
that take into account a range of possible climate futures.
    One key part of any future international regime will therefore need 
to consider who will pay for the adaptation required, particularly in 
the developing world. The sums involved are very large: Estimates of 
climate-related impacts range from $10 billion to more than $100 
billion per year, and these are only likely to increase. Meeting these 
costs poses both a moral and a political dilemma. Most developing 
countries consider historical responsibility in determining who should 
pay for damages. Under this model (using WRI data) the OECD countries 
along with the FSU are responsible for about 73 percent of the 
contribution to the rise in atmospheric GHG concentrations between 1850 
and 2000. This same group of countries also has the capacity to pay: In 
2003, OECD and FSU countries produced about 60 percent of the world 
total GDP.
    However, the politics of such payments are much more difficult. 
Virtually all OECD countries have seen development assistance decline 
as a percentage of their GDP. Even including private charitable 
donations (usually forthcoming in times of massive disaster), we have 
demonstrated a limited willingness to pay for sustained, long-term 
development priorities.
    On the more positive side, there will be business opportunities in 
disaster preparedness and relief, in the development of technologies 
that reduce the consequences of climate change such as new drugs, new 
water savings technologies, and new crops. All of these will reduce the 
burden that governments must meet. However, Congress has a 
responsibility too. First and foremost, it must enact a strong climate 
change program to help minimize global damages. It should consider 
increasing support for USAID and the various development banks that 
many of the poorest nations will turn to when disaster strikes. And it 
should support global agreements, including agreements that include 
insurance coverage and liability, and financial assistance to alleviate 
the worst of the suffering that will likely be borne by the world's 
most vulnerable communities. The U.S., and all donor countries, should 
work to mainstream adaptation into development assistance, and work to 
remove barriers to trade to facilitate the development of more 
resilient economies in developing countries that would be less 
susceptible to climate impacts. Finally there should be an increase in 
the global budget devoted to fundamental research on adaptation. We 
will not otherwise be able to cope with what appear to be increasingly 
certain damages.
                               processes
    All this will mean frank, sometimes complex conversations with our 
international partners. The UNFCCC is, and will continue to be the 
primary forum for engagement on climate change. Fortunately there is no 
shortage of additional opportunities for specific exchanges. To cite a 
few of the most important:
    Group of Eight (G-8): While the meetings of the G-8 Heads of State 
have long provided an opportunity for discussions of climate change and 
energy policy, the summit in Gleneagles, Scotland, in 2005 (hosted by 
then-Prime Minister Tony Blair), marked the beginning of a more 
aggressive phase of climate discussions. At the most recent session, in 
Heiligendamm, Germany, in June 2007, the group (including the U.S.) 
agreed that climate change is one of the major challenges for mankind 
and it has the potential to seriously damage the natural environment 
and global economy. They further agreed that urgent and concerted 
action is needed and accepted their collective responsibility to show 
leadership in tackling climate change. To that end, the G-8 agreed to 
consider setting a global goal for emissions reductions, and further 
agreed to consider seriously the decisions made by the European Union, 
Canada, and Japan which include at least a halving of global emissions 
by 2050. Finally, the group agreed that the U.N. climate process would 
remain the forum for negotiating future global action on climate 
change, and committed to moving forward in that forum, with a view to 
achieving a comprehensive post-2012 agreement (post-Kyoto agreement) 
that should include all major emitters. Japan, host of the next G-8 
meeting in June 2009, is committed to continuing to use the sessions as 
an opportunity to further develop a common policy for limiting climate 
change, including not only energy-related emissions, but also those 
related to land-use change and forestry.
    Major Economies Meeting (MEM): The United States convened the first 
Major Economies Meeting in late September 2007. Bringing together 
senior representatives from 17 major economies (a group nearly 
identical to the top emitters group as defined in Table 1), the session 
highlighted the importance of establishing a long-term global goal for 
greenhouse gas reduction in balance with sustainable development 
objectives. There was wide agreement that all nations would need to act 
to advance the global goal. The discussions emphasized the importance 
of enhancing investments in technology, and the need for financing 
clean energy technologies in the developing world, with considerable 
attention also paid to the need to address adaptation in concert with 
efforts to mitigate climate change. While the MEM session did bring a 
critical group of countries to the table, it is too soon to tell 
whether the sessions (of which several more are planned) will bear 
fruit. A considerable skepticism exists as to whether the sessions are 
a forum for agreement, or rather, a venue in which rhetoric outweighs 
action. Some clarity on how the U.S. intends to work with the group may 
emerge at the session in Bali--where the U.S. efforts to bring the 
results of the MEM discussion into the UNFCCC process, as agreed in the 
G-8 dialogues (at the MEM itself) will be tested.
    United Nations High Level Event on Climate Change: On September 24, 
2007, the U.N. Secretary General convened a high-level session (1 day 
before the opening of the U.N. General Assembly). The session focused 
on four themes: Adaptation, mitigation, technology, and financing. 
While there was no consensus outcome from the session (nor was one 
sought), it was clear that the delegates were in overwhelming 
agreement: The climate problem was real and increasingly severe; 
damages were already being observed and immediate steps were needed to 
mitigate damages and reduce future climate change. Technology was 
widely considered a key element for any success, and adequate 
financing--both to alleviate current impacts, and to mitigate 
emissions, including through the development and integration of new, 
low GHG technologies, would be required. Perhaps the strongest 
conclusion was a general agreement on the need to come together and 
work through the UNFCCC, beginning with the meeting in Bali, Indonesia, 
in December 2007, to take appropriate steps toward an agreement that 
could enter into force no later than 2012.\21\
---------------------------------------------------------------------------
    \21\ For a copy of the Secretary General's meeting summary, see: 
http://www.un.org/climate
change/2007highlevel/summary.shtml.
---------------------------------------------------------------------------
    Asia Pacific Economic Cooperation (APEC): At their most recent 
session in early September 2007 (held in Sydney, Australia), the 
leaders of the APEC countries \22\ agreed on the need for global action 
to address climate change, while also reaffirming the need to take 
account of differentiated responsibilities and capabilities. Emphasis 
was placed on the need to develop new, low and zero emitting energy 
technologies, as well as on combating deforestation, while promoting 
open trade and investment. As with dialogues in the U.N., in the MEM, 
and in the G-8, there was agreement that the appropriate forum for 
international negotiation would be the U.N. Climate Convention, and the 
group called on those negotiations to reach an agreement on a post-2012 
arrangement that would reduce global GHG emissions. In a more concrete 
vein, the group agreed to work together to increase energy intensity 25 
percent by 2030 (and called on each member to set national goals), to 
increase regional forest cover by 20 million hectares by 2020, and to 
establish a new network for the exchange or information on low emitting 
energy technologies. Follow through, both on the general agreement to 
support the UNFCCC, as well as on specific target efforts is to be 
reviewed at subsequent APEC sessions.\23\
---------------------------------------------------------------------------
    \22\ APEC countries include: Australia; Brunei Darussalam; Canada; 
Chile; People's Republic of China; Hong Kong, China; Indonesia; Japan; 
Republic of Korea; Malaysia; Mexico; New Zealand; Papua New Guinea; 
Peru; Philippines; Russia; Singapore; Chinese Taipei; Thailand; United 
States; Viet Nam.
    \23\ For a full copy of the APEC statement on climate change, 
energy security, and clean development, see: http://203.127.220.67/etc/
medialib/apec_media_library/downloads/news_uploads/
2007aelm.Par.0001.File.tmp/07_aelm_ClimateChangeEnergySec.pdf.
---------------------------------------------------------------------------
    Asia Pacific Partnership (APP): The APP,\24\ created by the U.S. in 
2006, is focused on accelerating the development and deployment of 
clean, low or zero emitting technologies. In particular, the group, 
composed of representatives of both governmental and private sector 
partners for the six major Asia Pacific economies, is examining 
opportunities through eight task forces: (1) Aluminum, (2) Buildings 
and Appliances, (3) Cement, (4) Cleaner Use of Fossil Energy, (5) Coal 
Mining, (6) Power Generation and Transmission, (7) Renewable Energy and 
Distributed Generation, and (8) Steel. The U.S. chairs or cochairs the 
task forces on power, aluminum, coal and buildings. While the group 
acknowledged its interest in being consistent with the principles of 
the UNFCCC, its emphasis is on technology development--with a specific 
private sector focus. As of the 2nd Annual Meeting (held in New Delhi 
in October 2007), the group had endorsed 110 specific projects, 
although details of the extent of implementation of these is difficult 
to ascertain. In 2006, the U.S. proposed a $50 million budget for the 
APP, significantly less even than the Australian contribution of $75 
million. The APP provides an excellent tool for public-private 
partnerships and the direct business participation in efforts to reduce 
GHG emissions. However, while the program promotes business 
collaboration and technology interchange in a way the purely government 
fora do not, to date its impact has been limited by the lack of a U.S. 
commitment to clear leadership and clearly expressed GHG limitation 
goals and by the differential way the U.S. treats collaboration with 
the developing country members--China and India.
---------------------------------------------------------------------------
    \24\ Current APP members include Australia, Canada, China, India, 
Japan, Republic of Korea, and the United States.
---------------------------------------------------------------------------
    All these processes and others \25\ have a role to play in helping 
shape a climate deal. However, as indicated above, all of them have 
repeatedly emphasized, with the agreement of the U.S., that the central 
process for the development of a post-2012 climate agreement is under 
the United Nations Framework Convention on Climate Change (UNFCCC). 
Thus, actions the U.S. and other countries take through that forum will 
dictate the ultimate stringency and effectiveness of the post-Kyoto 
regime.
---------------------------------------------------------------------------
    \25\ In addition to the fora discussed here, which are either 
climate specific or which have a broader political agenda where climate 
change is only one element, there are several new fora focused on 
forests, including the Asian Forest Partnership and the Asia Pacific 
Forest Law Enforcement and Governance Process. In addition, China has 
proposed a new Asian forest network to examine the link between forest 
and climate in the context of APEC.
---------------------------------------------------------------------------
                      a pathway to engaging china
    As we are all aware, Chinese emissions are rising rapidly. The 
International Energy Agency projects that China will surpass U.S. in 
total energy consumption within the next few years \26\--not surprising 
given reports that indicate China is building a new power plant nearly 
every week.
---------------------------------------------------------------------------
    \26\ International Energy Agency, World Energy Outlook, 2007.
---------------------------------------------------------------------------
    However, even though it is characterized (legitimately) as a 
developing country under the UNFCCC context, China none the less has 
adopted a significant climate change policy, albeit one that uses a 
different mix of policy tools than either the European or the U.S. 
model.\27\ In responding to energy security, air pollution, and water 
and soil degradation issues, China's climate strategy to date has 
highlighted three key elements:
---------------------------------------------------------------------------
    \27\ For details of the Chinese climate policy, see ``China's 
National Climate Change Programme,'' relased in June 2007, and 
available at: http://www.ccchina.gov.cn/WebSite/CCChina/UpFile/
File188.pdf.

   Increasing energy efficiency. China's target is to reduce 
        energy intensity per unit GDP by 20 percent between 2006 and 
        2010 (the 11th Five Year Plan Period). This target codifies the 
        national commitment to reverse the trend of the previous 5 
        years, where China, for the first time since the period of 
        economic reform, lost ground in its energy intensity. As part 
        of its efficiency agenda, China has also adopted strong 
        automobile efficiency standards (stronger even than those 
        proposed by California), and it is concurrently raising gas 
        prices to market levels. The combination should significantly 
        limit the growth in Chinese demand (although not enough to 
        offset the large numbers of new vehicles and vehicle miles 
        traveled).
   Increasing the use of renewable energy. China's goal is to 
        increase renewables to 15 percent of the overall energy mix by 
        2020. This goal is coupled with additional measures to reduce 
        the overall amount of coal in the energy mix (where it still 
        accounts for over two-thirds of total energy use and over 
        three-quarters of electricity generation). Complementary 
        policies in the energy sector include increasing the use of 
        nuclear energy, encouraging methane capture for energy, and 
        increasing the use of natural gas.
   Increasing forest cover and implementing land-use policies 
        that reduce soil degradation and increase carbon capture. 
        Reforestation efforts within China have long been consistent 
        and impressive. Anyone who compares a recent visit to the tree-
        surrounded Great Wall to a postcard of a similar vantage from 
        the first half of the 20th century will be surprised at the 
        previous view of bare hills. Since 1990 forest cover in China 
        has grown from 14 to 18 percent--although this has come in no 
        small part as a consequence of rapidly increased imports of 
        forest products from other parts of the world. \28\
---------------------------------------------------------------------------
    \28\ Between 1997 and 2005, the value of Chinese forest product 
imports rose from $6.4 billion to $16.4 billion, and the volume more 
than tripled See ``China and the Global Market for Forest Products: 
Transforming Trade to Benefit Forests and Livelihoods'' available at 
http://environment.yale.edu/posts/downloads/a-g/
China_and_global_markets_for_forest_products.pdf.

    Other than reforestation, these goals are very much works in 
progress. For China to meet its own energy efficiency and renewable 
energy goals will be extremely challenging. Success will in part be a 
function of the extent of the technical support China receives to meet 
these goals. Policymaking in China is typically an iterative process: 
First a goal is set. Then, if it is not met immediately, implementation 
is reviewed, new policies are issued and implementation is 
progressively strengthened.
    China is currently developing the tools it needs to meet its goals, 
including the ``1000 Enterprises Program'' for energy efficiency; 
energy conservation and renewable energy laws; new public 
transportation initiatives; and improvements in efficiency in the 
building sector. China's industrial energy efficiency goal is to reduce 
its emissions by 100 million tons coal equivalent between 2006 and 2010 
compared with business as usual. This corresponds to about a 15-percent 
energy intensity improvement and constitutes the equivalent of 240 
million tons of CO2 averted. The program, while quite new, appears to 
be on track: In 2006, China averted 20 million tons of coal equivalents 
under this program.
    China does not yet use energy in buildings at anywhere near the 
rate that we or the Europeans do: Residential efficiency efforts are 
also underway. Chinese use of energy per square meter of building space 
is about 30 kwh/m \2\ in rural areas, and 65 kwh/m \2\ in urban areas 
(less than a third of the U.S. average and less than half of the EU 
average \29\). While these levels will undoubtedly increase, and the 
Chinese have put in place a number of measures, including insulation 
requirements and other building standards, promotion of compact 
fluorescent lights, improved appliance standards and improvements in 
the efficiency of building materials production to try to stem the rate 
of increase. For example, China, which makes 70 percent of the world's 
light bulbs, has agreed to phase out incandescent bulbs in favor of 
more energy-efficient ones, part of a push by the Global Environment 
Facility (GEF) to phase out incandescent bulbs globally. China is the 
first developing country to agree to join this program, and the 
facility will invest about $25 million for the Chinese program alone.
---------------------------------------------------------------------------
    \29\ Respectively the EU and the U.S. are 187kwh/m \2\ and 146 kwh/
m \2\.
---------------------------------------------------------------------------
    China has just begun to implement serious metrics to monitor these 
programs, and to develop performance benchmarks for progress. 
Additional tools will be needed in this area, as well as in the 
financing of clean energy projects, and in innovating new approaches to 
technology adoption. These offer potential areas where the 
international community can offer technical assistance. The discussion 
above, on technology development and penetration, suggests additional 
opportunities for both U.S. and China in this area.
    China's goals are ambitious, and will likely be difficult to meet. 
A combination of factors will be key for success. Perhaps foremost 
among these will be a commitment by the developed world to collaborate 
with China and work jointly to develop the tools it needs to reach 
these goals. This includes much more active engagement by USG agencies 
in joint research and implementation of energy conservation and 
renewable energy technologies in China. The limited engagement thus far 
by both the USEPA and the Department of Energy's National Laboratories 
has yielded concrete results in both areas, but the scale has been far 
lower than what the Chinese need to bring the needed technologies to 
scale.
    To resolve the big question that hangs over the heads of our large 
developing country counterparts and ourselves--how to use coal without 
emitting CO2--we will need heavy investment. Effective uptake of this 
technology will be enhanced if major research institutes and industry 
in both the U.S. and China are parts of the teams developing the 
intellectual property to begin with. Furthermore, U.S. Government-
funded projects should be linked to counterpart projects around the 
world. We need to deploy these technologies everywhere quickly, without 
complex or expensive premiums.
    Ultimately, Chinese climate change policy, like that of the United 
States, will not be driven by international priority setting, but by a 
domestic acknowledgement of the urgency of the problem, and a clear 
internal sense of the importance of acting. China is on the early steps 
of a road to developing and implementing a strong climate program. 
While the legitimate question remains as to whether it will be large 
enough and soon enough to avert the worst of the global damages, it is 
already at least the equal of the U.S. climate policy effort. Moving 
forward, the United States, through a strong bilateral engagement with 
China, through active and constructive participation in the 
international climate dialogue, as well as through setting our own 
aggressive domestic agenda, can certainly help foster a continued, 
effective Chinese climate policy.
                         what we need from bali
    Next month, the Conference of Parties to the UNFCCC will hold its 
13th session in Bali, Indonesia. The Bali meeting is perhaps the most 
critical U.N. climate meeting for many years. Its principal objective 
is to successfully launch the negotiations for a post-2012 climate 
agreement. Swift progress on these negotiations will be necessary to 
ensure that agreement can be reached by 2009 to set the world on a fair 
and effective road to managing the climate challenge.
    The key features of the Bali agreement will need to include:
1. A mandate to negotiate a new international agreement by 2009
    Given the time that it takes countries to ratify and implement 
international agreements, in order to avoid a gap following the first 
commitment period under the Kyoto Protocol (which ends in 2012) the 
post-2012 agreement must be negotiated and agreed by 2009. The 
negotiation of such a framework will not be simple, so it is important 
to begin immediately. The United States should clearly signal that it 
will abandon its strategy of obstruction and support a timely and 
effective agreement.
2. Processes to frame both developed and developing country commitments
    The most efficient and effective process would be comprehensive, 
seeking to deal with all outstanding issues under a single umbrella. To 
date, the U.S. has called for a two-track process--one for Parties 
committed to the Kyoto Protocol (with its emissions trading and market 
mechanisms) and one for everyone else. This insistence on a two-track 
approach weakens the prospect of eventually getting key developing 
countries to take actions.
    Until the U.S. has a strong domestic cap-and-trade system in place 
it may be hard for us to reenter the discussion of targets with much 
confidence, or indeed with much credibility.
    However, the world is likely to look favorably on any serious U.S. 
efforts to rejoin an emerging agreement as soon as it finds the resolve 
to do so. In Bali, even if we cannot bring ourselves yet to contribute 
to the discussion on new commitments, we should at least not block 
them.
    In addition a mechanism to pledge and review varied types of 
actions from developing countries needs to be introduced. This would be 
a new development compared to the Kyoto Protocol as it now stands. Such 
mechanisms, which must be introduced in Bali, need not be agreed there; 
instead, they would be developed over the span of the next 2 years, 
prior to reaching an agreement in 2009. Provisions should be made for 
including a comparison of national efforts, so that negotiating 
countries can satisfy each other that each is taking real and 
substantive measures to control emissions, commensurate with their 
capacity and level of development.
3. New mechanisms to reduce the destruction of tropical forests
    In some major countries, notably Brazil and Indonesia, the majority 
of human emissions come from deforestation rather than fossil fuels. 
Mechanisms are needed to protect these forests, not just for the carbon 
they contain but because of their inestimable value as havens of 
biodiversity and home to millions. Again, a final agreement is not 
required at the Bali session; rather, the meeting must agree to launch 
a process, to conclude by COP 15 in 2009, to agree on how to handle 
these critical emissions.
4. New commitments to help the most vulnerable adapt
    Both the UNFCCC and the Kyoto Protocol include mechanisms to help 
vulnerable populations adapt to the impacts of climate change. Only now 
are these (still very limited) funds about to become operational. The 
U.S. can lead by example in pledging greater help, both through 
multilateral mechanisms and through the recommendation of other, new 
instruments such as USAID programs and other bilateral assistance. Such 
efforts will be central to ensuring the success of both a climate 
agreement in 2009 and to long-term efforts to cope with the global 
damages of climate change.
           a chance for the united states to show its colors
    Above all, Bali is an opportunity for the U.S. to reengage. After 
years of seeing the U.S. standing aloof from, or even obstructing, 
international progress in the fight against climate change, our 
international partners are more optimistic. Most are aware of the 
extensive efforts underway at the State and local level within the U.S. 
(indeed, many discussions are underway about linking national programs 
to State efforts \30\). Countries are also paying considerable 
attention to the active debate over the adoption of strong federal 
legislation, though all recognize there is still some way to go before 
such proposals become U.S. law.
---------------------------------------------------------------------------
    \30\ At a meeting held in Lisbon, Portugal on October 29, 2007, 
leaders of more than 15 governments met to launch the International 
Carbon Action Partnership (ICAP), a partnership of countries and 
regions that have implemented or are actively pursuing the 
implementation of carbon markets through mandatory cap-and-trade 
systems. The partnership provides a forum to share experiences and 
knowledge. Members include: European Commission; France; Germany; 
Greece; Ireland; Italy; Netherlands; New Zealand; Norway; Portugal; 
Spain; United Kingdom ; Arizona; California; Maine; Maryland; 
Massachusetts; New Jersey; New Mexico; New York; Oregon; Washington; 
British Columbia; and Manitoba.
---------------------------------------------------------------------------
    The U.S. is also on record as supporting the UNFCCC process. The 
Major Economies Meeting may have been short on substance, but our 
international partners left largely upbeat. They heard Secretary Rice 
repeat President Bush's pledge that the United States will work to 
ensure a negotiating process from Bali to 2009, leading to a fair and 
effective post-2012 climate agreement.
    Now is the time for the United States to live up to that pledge and 
to take up the leadership role it has ignored for so long.

    Senator Kerry. Thank you very much, Dr. Pershing.
    I appreciate the testimony of everybody, and I just want to 
try to follow up a little bit--while, indeed, Bali is a 
``process,'' meeting, I assume you would all agree that--I 
mean, knowing how these meetings work, you wind up, 
particularly, with the interparliamentarians sitting there and, 
sort of, talking substance. And to the degree that they view us 
as legitimate, genuine, prepared to take on certain tasks, I 
assume you would agree that will affect how they view a 
timeframe for a mandate, or what kind of and extent of mandate 
they're willing to embrace, or the timetables, et cetera. I 
mean, clearly you can't divorce the process from some of their 
perception of your attitude about the substance. Is that 
correct, or not?
    Senator Wirth. Well, I think the reality is that 2008 will 
be consumed by looking at all the details that have to get 
filled in, and there'll be a lot of blanks there, because 
everybody's going to wait for 2009. So, what 2008 can do is to 
take the framework--and Paula Dobriansky laid it out, and 
that's the one everybody's agreed to--mitigation, adaptation, 
technology, and finance--and forestation is a major piece of 
this--and they will decide that that's going to be the 
framework that we work on. But they're not going to fill in the 
blanks until they see a new administration come in.
    Senator Kerry. Understood. But, I mean, clearly the brunt 
of this negotiation is going to be in 2009----
    Senator Wirth. That's right.
    Senator Kerry [continuing]. In a very short period of time, 
as I said earlier. But I--but would you not think that--for 
instance, on technology--do you see some of that discussion 
taking place? Do you think it's important for us to be laying 
out some constructive, forward thinking about where we're at in 
this? Obviously, I know, from your testimony, you do, Dr. 
Pershing, but I'd like to get the others, too, because I----
    Dr. Pershing. Let me suggest just a few points about that, 
because I would fully subscribe to the theory that--they 
usually say 90 percent of the agreement happens in the last 10 
percent of the time, and that's about right. But it only 
happens because 90 percent of the work was done at the 
beginning. And so, in this particular instance, I would suggest 
two possible courses of action.
    The first is, this administration has indicated, while it 
doesn't, obviously, care a lot about the mitigation side, it's 
prepared to talk about forests, it's prepared to talk about 
adaptation, and it's prepared to talk about technology. Take 
them up on it. Let's see what they do with those things. There 
is enormous scope for very positive action, which the world 
could agree, at this meeting, at Warsaw, which is the next 
meeting, and at Copenhagen, which is the 2009 meeting, all 
during the administration's tenure and purview. Move on those, 
and reserve these hard political decisions to that last 
session, when perhaps a more focused and positive viewpoint is 
in office.
    Senator Wirth. Let me, if I might, Mr. Chairman, follow up 
on that.
    Secretary Paulson's been charged--I think it's the third 
time that this charge has been given to somebody--to put 
together a technology initiative. Take him up on it and say, 
``Let's move.'' Now, the response to that will be, ``Well, 
we're putting in X number of billions of dollars more than has 
ever been done before.'' Well, get to the bottom of those 
numbers. The reality is that we're spending about 25 percent 
today in research, development, and demonstration of what we 
were spending at the time of the last oil crisis in the 1980s. 
Our RD&D expenditures have just plummeted. Now, every single 
outside group--every single one--will say, ``This is a set of 
expenditures that have to be made.'' As I say, it's a low-
hanging fruit, and that's something that could be done with the 
leadership of the Senate, working with the Department of 
Energy, and say, ``OK, let's go ahead and do this, and let's, 
over, say, a 4-or-5-year period of time, ramp us back up to a 
four--or five-times value.'' That has to be done. The report 
done by John Holdren in 1997 for the President's Committee of 
Advisors on Science and Technology is the No. 1 blueprint for 
what ought to be done. All the material is there. It's now just 
a matter of fact of doing it. So, take them up on it, and let's 
do that. We could really demonstrate that we're serious.
    Dr. Sandor. I would say one thing, from a market's point of 
view, is to try to create as many linkages as possible. We have 
a case in point where Baxter International reduced emissions at 
their EU regulated facility in Dublin, Ireland, and delivered 
them in satisfaction of the requirements of CCX.
    I think the goal of any such system has first and foremost, 
is to get at the disease--to reduce greenhouse gas emissions at 
the lowest possible cost. That, to me, is critical. That says--
and Jonathan and Tim both know--that there are many emission 
reduction actions which we find acceptable that other people 
may not. For example, those at this table have found avoided 
deforestation to be a very big issue. At CCX, we account for 
it. There are many, elsewhere, that don't.
    There are issues of equity here, in terms of a market. 
Should it be that Chinese coal-mine methane is allowed into the 
system when it is additional, but Pennsylvania's is not? Is 
that a good policy? Or is the Lugar Stock Farm reforestation 
project OK in CCX, but not OK in an international market, even 
though those walnut trees soak up a lot of carbon?
    So, the only thing I would urge is that, as a student of 
economics and somebody who for the better part of 35 years has 
been working on new products, we create linkages and 
homogeneity and do not bifurcate the market. We managed to 
homogenize wheat and soybeans, Treasury Bonds, and even the S&P 
500. I think the leadership position for us here is to make the 
market as homogeneous, drive the cost of reducing the 
greenhouse gases down, and keep focused on that.
    Senator Wirth. Mr. Chairman.
    Senator Kerry. Yes, Senator Wirth.
    Senator Wirth. Just one other very specific item which you 
could do that would have a significant impact: In the Warner-
Lieberman legislation--which I applaud, I think it's really 
headed in the right direction--there was initially a set-aside 
that 10 percent of the funds yielded by the legislation would 
go to adaptation purposes. Now, that was of great interest to a 
lot of people, for reasons Senator Murkowski was suggesting 
domestically, but also of very significant interest to a lot in 
the evangelical community and the Catholics bishops who are 
very concerned about poverty around the world. And this was the 
item in Warner-Lieberman that really got them enthused about 
the climate legislation. Unfortunately, someplace along the 
road, that 10-percent requirement got dropped. It then got 
added back in again in very much of a watered-down way. It 
ought to come back in its full robustness. That's a statement 
to the developing world that, ``We are serious about the 
adaptation issue. We know that you're the ones that are going 
to get the most impacted by climate change. We caused the 
climate change. Now we're willing to work with you.'' That's 
something that can be done right away, to restore that back 
into the Warner-Lieberman legislation--I mean, Lieberman-
Warner, whatever. It's a perfect little vignette about the 
kinds of things that you can do and make a statement around, 
that's extremely important on an issue of adaptation and an 
issue of international negotiation, and an issue of morality 
and equity.
    Senator Kerry. Senator Lugar.
    Senator Lugar. Let me raise a question, just for 
information, about markets, in the sense of the discussion that 
might occur at Bali. As I understand--and I think you've said a 
little bit about this, Dr. Sandor--in Europe, they've had an 
active market, based on the Kyoto Protocol and obligations that 
countries feel they undertook to trade. The price of carbon, 
from what I've seen in the regular press, quite apart from the 
financial press, has ranged from $15 a ton to $40 a ton at 
various times; a huge range. Why such a range? And, second, 
could this market in Europe, plus the one you've established at 
CCX, or maybe others that are established--can this become, 
potentially a worldwide market? For example, today you can get 
a price for gold and copper, which is an international market, 
sold in different prices earlier today in Tokyo, but now, New 
York or Chicago, a different price now. In other words, is one 
of the things you might achieve at the Bali conference a sense 
of how a worldwide market construct could occur, and at least 
what the rules of the game might be if everybody decided to 
enter into this?
    In our own domestic debate, it often goes that the cap-and-
trade business is sort of a softie thing. What you really need 
is a carbon tax. This is what real people do to--if you want to 
get at it. On the other hand, it's hard to adopt a carbon tax 
worldwide, given the sovereignty of many, many countries. But 
I'm wondering whether the market principle that you've 
established doesn't violate the sovereignty of countries, but 
is really the international idea of the trading of commodities, 
generally. Carbon becomes this type of commodity--so that when 
the hard negotiations finally transpire; do you enter the 
market, do you subject all of your processes to the fact that 
you must buy your way out of a problem, if you have one, and 
you must have suppliers that are sufficient to get some 
balance. What comment do you have on, sort of, blue-skying this 
kind of concept for a world market?
    Dr. Sandor. Well, we, for one--it is my business, 
shamelessly speaking, Senator--would like to see a worldwide 
market. We would like to see linkages of some sort. We don't 
understand from our point of view in administering a market, 
why a coal mine methane project in Germany should be treated 
any differently than a coal mine related project in 
Pennsylvania or China. To the extent that we can forge 
homogeneous instruments, we will broaden the liquidity and make 
it much cheaper to transact, just as we do in agricultural 
commodities like corn or wheat or soybeans. There are lots of 
different grades, but they are all deliverable. So--and, to the 
extent that the negotiators can agree upon very critical 
issues, like those that Jonathan mentioned, and like avoided 
deforestation--this, to me, is a very, very important issue, 
and there is a great debate about it.
    How do we address the need for equity and make it as cheap 
as possible to comply? Sometimes these goals conflict with each 
other.
    Which leads me to the third part of your question. In the 
first or pilot stage of the European trading scheme, there were 
no domestic offsets allowed. The U.N.'s CDM process was clogged 
and did not come into play. There wasn't any offset opportunity 
for domestic agriculture in there, for example. There wasn't a 
lot of the low-hanging fruit available. The pilot stage dealt 
with only one gas, CO2. It didn't include other 
greenhouse gases like methane. You couldn't do methane capture 
projects, for example, from dairy farms, coal mines or 
landfills. I think a well-designed program, with an objective 
of reducing greenhouse gases at the lowest possible cost can 
also yield other important co-benefits to society. But one has 
to be very careful when designing such a program or you're 
liable to get a three-wheeled car that doesn't go very fast if 
you compromise the market instruments.
    Regarding the $15 to $40 price range, I think it is 
reasonable. Depending on how you design the deliverable 
instruments, you can price a commodity any way.
    Senator Lugar. Let me just pick up on a thought. Ideally, 
in a world agreement, people are going to be more inclined to 
vote for that which is the least cost, as opposed to something 
more rigorous. Some might take that option, but probably not a 
majority, simply because each of these economies wants to exist 
and survive this process, and it could be expensive. But what 
I'm curious about--you mentioned deforestation in Brazil, or 
wherever we tried to stop it--what if you give credits to the 
country of Brazil for their forests, as they're sitting there? 
In other words, in terms of this world equity, there are a lot 
of forests there now. One reason why somebody wants to cut them 
down is that they have more value being lumbered than they do 
sitting there. Or, likewise, people who have farmland and adopt 
different practices, like the Farmers Union out of North 
Dakota, or what have you, no-till planting. Maybe people might 
say, ``Well, this is very soft. We're not really sure of the 
measurement of this. This is getting pretty queasy.'' Well, 
there is rigorous measurement--but, if you begin to introduce 
these worldwide situations, where people have farmland, they 
have forests, they have other things to put into this equation, 
this makes them more interesting, it seems to me, in terms of 
the equities, as well as the cost of it.
    Now, what is your judgment about that?
    Dr. Sandor. Well, I think you can do it. I think you can 
create equities. We've had the measurement challenge, whether 
it's for the trees on the Lugar Stock Farm or it's for Nebraska 
soil sequestration, are nowhere near as onerous as one would 
suspect. And you can deal with avoided deforestation. You can 
have what economists would call a counterfactual. If, for 
example, the rate of deforestation in Amazonas is 10 percent 
and you stop that rate, you don't have to give full credit. You 
can say 10 percent of it would have been deforested, and if 
you're stopping the deforestation rate, you're contributing 
something to the abatement of global warming and, therefore, 
get partial credit. So, there are technical answers to lots of 
these questions. And I do think you can get a worldwide system. 
WRI does an enormous amount of work in the protocol area and 
they do a fantastic job. As a matter of fact, half of protocols 
we use come from WRI. I think the U.S. can lead in saying we 
can measure and we can do the job appropriately. It is not so 
daunting. And we can develop an equity-driven system which is 
fair.
    Senator Lugar. Yes. I didn't wish to diminish the whole 
argument to a business arrangement, but I--in the spirit of----
    Dr. Sandor. Yes.
    Senator Lugar [continuing]. Of what Bali is supposed to 
do--that is, set up some parameters in which we may have some 
discussion. This seems to me to offer a potential model that 
might bear fruit as people decide that they can enter their 
equities. We're not demeaning the Chinese, or they're not 
claiming, ``You've already dirtied the atmosphere for 50 years, 
we need a chance.'' We get over that sort of thing and get on 
with the economics currently of the world trading system.
    Senator Kerry. Dr. Pershing.
    Dr. Pershing. Just one very brief comment on that exchange, 
I think it's exactly the heart of part of the issue. The whole 
structure of the carbon market is little different than the 
structure of commodities markets. It's created exclusively 
because governments have gotten together and said there's now a 
cap, and the cap creates scarcity, and the scarcity creates the 
price. So, we have to go back to the question of: Will there be 
a cap, going forward?
    But the second thing which we have to do is examine 
whether, if there were a cap in all countries, we'd believe the 
implementation, and whether, if we had a contract for exchange 
of those permits, we'd believe the contract. In some cases the 
answer is, absolutely, we'd be very confident. I think the 
European exchange is a perfect example. Your farm is a perfect 
example. But in the forestry side outside of those areas, we 
may be more skeptical.
    So, for example, I'm decreasing deforestation in Indonesia, 
but, turns out Brazil's not part of the institution, and so, 
the wood demand that was down in Indonesia is now up in Brazil. 
The fact that, in Indonesia, there is a change does not 
necessarily mean that, globally, the change has happened, 
because we're not managing or mapping or recording globally. 
So, those are the dynamics that will be part of the Bali 
discussion and which we need to facilitate and encourage before 
we could make a lot of progress.
    Senator Lugar. But we could also pick up some of the 
business of the World Trade Organization when--for instance, 
they now condemn certain agricultural subsidies, or various 
practices, and allow countries to exact their due in whatever 
the trade is.
    Dr. Pershing. Yes.
    Senator Lugar. I know, presently, of $4 billion that may be 
due by somebody. The United States, because of our cotton 
business, unless cotton reforms. There at least is some 
experience in the world trading community of this type of 
thing.
    Thank you, Mr. Chairman.
    Senator Kerry. Thank you very much, Senator Lugar.
    Dr. Pershing, you mentioned the three things the 
administration is willing to talk about, and it didn't include 
finances, which is on the list. Are they not?
    Dr. Pershing. We haven't seen substantial resources yet 
attach those financial proposals. There is, as the Under 
Secretary mentioned, the proposal for the Energy Fund. There is 
some financing proposed for it, but I haven't seen any 
authorization, I haven't seen a strong commitment to it. Other 
funds that might be required--the World Bank estimates anywhere 
from $10-$100 billion a year for adaptation, I haven't seen a 
fund there. The proposals are out there on the technology side 
for things like capture and storage, the administration talks, 
in the geological side, about putting in a billion dollars over 
a number of years; well, the current estimates from MIT are 
about 200 million per plant, so five plants would absorb the 
entire cost. So, your proposal, Senator, which would ramp up 
the notion of immediate programs for capture and storage 
plants, well, that would be something to bring to the table. 
Currently, I haven't seen, from them, concrete numbers that 
would allow me to say yes.
    Senator Kerry. Right. Nor have I, which is why I raised it 
with her. But--
    Senator Wirth.
    Senator Wirth. Mr. Chairman----
    Senator Kerry. Can you also, as you comment on that, I'd 
just like you both--and we're going to wrap up very, very 
quickly here--just--what's the ideal--I mean, I understand the 
process part of it, but what's the best message that you could 
say would come out, that you'd be thrilled if Bali did what?
    Senator Wirth. Well, I'm afraid it's relatively mundane. If 
I were a member of the Senate Observer Group, what I'd be doing 
is talking about the future and the growing change of 
commitment, how the private sector is being involved, and 
really tell people that the United States is moving as rapidly 
as it is. That is a message that is extremely welcome, and the 
more it's said--you know, there's a lot of skepticism about it, 
but, in fact, it's true. That, it seems to me, is the most 
important thing to do. The process is pretty much going to take 
care of itself, and it's pretty hard to make that more than 
what it is.
    Senator Kerry. But I assume you believe we could help 
change the dynamics for what follows as they go through the 
process.
    Senator Wirth. What follows is terribly important, and 
understanding what follows. What Jonathan said, I think, is 
correct--what happens in 2008 will prepare for 2009. We've 
talked about a number of things here--one, this whole business 
of what kind of long-term financial commitment is made for 
adaptation, and what the World Bank's going to do, and the 
other financial institutions--that's one whole clump of 
activities. The Clean Development Mechanism that Richard was 
talking about, and making that work is another; the trade issue 
which Senator Lugar talked about, and how that plays into 
climate change; and the biofuels issue is one that's barely 
been touched. There are a number of opportunities out there 
that are just ripe for working, and the demonstration that 
we're willing to do that, I think, is going to be----
    Senator Kerry. It would be good if----
    Senator Wirth [continuing]. The bulk of it.
    Senator Kerry [continuing]. We could, sort of, follow up 
with you. I'd love to do that in the next days and sort of talk 
about it a little more. It would be great.
    Yes, Dr. Sandor.
    Dr. Sandor. I would second a lot of what Senator Wirth 
said, and I would just add to that by saying that Europe is not 
as far ahead as people think and the U.S. isn't as far behind 
as people think. There are a lot of things going on at State 
level and at the local levels. And there is a very big private 
sector effort as demonstrated by the members of CCX.
    Senator Kerry. It's a good point.
    Dr. Sandor. And we will go forth and invent in the capital 
markets, and take a leadership role there.
    Senator Kerry. Well, it's an excellent point. And--
    Yes, last point, Dr. Pershing.
    Dr. Pershing. Yes; I'd just add two more things, because I 
would fully subscribe to both Richard's and Tim's comments.
    The two things that I would add is that you need to send 
out a sense of urgency. And the message that we need to bring 
is that--it's something like the timetable that I think that 
Tim negotiated in Geneva, which was the precursor process that 
set the stage for the negotiation. What we need to have is a 
sense of timetable, but scale. We need to have a sense of 
magnitude of effect and substantive elements, but we also need 
to have inclusiveness. That's the message from Bali. If we 
don't have that, we're really not on the right track.
    Senator Kerry. Well, I thank all of you for your 
leadership. It's so important to have folks like you, who have 
been working on this issue for a long time. And I admire each 
and every one of you enormously. And you'll forgive me if I 
particularly single out Senator Wirth, who, I think, since he 
left the Senate, has just been singularly focused on whether 
it's been in Davos or at the United Nations itself or in all 
the other meetings he's convened--I've been to several of them 
here and there, Washington and Harvard and elsewhere. And, boy, 
does that add up to help build energy and ultimately get us a 
consensus. And I'm of confident we're going to somehow get 
there.
    Just to underscore the spirit of sacrifice that this 
Senator has engaged in, I got a BlackBerry about 15 minutes ago 
that the World Series trophy was in my conference room. 
[Laughter.]
    And I got a BlackBerry 5 minutes ago saying it has moved on 
to the House and I have missed it. [Laughter.]
    So, there you go, ladies and gentlemen. But the Boston Red 
Sox are going to win it again, so----
    [Laughter.]
    Senator Kerry [continuing]. It's OK.
    Thank you all. Thank you for being here.
    We stand adjourned.
    [Whereupon, at 5:10 p.m., the hearing was adjourned.]
                              ----------                              


             Additional Statement Submitted for the Record


 Prepared Statement of Hon. Eileen Claussen, President, Pew Center on 
                 Global Climate Change, Washington, DC

    Mr. Chairman and members of the committee, thank you for inviting 
me to submit written testimony on the need to restore U.S. leadership 
in the international climate change negotiations. 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 nonprofit, 
nonpartisan, and independent organization dedicated to providing 
credible information, straight answers and innovative solutions in the 
effort to address global climate change. Forty-five 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.
    Mr. Chairman, I would like to commend you, Senator Lugar, Senator 
Kerry, and the other members of this committee for convening this 
hearing today on the international climate change negotiations. As one 
who has worked for many years to advance efforts on this and other 
critical environmental challenges, it is very gratifying to me that the 
U.S. Congress is at long last engaged in a genuine debate on how--not 
if, but how--the United States should address global climate change. So 
far, this debate has focused primarily on questions of domestic climate 
policy, and we are farther along in that debate than ever. But truly 
meeting the challenge of climate change will also require global 
solutions, and these will be possible, I believe, only with strong 
leadership from the United States. By broadening the scope of debate 
here in Washington to focus attention on the international dimension of 
climate change, this hearing will inform constructive U.S. engagement 
in the upcoming conference in Bali--a conference that hopefully will 
set the stage for an effective multilateral response to global climate 
change.
    The Bali meeting presents an enormous opportunity for the United 
States to help move nations toward a fair, effective, comprehensive 
post-2012 climate agreement, one that serves U.S. interests by ensuring 
that all major economies are onboard. However, producing such an 
agreement first requires the launch of a new round of negotiations. 
That must be the key objective in Bali.
    In my testimony today, I would like to set the Bali conference in 
context by highlighting recent international developments addressing 
climate change, and by outlining the key objectives a post-2012 climate 
framework must meet, and the form it should take. Finally, I would like 
to elaborate on the type of decision needed in Bali to start nations on 
the path toward such an agreement.
Recent international developments addressing climate change
    As the United States moves closer to taking comprehensive action on 
climate change, it is not alone in its efforts. Last week, British 
Prime Minister Gordon Brown presented legislation to mandate a 60-
percent in U.K. carbon dioxide emissions by 2050. The European Union--
which has established the Emissions Trading Scheme, the largest 
emissions trading market in the world--has now committed to reduce its 
emissions 20 percent below 1990 levels by 2020. Several EU Member 
States also have joined with other countries and 10 U.S. States in the 
International Carbon Action Partnership, which will work toward 
international linkage of greenhouse gas markets. The Australian 
Government has declared its intention to establish a nationwide cap-
and-trade system. Canada is developing a regulatory framework that the 
government projects will reduce emissions 20 percent by 2020. China, 
Mexico, and Brazil all issued national climate change programs within 
recent months. China's policies include an economywide goal of reducing 
energy intensity 20 percent by 2010, ambitious renewable energy 
targets, and vehicle fuel economy standards more stringent than those 
here in the United States.
    Climate change is figuring much more prominently in international 
fora as well. The potential security implications of climate change 
drew the attention of the U.N. Security Council earlier this year. In 
June, G-8 leaders called for a global agreement on a post-2012 
framework under the United Nations Framework Convention on Climate 
Change (UNFCCC) by 2009, and agreed to ``consider seriously . . . at 
least a halving of global emissions by 2050.'' At the APEC summit in 
September, leaders agreed on aspirational goals to reduce energy 
intensity 25 percent by 2030 and increase forest cover by at least 20 
million hectares by 2020. Later that month, more than 150 countries, 
most represented by heads of state or government, participated in a 
U.N. High-Level Event on Climate Change to urge a breakthrough at the 
Bali conference. This was followed a few days later by the Major 
Economies Meeting convened here in Washington by President Bush with 
the goal of forging a consensus contributing to a global agreement 
under the UNFCCC in 2009.
Key objectives of a post-2012 climate framework
    So what form should such an agreement take? The Pew Center's 
perspective on the future international framework reflects not only our 
own detailed analysis but also the collective views of an impressive 
group of policymakers and stakeholders from around the world. As part 
of our effort to help build consensus on these issues, we convened the 
Climate Dialogue at Pocantico, whose report was released in late 2005 
at an event here in Congress, hosted by Senators Biden and Lugar. The 
Pocantico group included senior policymakers from Britain, Germany, 
China, India, Japan, Australia, Canada, Mexico, Brazil, and the United 
States; as well as senior executives from companies in several key 
sectors, including Alcoa, BP, DuPont, Exelon, Eskom (the largest 
electric utility in Africa), Rio Tinto, and Toyota. Despite this 
diverse range of interests and perspectives, the Pocantico group 
succeeded in reaching consensus on a broad vision of a post-2012 
climate framework. This vision begins with a set of key objectives that 
a post-2012 framework must meet, and I would like to emphasize the two 
most critical of these objectives.
    First, the post-2012 framework must engage all of the world's major 
economies. Twenty-five countries account for about 85 percent of global 
greenhouse gas emissions. These same countries also account for about 
70 percent of global population and 85 percent of global GDP. 
Participation of all the major economies is critical not only from an 
environmental perspective, but from a political perspective as well, as 
we cannot reasonably expect any of these countries to be willing to 
undertake a sustained and ambitious effort against climate change 
without confidence that the others are contributing their fair share. 
We must agree to proceed together.
    At the same time, we must recognize the tremendous diversity among 
the major economies. This group includes industrialized countries, 
developing countries, and economies in transition. Their per capita 
emissions range by a factor of 14 and their per capita incomes by a 
factor of 18. This leads directly to the second critical objective 
identified in our Pocantico dialogue: The post-2012 framework must 
provide flexibility for different national strategies and 
circumstances. The kinds of policies that effectively address climate 
change in ways consistent with other national priorities will vary from 
country to country. If it is to achieve broad participation, the future 
framework must allow for variation both in the nature of commitments 
taken by countries and in the timeframes within which these commitments 
must be fulfilled.
    With these key objectives in mind, the Pocantico group then asked: 
What could be the key elements of a post-2012 framework? The group 
recommended several policy approaches.
    The first of these is targets and trading. This is the approach 
employed in the Kyoto Protocol, as well as in the European Union's 
Emissions Trading Scheme and the Regional Greenhouse Gas Initiative 
being undertaken by 10 States in the northeastern United States. There 
are very sound reasons why U.S. negotiators insisted so strongly on a 
market-based architecture for the Kyoto Protocol--and why many of the 
major climate bills now before Congress adopt the same approach. 
Emission targets provide a reasonable degree of environmental 
certainty, while emissions trading harnesses market forces to deliver 
those reductions at the lowest possible cost.
    While targets and trading should remain a core element of the 
international effort, we must recognize that China, India, and other 
developing countries are highly unlikely to accept binding economywide 
emission limits any time in the foreseeable future. Economywide targets 
also may be technically impractical for them: To accept a binding 
target, a country must be able to reliably quantify its current 
emissions and project its future emissions, a capacity that at present 
few if any developing countries have.
    A future framework, therefore, must allow for other approaches as 
well. These could include policy-based commitments, under which 
countries would commit to undertake national policies that will 
moderate or reduce their emissions without being bound to an 
economywide emissions limit. A country like China, for instance, could 
commit to strengthen its existing energy efficiency targets, renewable 
energy goals, and auto fuel economy standards. Tropical forest 
countries could commit to reduce deforestation. For this to work, the 
commitments would need to be credible and binding, with mechanisms to 
ensure close monitoring and compliance. Developed countries also may 
need to provide incentives for developing countries to adopt and 
implement stronger policies. One option is policy-based emissions 
crediting, similar to the Kyoto Protocol's Clean Development Mechanism, 
granting countries tradable emission credits for meeting or exceeding 
their policy commitments.
    A third potential element is sectoral agreements, in which 
governments commit to a set of targets, standards, or other measures to 
reduce emissions from a given sector, rather than economywide. In 
energy-intensive industries whose goods trade globally, which are the 
sectors most vulnerable to potential competitiveness impacts from 
carbon constraints, sectoral agreements can help resolve such concerns 
by ensuring a more level playing field. Such approaches are being 
explored by global industry groups in both the aluminum and cement 
sectors. We believe it is also worth exploring sectoral approaches in 
other sectors such as power and transportation where competitiveness is 
less of an issue but where large-scale emission reduction efforts are 
most urgent.
    A fourth potential element is technology cooperation. This could 
include two types of agreements. The first would provide for joint 
research and development of ``breakthrough'' technologies with long 
investment horizons. Such agreements could build on the Asia Pacific 
Partnership and other technology initiatives, but commit governments to 
the higher levels of funding needed to accelerate and better coordinate 
critical research and development. The second type of agreement could 
help to provide equitable access to both existing and new technologies 
by addressing finance, international property rights, and other issues 
that presently impede the flow of low-carbon technologies to developing 
countries.
    In addition to these approaches to mitigate greenhouse gas 
emissions, a sound international agreement must address adaptation. The 
top priority within the framework should be addressing the urgent needs 
of those countries most vulnerable to climate change, with a broader 
goal of spurring comprehensive efforts to reduce climate vulnerability 
generally by integrating adaptation across the full range of 
development activities.
The decision needed in Bali: To begin negotiation
    I have described the building blocks of a comprehensive agreement. 
Precisely how they fit together can be determined only through 
negotiation. What is needed in Bali is a clear decision by governments 
to begin that negotiation.
    Two years ago, parties to the Kyoto Protocol opened negotiations on 
post-2012 commitments for those countries that have emission targets 
under the protocol. In their present form, these negotiations are very 
unlikely to succeed because those countries are unlikely to commit 
internationally to stronger action without commitments from the United 
States and from the major emerging economies. The negotiations must be 
broadened with the goal of establishing commitments for all the major 
economies. The best way to accomplish that is to establish a new 
negotiating process under the Framework Convention, where the United 
States is party. These new negotiations should either be linked to or 
encompass those underway under Kyoto, with the aim of producing a 
comprehensive agreement with elements under both the convention and the 
protocol. A decision to launch such negotiations must set out a clear 
process and timeline. Ideally, it also should set clear terms of 
engagement specifying the types of commitments to be negotiated and for 
which countries.
    At present, while I expect that parties will agree on some type of 
process in Bali, I am not confident that it will be the type needed to 
produce a comprehensive and effective set of commitments. Of one thing, 
however, I am certain--a genuine negotiation will be possible only with 
the full and committed participation of the United States.
    Whether negotiations are launched in Bali or later, one of the most 
difficult challenges will of course be engaging developing countries. 
Meeting this challenge requires a firm but balanced approach. To begin 
with, we must be absolutely clear in our expectation that the major 
developing countries assume binding commitments in a post-2012 
framework. It is true that the United States, the world's largest 
economy, is also by far the largest historic contributor to climate 
change. In establishing mandatory limits on domestic emissions, the 
United States will have begun to fulfill the commitment it made with 
other industrialized countries to lead the climate change effort. And 
having done so, it will then be reasonable to expect that countries 
like China fulfill their responsibilities as well. China's emissions 
have grown 80 percent since 1990 and could rise another 80 percent by 
2020. It is essential that these trends be reversed. Realistically, 
given the greater capacity and historic responsibility of 
industrialized countries, China, India, and other developing countries 
will require incentives to undertake strong climate efforts. However, 
in return for these incentives, China and the other major developing 
countries must assume appropriate commitments that will slow and 
ultimately reverse the growth of their greenhouse gas emissions.
    To summarize, I believe it is incumbent upon the United States to 
lead both by strong action at home and by actively and constructively 
reengaging in the international climate effort. Only with strong U.S. 
participation and leadership can we achieve a fair and effective global 
response to the critical challenge of climate change. I thank the 
committee for the opportunity to present these views.

                                  
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