[Senate Hearing 110-586]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 110-586

                      INTERNATIONAL CLIMATE CHANGE
                    NEGOTIATIONS: BALI AND THE PATH
                   TOWARD A POST-2012 CLIMATE TREATY

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

                                HEARING



                               BEFORE THE



                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE



                       ONE HUNDRED TENTH CONGRESS



                             SECOND SESSION



                               __________

                            JANUARY 24, 2008

                               __________



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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

Castellani, John J., president, Business Roundtable, Washington, 
  DC.............................................................    60
    Prepared statement...........................................    62

Cardin, Hon. Benjamin, U.S. Senator from Maryland................    12

Connaughton, Hon. James L., chairman, Council on Environmental 
  Quality, Executive Office of The President, Washington, DC.....    15
    Prepared statement...........................................    18

Diringer, Elliot, director of international strategies, Pew 
  Center on Global Climate Change, Arlington, VA.................    38
    Prepared statement...........................................    40

Kerry, Hon. John, U.S. Senator from Massachusetts................     7

Lugar, Hon. Richard G., U.S. Senator from Indiana................     5

Lyons, Jim, vice president for policy and communication, Oxfam 
  America, Washington, DC........................................    54
    Prepared statement...........................................    57

Menendez, Hon. Robert, U.S. Senator from New Jersey..............     1
    Prepared statement...........................................     2

Prickett, Glenn, senior vice president, business and U.S. 
  government relations, Conservation International, Washington, 
  DC.............................................................    46
    Prepared statement...........................................    49

Voinovich, Hon. George V., U.S. Senator from Ohio................    12
    Prepared statement...........................................    13

                                Appendix

Prepared statement submitted by Hon. Barbara Boxer, U.S. Senator 
  from California................................................    75

Responses to additional questions submitted for the record by 
  members of the committee.......................................    77

                                 (iii)



 
                      INTERNATIONAL CLIMATE CHANGE
                    NEGOTIATIONS: BALI AND THE PATH
                   TOWARD A POST-2012 CLIMATE TREATY

                              ----------                              


                       THURSDAY, JANUARY 24, 2008

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:38 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Robert 
Menendez, presiding.
    Present: Senators Menendez, Kerry, Bill Nelson, Cardin, 
Lugar, Corker, and Voinovich.

          OPENING STATEMENT OF HON. ROBERT MENENDEZ, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Menendez. Welcome to today's hearing, the committee 
will come to order. Senator Reid caught me on the floor, and I 
got a little detained.
    We welcome everyone to today's hearing regarding the Bali 
Conference and international climate change negotiations. We'll 
hear from two panels, the first will focus on the 
administration's efforts to secure a climate change treaty. The 
second panel will provide important perspectives on the main 
issues that we have, that will have to be resolved for a post-
2012 climate change treaty to become a reality.
    I appreciate Chairman Biden, for allowing me to chair this 
most important hearing. It's also within the jurisdiction of 
the subcommittee, so we appreciate the opportunity. This issue 
promises to be one of the most important our committee grapples 
with over the next few years.
    Climate change is not just a potentially devastating 
phenomenon, but also provides a chance for the United States to 
stand in solidarity with people around the world in a struggle 
to protect people's homes, their land, and their well-being. It 
is an opportunity to show leadership and improve how the world 
views our country.
    Of course, leadership is also necessary because the effects 
of climate change will also be felt acutely here at home.
    For instance, millions of people in my home State of New 
Jersey see the New Jersey shore and its 127 miles of beautiful 
white, sandy beaches as the only place to spend the summer. The 
Jersey shore is an irreplaceable treasure in my home State, but 
it faces an uncertain future in light of climate change. This 
treasure, literally, may not exist by the end of this century.
    Because much of the shore is subsiding while sea level is 
rising, some studies have projected erosion on the scale of 300 
feet inland.
    In addition, the barrier islands which front our coast 
could be completely eroded away. That includes Atlantic City, 
which itself is built on a barrier island.
    Not only does global warming mean relocating millions of 
people, and facing the potential of billions of dollars in 
property damage, but it would mean the end of an invaluable 
resource, treasured by generations. I know people don't want to 
wait until they start vacationing at the Pennsylvania shore.
    We can't wait for hurricanes to creep northward and rip 
through New Jersey homes, like Katrina ripped through New 
Orleans. Waiting as increased temperatures cause savage 
droughts, means farmers will face barren fields, and American 
families could face shortages of food.
    Five years ago, a heat wave killed an estimated 35,000 
people in Europe. It would be foolish to wait to act against 
global warming until a heat wave of that magnitude strikes us 
here. We can't wait until the oven dings before turning down 
the heat.
    But coming up with a solution to global climate change is 
not just about avoiding catastrophe, it is about seizing 
opportunity. A climate treaty could and should be one of the 
biggest driving forces of new, high-paying, high-tech jobs that 
this country needs. Finding new sources of power, and improving 
efficiency for the average American, this would mean lower gas 
prices, lower electric bills, and higher paying, high-tech jobs 
in the growing field of green energy. It's all part of the same 
equation, all part of a comprehensive effort.
    The centerpiece of a comprehensive effort has to be an 
effective international treaty that will be enforced post-2012. 
It has to be a treaty that is strong enough to avert disaster, 
but one flexible enough to be ratified by the U.S. Senate. We 
cannot have another situation, like the Kyoto treaty, where a 
treaty was negotiated, but could not be ratified by our 
country. That means the U.S. Senate, and this committee, in 
particular, is perhaps the most important place in the world 
for the post-2012 climate treaty to be negotiated.
    Bali has provided a very sparse framework for these 
negotiations to begin, and it is essential that we stay 
actively engaged with the process, so that negotiators from 
other nations understand the kind of treaty that can receive 67 
votes here in the Senate.
    Right now, given the many challenges facing such a treaty, 
it certainly seems like a daunting task. But if we, as a 
committee, are willing to be fully engaged in the climate 
treaty negotiation process, I think we can resolve these 
issues, and help form an agreement that can be ratified.
    Probably the most important issue for this committee to 
resolve is whether the United States is willing to commit 
itself to mandatory emissions targets. As Mr. Connaughton may 
address in a moment, this administration has firmly opposed 
mandatory emission cuts. Going forward, this committee will 
need to be engaged on this issue, and try to determine which 
targets we can realistically commit ourselves to. Without such 
a commitment, it is unclear how we, as a planet, can reduce our 
emissions to avert the most dangerous effects of climate 
change.
    Another substantive issue that will need to be addressed 
for a successful climate change treaty is China's unwillingness 
to be part of the solution. Some are convinced that China is 
focused on growth at any cost, and at any level of pollution. 
But others feel China is willing to embrace policies that will 
commit them to lower their emissions. We will need to resolve 
whether China is willing to entertain firm policy commitments 
that will reduce greenhouse gas pollution.
    And it is not just the major emitting nations that a 
climate treaty must concern with, of course. There will also 
need to be mechanisms to require developing nations to protect 
tropical rain forests which serve as an essential carbon sink, 
allowing enormous amounts of carbon dioxide to be scrubbed from 
the atmosphere.
    And vulnerable, developing nations will also need funds to 
adapt to climate change. Such funds could be used to acquire 
drought-resistant crops, build sea walls, restore wetlands, or 
even resettle those displaced by the effects of climate change. 
The next climate treaty must not just be about mitigating 
climate change and reducing emissions, but it also must be 
dealing with the inevitable effects of climate change.
    In conclusion, the conference at Bali was a promising start 
that set the framework for international climate change 
negotiations, but the bulk of substantive work remains ahead of 
us.
    I'm hopeful that today's hearing will begin a process 
whereby the committee can be in active communication with the 
White House, the State Department and other nations to help 
shape a successful climate change treaty. This issue is simply 
too important to risk failure. It is up to us, not only as 
policymakers, but as human beings, to stand in solidarity with 
people around the world who stand to lose their homes, their 
land, their ways of life, because of a problem to which America 
is significantly a part of.
    I'd like to take a moment to highlight that we will be 
hearing--after the distinguished ranking member--from Senator 
Kerry who was in Bali to monitor these negotiations, and we 
appreciate his leadership on this. We look forward to giving 
him an extended opportunity to talk about his experiences.


    [The prepared statement of Senator Menendez follows:]


             Prepared Statement of Senator Robert Menendez

    Welcome to today's hearing regarding the Bali conference and 
international climate change negotiations. We will hear from two 
panels--the first will focus on the administration's efforts to secure 
a climate change treaty and the second will provide important 
perspectives on the main issues that will have to be resolved for a 
post-2012 climate change treaty to become a reality. I would like to 
thank Chairman Biden and Ranking Member Lugar for allowing me to chair 
this important hearing. This issue promises to be one of the most 
important our committee grapples with over the next two years. Climate 
change is not just a potentially devastating phenomenon, but it is also 
a chance for the United States to stand in solidarity with people 
around the world in a struggle to protect people's homes, their land, 
and their well-being. It is an opportunity to show leadership and 
improve how the world views our country. Of course leadership is also 
necessary because the effects of climate change will be felt acutely 
here at home as well. For instance, millions of people see the Jersey 
Shore and its 127 miles of beautiful, white, sandy beaches as the only 
place to spend the summer. The Jersey Shore is an irreplaceable 
treasure for my home state but faces an uncertain future in light of 
climate change.
    This treasure literally may not exist by the end of this century. 
Because much of the shore is subsiding while sea level is rising, some 
studies have projected erosion on the scale of 300 feet inland. In 
addition, the barrier islands which front our coast could be completely 
eroded away--that includes Atlantic City which is itself built on a 
barrier island.\1\
---------------------------------------------------------------------------
    \1\ From Reports by Environment NJ and the Union of Concerned 
Scientists.
---------------------------------------------------------------------------
    Not only does global warming mean relocating millions of people and 
facing the potential of billions of dollars in property damage, but it 
would mean the end of an invaluable resource treasured by generations. 
We can't wait until people start vacationing at the ``Pennsylvania 
Shore.''
    We can't wait for hurricanes to creep northward and rip through New 
Jersey homes like Katrina ripped through New Orleans. Waiting as 
increased temperatures cause savage droughts means farmers will face 
barren fields and American families could face shortages of food. Five 
years ago a heat wave killed an estimated 35,000 people in Europe. It 
would be foolish to wait to act against global warming until a heat 
wave of that magnitude strikes us here. We can't wait till the oven 
dings before turning down the heat.
    But coming up with a solution to global climate change is not just 
about avoiding catastrophe; it's about seizing opportunity. A climate 
treaty could and should be one of the biggest driving forces of new 
high-paying, high-tech jobs that this country needs. Finding new 
sources of power and improving efficiency-for the average American this 
would mean lower gas prices, lower electric bills, and higher-paying 
high-tech jobs in the growing field of green energy. It's all part of 
the same equation, all part of a comprehensive effort.
    The centerpiece of a comprehensive effort has to be an effective 
international treaty that will be in force post-2012. It has to be a 
treaty that is strong enough to avert disaster, but one flexible enough 
to be ratified by the United States Senate.
    We cannot have another situation like the Kyoto treaty where a 
treaty was negotiated, but could not be ratified by our country. That 
means that the United States Senate and this committee in particular is 
perhaps the most important place in the world for the post-2012 climate 
treaty to be negotiated. Bali has provided a very sparse framework for 
these negotiations to begin, and it is essential that we stay actively 
engaged with the process so that negotiators from other nations 
understand the kind of treaty that can receive 67 votes here in the 
Senate.
    Right now given the many challenges facing such a treaty, it 
certainly seems like a daunting task. But if we as a committee are 
willing to be fully engaged in the climate treaty negotiation process, 
I think we can resolve these issues and help form an agreement that can 
be ratified.
    Probably the most important issue for this committee to resolve is 
whether the United States is willing to commit itself to mandatory 
emissions targets. As Mr. Connaughton [Pronounced Con-a-ton] may 
address in a moment, this administration has firmly opposed mandatory 
emissions cuts. Going forward, this committee will need to be engaged 
on this issue and try to determine which targets we can realistically 
commit ourselves to. Without such a commitment it is unclear how we as 
a planet can reduce our emissions to avert the most dangerous effects 
of climate change.
    Another substantive issue that will need to be addressed for a 
successful climate change treaty is China's willingness to be part of 
the solution. Some are convinced that China is focused on growth at any 
cost and at any level of pollution. But others feel China is willing to 
embrace policies that will commit them to lower their emissions. We 
will need to resolve whether China is willing to entertain firm policy 
commitments that will reduce greenhouse gas pollution.
    It is not just the major emitting nations that a climate treaty 
must concern itself with of course. There will also need to be 
mechanisms to require developing nations to protect tropical 
rainforests which serve as an essential carbon sink, allowing enormous 
amounts of carbon dioxide to be scrubbed from the atmosphere. And 
vulnerable developing nations will also need funds to adapt to climate 
change. Such funds could be used to acquire drought resistant crops, 
build sea walls, restore wetlands, or even resettle those displaced by 
the effects of climate change. The next climate treaty must not just be 
about mitigating climate change and reducing emissions, but also about 
dealing with the inevitable effects of climate change.
    In conclusion, the conference at Bali was a promising start that 
set the framework for international climate change negotiations, but 
the bulk of the substantive work remains ahead of us. I am hopeful that 
today's hearing will begin a process whereby this committee can be in 
active communication with the White House, the State Department and 
other nations to help shape a successful climate change treaty. This 
issue is simply too important to risk failure.
    It is up to us, not only as policy-makers, but as human beings, to 
stand in solidarity with people around the world who stand to lose 
their homes, their land, their ways of life, because of a problem to 
which America significantly contributes. The sooner we throw our weight 
behind real solutions, the better off we all will be.Thank you.


    And with that, we recognize the distinguished ranking 
member, Senator Lugar.

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

    Senator Lugar. Well, thank you very much, Mr. Chairman.
    Last week I returned from an extended trip to Central Asia 
and the Caucuses, in which I visited Kazakhstan, Turkmenistan, 
Azerbaijan, Georgia, and Ukraine. This region is emblematic of 
the challenges that we face as we discuss climate change, and 
the so-called post-Bali roadmap for international negotiations.
    More than 15 years after the collapse of the Soviet Union, 
all five of these countries continue to struggle to develop 
their economies, to rebuild their infrastructure, and to 
address widespread pollution and toxic waste problems.
    Central Asian hydrocarbon reserves are the subject of 
intense global, diplomatic, and economic competition. The race 
for control of the natural gas and oil in this region will 
impact energy equations throughout Europe and Asia. Russia is 
vying to monopolize energy flows from Central Asia, while other 
nations are hoping to secure access to these supplies as an 
alternative to current sources of energy.
    Meanwhile, energy-rich states like Kazakhstan, 
Turkmenistan, and Azerbaijan, are considering how to maximize 
the economic benefits that will be derived from their oil and 
natural gas reserves. Given these stakes, climate change, and 
the post-Bali roadmap are distant, and truly hypothetical 
topics in Central Asian capitals.
    One can engage officials in Baku, Astana, and Ashgabat 
about melting ice caps, flooding coastlines--even the fate of 
the polar bears--but they will say the concern for the global 
environment is all well and good, but they have to develop and 
use their fossil fuel resources to raise standards of living.
    They will say that they live in a tough neighborhood, and 
have few economic options. They will say they have to sell the 
energy sources that will put even more carbon in the 
atmosphere. Clearly, they do not lack customers.
    The picture is even more sobering when we consider China. 
That country's rapid economic growth and industrialization are 
obliterating old ways of thinking about the global economy. In 
2007 demand for power generation in China expanded by a 
phenomenal 16 percent. This figure followed a 14-percent 
increase in demand for power in 2006. The Chinese coal plants 
that came online in 2006 alone, added a net 80 gigawatts of 
electricity generation to the Chinese system, an amount roughly 
equal to the entire electrical capacity of Great Britain.
    Vehicle sales in China increased by more than 25 percent in 
2006, as China passed Japan to become the second largest 
vehicle market in the world, behind the United States. The 7.2 
million vehicles sold in China in 2006 were four-and-a-half 
times as many as were sold in China just 9 years earlier.
    The resulting demand for transportation fuels has focused 
the Chinese Government on a global search for reliable oil 
supplies that pays little attention to the external behavior or 
internal human rights record of potential suppliers. Rapid 
industrialization in China, India, and other nations is 
rendering obsolete many well-intentioned approaches to energy 
security, climate change, and global economic policy.
    I say all of this, not to diminish the problem of climate 
change, or to dismiss the grave security and economic threats 
that could come from ignoring it. My concern is that the debate 
over climate change must not become divorced from what is 
happening in China and India, and regions such as Central Asia. 
The global surge in energy demand cannot be restrained purely 
through negotiation, nor will arbitrary and unfocused goal 
setting related to carbon emissions, have much impact.
    We need to sharpen the focus of our debate over climate 
change and the economic and energy factors connected to it. We 
have to recognize that energy and supply and demand issues are 
at the core of most foreign policy, economic, and environmental 
issues today. Technological breakthroughs that expand clean 
energy supplies for billions of people worldwide will be 
necessary for sustained economic growth.
    In the absence of evolutionary changes in energy policy 
that are focused on these technological breakthroughs, we will 
be risking multiple hazards for our country that could 
constrain living standards, undermine our foreign policy goals, 
and leave us highly vulnerable to economic, political, and 
environmental disasters, with almost an existential impact.
    The United States should recognize the steps to address 
climate change involve economic opportunities, not just 
constraints. As the chairman has pointed out, thanks to new 
technology, we can control many greenhouse gases with 
proactive, progrowth solutions. Such technology represents an 
enormous opportunity for U.S. exports.
    But we have to have the will to develop, test, and 
implement these technologies on a truly urgent basis. The next 
President must demand that research projects related to battery 
technology, cellulosic ethanol, carbon capture and storage, 
solar and wind power, and dozens of other technological 
projects receive the highest priority within that 
administration.
    We also have to create the financial incentives that move 
new technologies toward implementation on a national scale. To 
be successful, both parties must forgo traditional partisan 
posturing on these issues. In the interest of national 
security, many Republicans will have to be more flexible in 
accepting government mandates, Federal research spending, or 
other tools that might prove useful in jumpstarting specific 
innovations.
    Meanwhile, many Democrats will have to reconsider their 
views on nuclear power, clean coal technologies, and other 
options that may not satisfy an ideal vision of environmental 
friendliness. With less than a year left in this 
administration, I remain hopeful that the United States will 
exercise global leadership in developing, deploying cleaner 
energy technologies that could transform the world economy, and 
provide our best opportunity to mitigate the risks of climate 
change.
    I look forward to the insights of our witnesses on this 
important topic.
    Thank you, Mr. Chairman.
    Senator Menendez. Thank you, Senator Lugar.
    Senator Kerry.

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

    Senator Kerry. Mr. Chairman, thank you for having this 
hearing. And thank you for your important statement, which 
summarized the possibilities, as well as the challenges.
    And likewise, Senator Lugar, as always, a perceptive and 
comprehensive statement about what we face here. I'd like to 
pick up on what you said.
    No. 1, you said we've got to sharpen the focus on the 
debate. I couldn't agree with you more. And I think, if you're 
going to sharpen the focus, you have to begin to decide what 
your fundamental, scientific, beliefs are. And what the data 
tells you is incontrovertible.
    To that end, you can't be half-pregnant on the subject of 
climate change, Mr. Chairman, and the ranking member. If you 
accept the fundamentals of the greenhouse concept--which are 
essential to the existence of life on earth because without a 
greenhouse, you don't have an average temperature of 57 
degrees, and we don't have life, and you extrapolate from that 
the notion that you're filling up that greenhouse with 
additional gases that trap more heat, it's almost elementary. 
Any school kid can tell you what's going to happen, and that's 
what scientists have been telling us. It goes way back to the 
1800s, when a Swedish scientist warned us of this possibility.
    I say that because the science with respect to the change 
is incontrovertible. Last year, incidentally, has now been 
announced the warmest year on record, with the exception of 
2005. We've got a series now, which has been a continuum for 
the last 12, 15 years.
    I want to begin here, because I think it's important to 
what this committee is going to do. Senator Voinovich and 
Senator Corker, I know, have been spending a lot of time and 
doing their due diligence on this issue. And Senator Nelson has 
always been there, as well as others on the committee.
    But this committee is going to be critical over the next 2 
years and in what happens with the United States because this 
is, after all, a treaty we're talking about. And just as we 
played a significant role during the arms control years, 
Senator Lugar with Senator Pell, Senator Nunn, and others who 
were here at that time--we need to play that kind of role 
again.
    I think it's really important to give a short history, and 
I want to do this fairly quickly. I appreciate the opportunity 
to speak before the panel, and I welcome Mr. Connaughton here. 
He's been at these things for awhile, and he does know his 
stuff. And I think--though I don't know whether he's limited by 
some of the positions of the administration, which we can 
explore--that he's knowledgeable on the details of this issue, 
as were the people who represented the administration in Bali.
    The problem is that you can't begin addressing this issue, 
with the urgency it requires, unless you put in a mandatory 
scheme. You can talk to any qualified, accepted, legitimate 
scientist--from Jim Hanson at NASA, to Bob Corel over at the 
Heinz Center, to John Holdren at Harvard, and a host of 
others--and what's interesting is that each of these scientists 
is expressing, as each week goes by, a greater level of alarm, 
not a lesser one. A greater level of certainty--not more doubt. 
And each of them finds that the evidence that Mother Earth 
herself is giving to us--feedback as we call it--is coming at a 
faster rate than they predicted, and in a greater quantity than 
they predicted.
    So, as reasonable and prudent people, which we ought to be, 
charged with our responsibility to protect our country and do 
what's responsible for national security, the environment, 
future generations, et cetera--we need to process this 
information.
    You look at the Antarctic ice sheet; you look at the 
Greenland ice sheet. The New York Times recently had a very 
dramatic story about the flow of rivers and the amount of water 
melting at the poles--a stunning reversal from a totally stable 
ice sheet in 1990. And there are potential dramatic 
consequences of a 16 to 23 increase in sea level, if those two 
sheets melted completely. Now, nobody can tell you if and when 
it may happen--I can't tell you, no scientist can tell you. 
What I can tell you is that we see striking evidence that we 
are moving in that direction at a faster rate.
    So, the ``do no harm'' ethic ought to guide us here.
    And I'll put this into a little over 20-years of 
perspective now. Back in 1988, Al Gore and I--on the Commerce 
Committee, held the first Senate hearings on global climate 
change. Four years later, we went to Rio for the Earth Summit, 
and to their credit, President George Herbert Walker Bush, Bill 
Reilly, and the administration participated and helped come up 
with the voluntary framework we put in place, which required us 
all to take steps to reduce emissions.
    So, 20 years ago we came to an international agreement that 
we had to do something. The problem was, because it was 
voluntary, nobody did anything serious, despite some steps here 
and there. And so, I went to The Hague, and I went to Buenos 
Aires for further conferences and party meetings. And 
subsequently I went to Kyoto. I remember working with the 
Clinton White House senior staff member, Roger Ballentine, and 
others on the workup for how we would approach Kyoto, and what 
needed to be done.
    Regrettably, a fundamental decision, an error was made in 
Berlin at a prior meeting. They decided to separate the 
developing countries from the less-developed countries--so-
called Annex 1, from the Annex 2. And that really sowed the 
seeds for the ultimate failure of the United States to ratify 
the Kyoto Protocol.
    Now, other countries would say the Treaty was not a 
failure, because a lot of them ratified it, signed up to it, 
and in fact, took steps to live up to it. Even some of our own 
communities in the United States today have taken action. 
Portland, Oregon, in its own efforts, is already at 1990 Kyoto 
levels, and it is going to get below them by doing innovative 
things with building codes and transportation and recycling and 
so forth. And other cities--there's a conglomerate of mayors, 
some 4 or 500, that have come together to try to take these 
steps--are way ahead of the Federal Government in this effort.
    But, what I want to focus on in terms of this committee, 
and those international meetings, is that out of the voluntary 
framework developed in Rio, ultimately came a mandatory 
framework--the Kyoto Protocol--for the simple reason that 
nothing else was going to do the job.
    The mandatory framework failed for a number of reasons. One 
inescapable reason is that we never took the lead, we didn't 
participate, we didn't ratify it. And every country will tell 
you--every discussion I've ever had with anybody, anywhere, 
looks to the United States for leadership on this issue--that 
we have to. We're 25 percent of the world's problem. We're the 
world's biggest energy user, still--China about to catch us, 
but right now, we're still the biggest waster of energy.
    You go to Europe, and when you leave your hotel room, the 
lights in the hallway don't turn on until you start walking 
through it. Escalators don't run until you get on them. In the 
United States, the lights are on all the time, the escalators 
are running all of the time--we just throw energy away, as if 
it doesn't cost anything.
    Slowly, I think we're beginning to catch up to that. But, 
at the meeting in Bali--and I regret that because of votes in 
the Senate, I only had about 36 hours to be there--I met with 
the Australian delegation, the European delegation, the Small 
Islands delegation, the Indonesian delegation, the Indonesian 
President and Environment Minister, the Japanese delegation, 
and the Chinese delegation.
    What I found most intriguing is that I've met with the 
Chinese delegation, for over 20 years now, and usually, and I'm 
sure Jim Connaughton would tell you this, it's a pretty bleak 
conversation. It doesn't really go anywhere. You talk to them, 
they look at you, you have some conversation, but no progress 
is made.
    This time, we had a totally different, eye-opening 
conversation that really struck me. I'm interested to know if 
Jim had the same kind of reaction. It was very different. The 
Chinese are waking up and understanding this for a number of 
reasons. Their sacred glaciers are melting. Their agrarian 
society is being significantly impacted. The livelihoods of 
fishermen and other people are being affected.
    In addition, they've got the Olympics coming up. They're 
trying to cope with their pollution, and they understand the 
problems that they have in their cities. Coal is obviously 
cheap and abundant in China--as it is in South Africa, India, 
here, and other places. Coal now accounts for 80 percent of 
China's emissions. And they're building the equivalent of one 
new pulverized coal-fired plant per week.
    If that continues to happen over the next 10 years, and we 
build the 100-plus or so plants that we're supposed to build, 
it's ``Katy bar the door.'' You might as well sit around and 
talk about adaptation, because the ability to mitigate the 
damage at that point is going to be significantly foregone.
    What the Chinese are now talking about is not stonewalling, 
as they did in Kyoto, where they just refused to be part of the 
conversation. Now they're ready to sit down and discuss 
technical assistance, financing mechanisms, perhaps even joint 
ventures on R&D, which would be a brilliant idea, in my 
opinion, for us to engage in. Or there could be a triventure 
with India and others in a massive effort to try to come 
together to focus on clean-coal technology and other efforts.
    Senator Stevens and I have now joined together. We have a 
bill to create three to five commercial-scale demonstration 
projects, here in the United States, which we ought to get out 
there as fast as we can, and then let the marketplace decide 
which one works most effectively. Then hopefully, if they work, 
we will be able to bargain, using that technology with the 
Chinese, Indians, and others, in an exchange either for credits 
or for some other instrument to create a joint effort that 
moves us forward in this endeavor.
    As Jim will tell you, Bali was not meant to be a 
substantive negotiation. Bali was always a process meeting, to 
lay out the roadmap for the next 2 years, but the substance has 
to be engaged in now. The difficulty is that we currently have 
three potential tracks through which that substance is going to 
be discussed.
    One track is under the United Nations, the UNFCCC, which we 
will take part in. And we're part of the ad hoc working group.
    The second track is the Kyoto ad hoc working group, which 
we're not formally a part of, because we didn't sign onto 
Kyoto.
    And the third track is the major emitters meetings, which 
President Bush has called, which will hold its next meeting at 
the end of January in Hawaii, but which many people in the 
European community and elsewhere view--with great skepticism, 
and even some alarm. They question whether or not it's an 
effort by major emitters who have wanted to avoid 
responsibility up until now, to kind of create a scheme outside 
of Kyoto, and outside of the United Nations, to subvert the 
U.N. process.
    At some point, these three tracks have got to meld. They've 
got to come together into one effort. Perhaps we can be 
instrumental on this committee to help that happen and find a 
way to bring it together. In my opinion, the critical issue 
now, is the language that came out of Bali. It is language that 
has been floating around for some time, by which we all agree 
that we probably have to engage in mutual reductions, but that 
we're going to have common but differentiated responsibilities.
    The real test here is how you give meaning to these words--
common but differentiated responsibilities. For instance, we 
just passed our energy bill, and we're going to have a 35-
miles-per-gallon requirement for vehicles that goes into effect 
in 2020. China will have a 36.7-miles-per-gallon requirement 
that goes into effect next year. Can they get credit for that? 
Will we credit them for that? How do you credit them for that?
    China's engaging in fuel switching. China has ordered a 20-
percent reduction in energy intensity usage, even as that curve 
goes up, as you referred to, Senator Lugar. So, will they get 
credit for that? How do they get measured credit for that? How 
will that fit into this overall reduction scheme?
    This is the single, and I think Jim will agree with me, 
toughest hurdle we're going to have to get over in these next 
preparatory months. And the role we can play, my colleagues, is 
to really lay the groundwork for the next President, whoever 
that may be, Republican or Democrat, which we have the 
abilityto do in this next year. There's a 2-year span--in 2009 
in Copenhagen, the parties are coming together again for the 
final negotiation, hopefully, for the follow-up to Kyoto.
    If we approach this correctly and do our work in this 
committee, over the next year and help give meaning to this 
common but differentiated responsibility, we can bring less 
developed countries to the table, by finding ways to give them 
credit for deforestation efforts, regulatory efforts on 
deforestation, alternative fuels, and other kinds of things. 
And they don't necessarily have to meet our standards on day 
one, which is their fear--that there is some sort of a Western 
conspiracy against their economic development. If they feel 
that we're legitimately on board, and we're moving down the 
road, I would bet everything on the fact that these less-
developed countries will agree to a scheme that ultimately sees 
everybody meeting the same standard as the technology grows, 
and we advance.
    I think in Bali, unfortunately, our delegation was not that 
well-received. The Papua-New Guinea delegate, at one point 
said, ``If the United States isn't going to lead, at least get 
out of the way.'' And in the final plenary session, 
regrettably, our chief negotiator and highest representative, 
Paula Dobriansky, was booed for one solid minute, by a group of 
diplomats who, usually, are pretty restrained.
    So, the United States has really got to start to shift on 
this and take the lead. And again, I think, Mr. Chairman, this 
committee has a unique opportunity to be able to contribute to 
that. We have cap-and-trade legislation that we can take up 
this year.
    The final comment I'll make is that in my meetings with the 
European delegation, and with the Japanese and Australians, 
they were thrilled and excited by the fact that the United 
States Congress has several pieces of active legislation that 
are on the table--one on oceans acidification, one on bringing 
all of our science under one roof and promulgating it to our 
constituencies more effectively, one on adaptation, and, of 
course, the final one is the cap-and-trade bill.
    They're excited that we seem to be ready to embrace this. 
Particularly, the business community, the U.S. CAP, major 
corporations, the Business Roundtable and others, are coming to 
this issue with an understanding of its urgency. And I can't 
think of any issue that's been in front of the Congress during 
the years that I've been here which presents us with a better 
opportunity to lead, and a more compelling rationale to get rid 
of the partisanship and get down to the business of making it 
happen.
    Thank you, Mr. Chairman. Thanks for the extra time, I 
appreciate it.
    Senator Menendez. Thank you, Senator Kerry, for that 
indepth overview of both the issues, and the opportunities.
    We certainly want to get to our two panels, and--but we 
certainly want to give our colleagues an opportunity.
    Mr. Hagel. Senator Hagel.
    Senator Hagel. I'll wait for the witnesses.
    Senator Menendez. Senator Nelson.
    Senator Bill Nelson. Mr. Chairman, I want to get on with 
the witness. I bring to the table the same concerns that all of 
us have up here, and that we've got to do something about it. 
And I bring to the table the representation of the State that 
has the most to lose by the rise of the seas. And if you doubt 
what I'm saying, take a look at the maps of what it would look 
like if the sea rises 2 feet in South Florida and the coast of 
Florida, and what it would be if it rises 3 feet or 4 feet. It 
is something that we must do, I'm a cosponsor of the cap-and-
trade legislation, and let's move on.
    Senator Menendez. Senator Corker.
    Senator Corker. I'd like to hear the witness, and I'll 
wait.
    Senator Menendez. Thank you.
    Senator Cardin.

              STATEMENT OF HON. BENJAMIN CARDIN, 
                   U.S. SENATOR FROM MARYLAND

    Senator Cardin. Mr. Chairman, let me just make one brief 
comment. I just came from the hearing of the Environmental 
Public Works Committee where we had a hearing on the 
administration's denial of the California waiver on greenhouse 
gas emissions.
    And I just want to make one observation--what Senator Kerry 
says is absolutely correct. International communities look to 
the United States for leadership and we haven't provided that 
leadership, and I'm very pleased we're having this hearing 
today on global climate change. It's critically important to 
the people of Maryland, it's critically important to the people 
of our Nation.
    But, what I find very disappointing, Governor O'Malley, my 
Governor, testified before our committee said, ``Look, if the 
Federal government's not willing to do what it needs to do in 
greenhouse gas emissions and global climate change, at least 
allow the States to be able to move forward.'' Seems like the 
same thing the international community was saying about our 
Federal Government. We're not only blocking international 
progress, we're blocking local progress.
    And even our courts are telling the administration, ``We 
need to do something about--EPA needs to do something about 
greenhouse gases.''
    So, I'm very happy we're having this hearing, I think it's 
critically important to our country and I thank you very much, 
and I thank Senator Kerry for his comments.
    Senator Menendez. Senator Voinovich.

            STATEMENT OF HON. GEORGE V. VOINOVICH, 
                     U.S. SENATOR FROM OHIO

    Senator Voinovich. I think that most of what I would like 
to say has been said. The only point I would like to add is 
that we are now considering legislation that was voted out of 
the Environment and Public Works Committee that, quite frankly, 
has not been properly appraised by the Environmental Protection 
Agency or the Energy Information Agency. We can not deal with 
this problem here in the United States as if we were in a 
cocoon. I was very pleased to hear Senator Kerry's remarks that 
there seems to be some receptivity by China and India and 
others. I remember when I visited India, my eyes burned the 
whole time in Delhi.
    Chairman Klein, from the NRC, just returned from Beijing, 
where he talked about nuclear power with the Chinese, and he 
said that they are going to ban all automobiles during the 
Olympics--they have an enormous problem with air pollution.
    I talked to Chinese Premier Wen Jiabao a couple of years 
ago about this, and he says, ``I understand the problem, but 
jobs trump everything.''
    So the real issue here is how to harmonize what we're doing 
here in the United States, understanding that global climate 
change is not just our problem, but the world's problem. And I 
have serious concerns about a ``cap and trade'' program that 
would over a long period of time. I would rather see this 
country--and I wish the Presidential candidates were talking 
more about it--have a commitment to technology spend the money 
necessary to move this down the track much faster than we could 
under the ``cap and trade'' program. And that, in that effort, 
that we would not only deal with taking care of our challenges, 
but, hopefully, as Senator Kerry suggested, others would 
participate as well, and we could really do the job worldwide.
    But your point is well-taken. We disallowed three coal-
fired plants last month here in the United States. During that 
same period of time, China broke ground for eight of them.
    I think that the time has come to move this to the front 
burner, spend the money necessary to do it and convince the 
American people that they're far better off with this 
investment early on in the game, rather than waiting several 
years to try to work it out and get the technology, and so 
forth.
    We can do it. We had a Manhattan Project. When Sputnik went 
up, we had our Apollo Project. We can do it. We have the 
resources, we have the brains. And there are others around the 
world that could help us get the job done.
    That's the real challenge, to work toward this on a global 
basis, but understand that the leadership is going to have to 
come from the United States of America.


           Prepared Statement of Senator George V. Voinovich

    Mr. Chairman, I appreciate your having today's hearing. Just before 
recess, the Senate Environment and Public Works Committee was engaged 
in a debate concerning how best to deal with the issue of global 
climate change. After a flurry of hearings over a period of just a few 
weeks the committee on December 5, 2007, passed S. 2191, ``America's 
Climate Security Act''--a bill introduced by Senators Lieberman and 
Warner.
    While I acknowledge the commitment that Senators Lieberman and 
Warner have shown to addressing this issue, the legislation causes me 
great concern. Indeed, the bill contemplates a massive bureaucratic 
intrusion into American's lives that will have a profound impact on 
businesses, communities, and families with little or no impact on 
global temperatures.
    The pace of committee action on this bill was unprecedented and 
belies the significant impact the bill will have on the United States 
and international economies, the environment and our quality of life. 
Climate policy development necessitates more than political will. This 
is one of the most important issues we have to deal with and members 
must be accorded the time to ensure an appropriate policy response.
    The very mechanisms the bill advances to contain costs seem to be 
more the stuff of academic theorizing than sound analysis. We heard 
from no witnesses on the efficacy of the ``carbon board'' and its 
ability to protect the economy; veiled allusions to the Federal Reserve 
Board only remind us of the decades of trial and error endured before 
that institution regularized its procedures.
    Indeed, a recent analysis by Charles River Associates, provided a 
devastating critique of the policy proposal--estimating that by 2020 
the policy would result in a net loss of as many as 3.4 million 
American jobs; an annual decrease in disposable income by as much as 
$2,500; and annual losses in GDP of $1 trillion.
    Importantly, and to the point of today's hearing, we have no 
assurance that the bill's international provisions are adequate to 
ensure the effective participation of China, India, and other 
developing nations. The U.S. Senate clearly spoke to this issue through 
the Byrd-Hagel resolution, which stated that the United States would 
not adopt mandates to reduce greenhouse gas emissions without the 
participation of the developing world or that would result in harm to 
the U.S. economy.
    Comprehensive energy and climate change policy should strike a 
balance among protecting the environment, keeping U.S. businesses and 
industries competitive, and ensuring long-term U.S. energy security. 
While I am committed to taking action to address this issue, S. 2191 
fails to achieve this balance.
    Climate change is global in its reach and economywide in its 
breadth. Unilateral reductions in the United States will do little to 
address the climate change. This is because China and other developing 
nations will continue to rely on coal to meet their energy needs. China 
now uses more coal than the United States, the European Union, and 
Japan combined. And it has increased coal consumption 14 percent in 
each of the past 2 years. To make matters worse, India is right behind 
China in stepping up its construction of coal-fired power plants--and 
has a population expected to outstrip China's by 2030. Moreover, the 
Energy Information Agency, predicts that in 2030, carbon dioxide 
emissions from the developing world will exceed those from the 
industrialized counties by 57 percent.
    Tackling the climate change problem is not something we can do 
alone. I agree that the United States should be a leader. But passing 
unilateral restrictions will more likely motivate newly industrializing 
nations to become ``carbon havens'' for manufacturing assets no longer 
competitive in the United States--fostering both economic and 
environmental problems--than encourage them to follow suit.
    We have already seen an exodus of U.S. industry and manufacturing 
jobs to countries that do not share our environmental objectives. Fuel 
switching from coal to natural gas for electric power generation--
accounting for almost 94 percent of the increase in domestic demand for 
natural gas since 1992--sending ripple effects throughout the economy 
because of its use as both a fuel and a feedstock for the production of 
everything from fertilizer, to plastics, to the heating of homes. In 
fact, it has contributed to a loss of over 3.1 million U.S. 
manufacturing jobs.\1\ These sharp price increases continue to impair 
the competitive position of U.S. manufacturing companies in domestic 
and world markets. The chemistry industry is a case study of the 
impacts: It has gone from a $19 billion trade surplus in 1997--the most 
successful export industry in U.S. history--to becoming a net importer 
of chemicals.
---------------------------------------------------------------------------
    \1\ U.S. Dept. of Labor.
---------------------------------------------------------------------------
    The regulatory mechanisms of the past will not be sufficient to 
address carbon emissions of today or the future. Addressing this issue 
is not as simple as scaling up the Acid Rain Programs trading 
mechanisms. First, it is abundantly clear that developing world does 
not desire our advice on carbon caps or taxes. China has vowed never to 
adopt a mandatory cap-and-trade program or anything that will remotely 
slow its economic growth. Second, what is needed to effectively deal 
with climate change is a technological revolution centered on how we 
produce and use energy.
    Whether domestic or international, punitive policies--like a cap-
and-trade program--will not spur this type of technology development. 
Indeed, the evidence suggests that compliance with cap-drive companies, 
quite naturally, to the least-cost compliance option--fuel switching or 
buying carbon offsets--instead of investment is needed, but more 
speculative technologies. Moreover, carbon caps will impose severe 
near-term cost, undermine economic growth, and therefore starve capital 
markets of the true tools needed to invest in innovation. As the 
National Institute of Standards and Technology found, ``the overall 
health of the U.S. economy will affect the pace of innovation across 
all industries and technologies. A strong economy increases the pool of 
capital available for the purchase of new technology and for investment 
by companies in R&D.'' \2\
---------------------------------------------------------------------------
    \2\ Future R&D Environments: A Report for the National Institute of 
Standards and Technology (2002) at 131 available at http://
books.nap.edu/.
---------------------------------------------------------------------------
    Thank you. I look forward to hearing witnesses perspectives on this 
important issue.


    Senator Kerry. Mr. Chairman, can I--I know you want to hear 
from the witnesses, can I take 30 seconds, quickly?
    Senator Menendez. Yes.
    Senator Kerry. Back when I was Lieutenant Governor, I had 
the privilege of chairing one of the Governor's Task Forces. I 
came out to Ohio and met with Dick Celeste, repeatedly, and we 
put together, with John Sununu, the first cap-and-trade 
emissions program for sulphur dioxide, which we replicated 
Federally in the Clean Air Act in 1990. And the industry kept 
saying, ``Don't do this, don't--''
    Senator Voinovich. Acid rain provisions.
    Senator Kerry. Acid rain, correct. And the industry said, 
``It's going to cost $8 billion, it's going to take 8 years, 
don't do it to us, it'll bankrupt us.'' To the credit of the 
Bush administration, they did it. The environment community 
said, ``It'll only cost $4 billion, and it'll take about 4 
years,'' and guess what? It cost about $2 billion, took about 
2\1/2\ years. Why? Because no one was able to predict what 
happens when the country commits, and you start down the 
technology road. And when the technology is developed, and the 
private sector money is then chasing the regulatory structure--
boom, it just takes over. And the same thing can, and will 
happen with respect of alternative new fuels and so forth. You 
have to believe in it. You have to believe in the technology. I 
believe in our innovative capacity.
    Senator Menendez. Thank you very much. Let me thank our 
witness for his patience. I'd like to welcome the Honorable 
James Connaughton to the committee today.
    Mr. Connaughton is Chairman of the Council on Environmental 
Quality in the Executive Office of the President; he led the 
United States at the second week at Bali, and also heads the 
President's major economies process. In the interest of time, 
we'd ask you to keep your testimony to about 7 minutes, we'll 
include a full copy of your testimony in the record, and we 
welcome you to commence.

 STATEMENT OF HON. JAMES L. CONNAUGHTON, CHAIRMAN, COUNCIL ON 
   ENVIRONMENTAL QUALITY, EXECUTIVE OFFICE OF THE PRESIDENT, 
                         WASHINGTON, DC

    Mr. Connaughton. Thank you, Mr. Chairman, and thank you so 
much for having this hearing so soon after Bali, and before we 
embark on what is going to be a very intensive many months 
ahead of us. I think this hearing and the guidance and feedback 
from this committee is very important so I appreciate that.
    I also, particularly, want to call out thanks to Senator 
Kerry for coming to Bali. I would note that the remarks he gave 
in Bali were very constructive in helping to educate the 
international community on the needs, you know, what it takes 
for America to move forward on this issue, together, in a 
bipartisan way, and I thought those remarks were very well 
received, Senator Kerry, so thank you, thank you for that.
    The Bali roadmap, it's called the ``Action Plan,'' but it's 
referred to as the roadmap, was, in fact, a major achievement, 
because it was adopted by 188 countries, and it is the first 
detailed plan for negotiations that we've had on this subject, 
since the Berlin mandate, and I think in many ways, it has 
substantially improved on the Berlin mandate, because it's 
comprehensive and because it really lays out some key 
components that responds to major developed countries, major 
developing countries, and of course, the lesser developed and 
small island states. So, it's a--it addresses what we have 
learned in the last 15 years, and I think provides us a good 
foundation for carrying forward into the generation that comes.
    The United States is committed to working with other 
nations to agree on a global outcome. We have two abiding 
principles--the outcome needs to be environmentally effective, 
so it needs to work, and economically sustainable. Those two go 
together. Only an arrangement that meets both of these 
objectives can win public support both here and abroad.
    To be environmentally effective, a new approach has to be 
truly global and involve measurable, reportable, and verifiable 
actions by the world's largest producers of greenhouse gas 
emissions that include both developed countries, and the major 
developing countries, alike.
    The truth is this: At this point in time, without 
substantial participation by the major developing countries, 
greenhouse gas emissions are going to continue to rise rapidly 
over the next 50 years, even were the United States and other 
developed economies to cut our emissions to zero. The 
discussion 20 years ago was different, but the reality today is 
that reality.
    To be economically sustainable, our actions need to hold 
the hopes of people everywhere for economic growth, energy 
security and improved quality of life. And to do that, we need 
to find ways to lower the cost of emission reductions. And that 
requires speeding up the development and deployment of 
technologies that will fundamentally improve the way we produce 
and consume energy.
    These include the capture and storage of carbon emitted 
from coal power plants, and Senator Kerry, I know you noted 
that, in particular, in your remarks after Bali, and I know 
that's something that Senator Voinovich has been very focused 
on--more affordable nuclear power, as well as gigawatt-scale 
renewable power. We need to move from megawatts to gigawatts-
scale renewable power. Biofuels, electric, natural gas, 
hydrogen and other clean alternatives to petroleum, and of 
course, greater efficiency.
    Now, in the absence of technology advances in these areas, 
reducing global emissions at the scale necessary will 
essentially be impossible without significantly sacrificing 
economic growth globally.
    The inverse is also true. By advancing technology in these 
areas, we can make substantial progress in a way that's 
consistent with growth and opportunity.
    That's why in May, President Bush announced that the United 
States would work closely with other major economies to 
contribute to this new global arrangement under the United 
Nations, and I think Senator Kerry had it right--there has been 
some suspicion in the past about this process, but I think 
through Bali and after that, the initiative is now receiving 
broad, and increasingly greater, international support--
including from the G-8 leaders, the Asian-Pacific Economic 
Cooperation leaders, and even U.N. Secretary, General Ban Ki-
moon. I mean, they recognize that getting a smaller group of 
countries together can make a meaningful contribution to the 
broader effort.
    We hosted our first meeting in September, bringing together 
17 of the major economies, and then guided by the consensus in 
Bali--and that's important--we now have a roadmap, and 
encourage you to read it, it's just four pages. And guided by 
this consensus, we're going to meet next week to discuss a work 
program that can focus on key elements that the major economies 
have something they can contribute to. The agenda is much 
broader, we will focus on a few key areas.
    Let me give you an example of, I think, the areas where we 
can make the biggest contribution.
    One, we do want to see a globally shared vision for a long-
term global emission reduction goal. Two, we want to understand 
the role of national plans that include midterm goals, backed 
by a nationally appropriate mix of regulations, incentives, and 
public-private partnerships. Third, complementary to that, we 
need cooperative technology strategies, and other actions on a 
sectoral basis, and in particular, the big sectors, like 
fossil- power generation, personal transportation, and 
sustainable force management, which account for almost all of 
the future growth in emissions.
    This can be aided by innovative financing mechanisms, and 
importantly, the elimination of tariff and nontariff barriers 
for these clean energy goods and services. We can approve our 
emission accounting systems to verify progress and make sure 
it's comparable, and then we need to find ways, and this is the 
area that you have emphasized, Mr. Chairman, to help countries 
adapt to climate change and get access to technology, 
especially in developing countries. And this was a major 
innovation, and important plank of the Bali process. And, you 
know, Mr. Chairman, you've called particular attention to that, 
and that's been very important.
    We do believe that we have a lot to contribute now, over 
the last 5 or 6 years, on a bipartisan basis, this Congress has 
come together with the President on a host of actions. So, 
let's look just at home.
    President Bush recently signed energy legislation that 
mandates substantial midterm mandates for vehicle fuel 
efficiency, renewable fuels, and efficiency of appliances, 
lighting systems, and government operations. This law is 
mandatory and binding, and it's going to produce some of the 
largest emission cuts in our nation's history.
    Our early estimates suggest that it will be more than 6 
billion metric tons of greenhouse gases reduced by 2030. 
Chairman Dingell, at the hearing last week, suggested that his 
estimate shows it could be as much as 10 billion tons. I think 
by any measure, this is an enormous step forward for America, 
backed in a bipartisan way by this Congress.
    But we're also working internationally. Last year, and this 
went largely unnoticed, the United States joined with key 
developing countries to forge a global, legally binding 
agreement, to accelerate the phaseout of hydroflourocarbons. 
These are also potent greenhouse gases.
    This accelerated phaseout includes China and India, and 
it's going to reduce greenhouse gases by at least 3 billion 
metric tons. That may, in fact, meet or exceed what the Kyoto 
Protocol would achieve by 2012, just to give you a sense of the 
scale of this.
    The aluminum sector came together under the Asia-Pacific 
Partnership on Clean Development and Climate, and set very 
specific goals to cut emissions of peripheral carbons by 80 
percent. This is a greenhouse gases that's 1,000 times or more 
potent than CO2. And they're also working on new technologies 
for aluminum that will make it more efficient to manufacture.
    This is an example where China and India--with American 
producers--have an agreed goal, the same goal, not one that's 
on a different schedule or different amount--it's the same 
goal. So, we have done this kind of thing when we break the 
problem into its component parts.
    Finally, the United States and the European Union just--
before going to Bali--have now jointly proposed in the World 
Trade Organization to rapidly eliminate the tariff and 
nontariff trade barriers that impeded investment in clean 
technologies and services.
    We're also going to, then, pull together a big, clean 
energy technology fund--in our view, these go together. If 
we're going to provide low-cost financing, we need to eliminate 
the tariffs on the goods and services we're financing. Again, I 
would observe Senator Kerry, and thank you for including that 
as a focal area in your solutions component. There is no excuse 
today for tariffs on carbon-friendly goods and services. And 
the fact that we have them, it makes absolutely no sense. We--
that's something we can do immediately if we work together 
globally.
    Just briefly, on deforestation, which accounts for 20 
percent of global emissions worldwide, we are seeing a change 
in attitude, especially in Brazil, Indonesia, the large 
forestry countries. What we need to work on are the strategies 
to turn that change in attitude into actual progress to the 
scale that's going to be necessary.
    I think the same is true of China, Senator. It has been so 
different the last 2 years, the conversation with China, in 
terms of attitude. What we now have to find is the mechanisms 
to turn that into long-term actions. And that's something that 
we'll all need to work on together.
    So, I look forward to your questions, I look forward to, in 
particular, a very constructive next year together, because the 
guidance from this committee, and the insights from this 
committee are centrally important to our success.
    So, thank you.


    [The prepared statement of Mr. Connaughton follows:]


 Prepared Statement of Hon. James L. Connaughton, Chairman, Council on 
 Environmental Quality, Executive Office of the President, Washington, 
                                   DC

    The ``Bali roadmap'' is a major achievement adopted by all Parties 
who attended the 13th Conference of Parties to the United Nations 
Framework Convention on Climate Change (UNFCCC) that will guide 
negotiation of a new post-2012 climate change arrangement by 2009. The 
United States is committed to working with other nations to agree on a 
global outcome that is environmentally effective and economically 
sustainable. Only an arrangement meeting both of these objectives can 
win public support.
    To be environmentally effective, a new approach must be truly 
global and involve measurable, reportable, and verifiable actions by 
the world's largest producers of greenhouse gas emissions--developed 
and developing countries alike. Without substantial participation by 
developing economies, global greenhouse gas emissions will continue to 
rise over the next 50 years, even if the United States and other 
developed economies were to cut emissions to zero.
    To be economically sustainable, our actions must uphold the hopes 
of people everywhere for economic growth, energy security, and improved 
quality of life. Lowering the cost of emissions reductions requires 
speeding up the development and deployment of technologies that will 
fundamentally improve the way we produce and consume energy--such as 
the capture and storage of carbon dioxide emitted from coal-fired power 
plants; more affordable nuclear and gigawatt-scale renewable power; 
biofuels, electric, natural gas, hydrogen, and other clean alternatives 
to petroleum; and greater energy efficiency. In the absence of 
technology and cost advances in these areas, reducing global emissions 
on the scale necessary will be impossible without significantly 
sacrificing economic growth globally.
    In May, President Bush announced the United States would work 
closely with other major economies to develop a detailed contribution 
to a new global arrangement under the UNFCCC. This ``Major Economies'' 
initiative has received broad international support, including from G-8 
and Asia-Pacific Economic Cooperation (APEC) leaders and U.N. Secretary 
General Ban Ki-moon. The United States hosted the first meeting in late 
September, bringing together 17 major economies accounting for more 
than 80 percent of the world's economic output, energy use, and 
greenhouse gas emissions.
    Guided by the consensus in Bali, the Major Economies plan to meet 
again next week to discuss a work program that can contribute to key 
elements of the Bali roadmap. In our view, such a work program would 
include discussion of: (1) A long-term, global emissions reduction 
goal; (2) national plans that include midterm goals, backed by a 
nationally appropriate mix of regulations, incentives, and public-
private partnerships; (3) cooperative technology strategies and other 
actions in key sectors, especially fossil power generation, personal 
transportation, and sustainable forest management; (4) innovative 
financing mechanisms and the elimination of tariff and nontariff 
barriers for clean energy goods and services; (5) improved emissions 
accounting systems to verify progress; and (6) ways to help countries 
adapt to climate change and gain access to technology, especially for 
developing countries. In addition, we think it would be useful to 
discuss ways of structuring a post-2012 arrangement that would 
encourage, rather than deter, actions by major developing and developed 
countries, and incorporate positive, not punitive, ways to ensure 
accountability. We hope these discussions can produce tangible outcomes 
that can be endorsed at a Major Economies leaders meeting later this 
year. This would fulfill the G-8 pledge of last year for the Major 
Economies to make a ``detailed contribution'' to the U.N. negotiations.
    For our part, the United States is already working on significant 
new global and national actions to combat emissions. Last year, the 
United States and key developing countries helped forge a global, 
legally binding agreement to accelerate the phaseout of 
hydrochlorofluorocarbons under the Montreal Protocol, which governs 
ozone-depleting substances. In this instance, the agreement will also 
produce a major climate change benefit by reducing greenhouse gases by 
at least 3 billion metric tons, probably meeting or exceeding what the 
Kyoto Protocol might achieve by 2012. The Asia-Pacific Partnership on 
Clean Development and Climate is also working with seven partners, the 
United States, China, India, Australia, South Korea, Canada, and Japan, 
in this fast-growing region to accelerate the adoption of clean 
technologies through over 100 projects and activities in major sectors 
such as power generation, cement, steel, aluminum, and buildings. For 
example, a majority of the world's major aluminum producers have 
committed to goals tailored to their capabilities. These include: An 
80-percent reduction by 2010 in perfluorocarbon (PFC) emissions (a very 
potent greenhouse gas) per ton of aluminum produced for the industry as 
a whole; at least a 33-percent reduction of fluoride emissions per ton 
of aluminum produced by 2010; and a 10-percent reduction in average 
smelting energy usage per ton of aluminum produced by 2010.
    Here at home, President Bush recently signed energy legislation 
that mandates substantial, midterm requirements for vehicle fuel 
efficiency (40 percent improvement), renewable fuels (36 billion 
gallons annually), and efficiency of appliances, lighting systems, and 
government operations. This law--which is mandatory and binding--will 
produce some of the largest emission cuts in our Nation's history. Our 
very preliminary estimate suggests the law will cumulatively reduce 
about 6 billion metric tons through 2030. Last week, the chairman of 
the House Energy and Commerce Committee stated the number could be as 
high as 10 billion.
    The United States is working with other countries on a new 
multilateral financing mechanism to help accelerate use of cleaner, 
lower carbon technologies and infrastructure. And the U.S. and EU have 
jointly proposed in the World Trade Organization to rapidly eliminate 
the tariff and nontariff trade barriers that impede investment in clean 
technologies and services. The World Bank has estimated that removing 
such barriers from about 40 lower emissions technologies would lower 
the cost of cutting emissions and increase clean technology trade by up 
to 14 percent a year. Along with Japan, the United States will continue 
its massive investment in cleaner, more efficient technologies and find 
ways to share this technology with other nations. Since 2001, the 
United States has invested nearly $18 billion in research and 
development of these clean, lower carbon technologies and is providing 
more than $38 billon in loan guarantees, as well as other measures, to 
help accelerate their deployment. We encourage other countries to step 
up their efforts.
    Deforestation accounts for roughly 20 percent of global greenhouse 
gas emissions, so the United States is enhancing its efforts to 
conserve and expand the world's forests in ways that sustain their 
renewable bounty. The United States is also working on monitoring and 
adaptation tools, such as the Global Earth Observation System of 
Systems (GEOSS), a 72-nation collaboration that can help communities 
plan and prepare for the effects of climate variability and change.
    Working through the UNFCCC and in concert with the Major Economies 
process, the United States is striving for a successful climate change 
arrangement that will attract broad international support. As President 
Bush put it: ``We've identified a problem, let's go solve it 
together.''

    Senator Menendez. Thank you, Mr. Connaughton.
    We're going to start with 7-minute rounds, and I'll start 
off. Let me just ask you--many believe that real progress on 
forming a climate treaty can not happen until the United States 
adopts a domestic program of mandatory emission cuts, and 
expresses a willingness to embrace binding emission reduction 
targets in an international treaty. Now, that's something the 
administration has consistently rejected. Is there any hope 
that the administration will change its views, and be willing 
to endorse mandatory emission cuts? And if not--how an the 
administration think that voluntary programs will get the job 
done? Even in your own two-prong approach on behalf of the 
administration, environmentally effective, the last IPCC report 
said that the majority of voluntary agreements, ``has not 
achieved significant emissions reductions beyond business as 
usual.'' That obviously has not been environmentally effective.
    So, is there a possibility? If so, under what conditions 
would the administration accept mandatory emission cuts? And 
second, if not, how can you possibly make the case that 
voluntary programs, which--have been, I think, pretty 
universally recognized as not meeting the challenge--are going 
to cut the mustard?
    Mr. Connaughton. On the first point, Mr. Chairman, I think 
there's been a longstanding misunderstanding of the 
administration's position. Our position has been the same as 
that of the Senate in its 95-0 resolution that we will not 
commit to binding international goals, unless the other major 
developing countries are also willing to step up and make 
commitments, consistent with their national circumstances. And 
so, when we talk about our rejection, it's in that context.
    The Bali roadmap is now about creating the platform by 
which major developing and major developed countries come 
forward with action, and then what we'll have to see is, can 
those be translated into binding commitments. We will be open 
to that--there was a big skirmish in Bali, and this was not 
reported, but the big skirmish in Bali was actually about that 
point.
    There was a very intensive effort by a few countries to 
further excuse any action in an international context for the 
next round, too. And that was not only unacceptable to the 
United States, it was unacceptable to a number of other 
countries. The United States just happened to be the country 
that gave voice to that, and we had to earn a little heat for 
that, but it was important. It would have done us no good to 
return to--here, to this body, and say that we put, in effect, 
the same negotiating agenda that led to the failure of Kyoto. I 
mean, you would not have accepted that if we did that, and so, 
we had to take a little heat to be sure that we came back, at 
least, with that as a commitment from the major developing 
countries, and we got it. That's the good piece. We did get it. 
It was hard, but we did get it.
    In terms of domestically, I did underscore in my 
testimony--we have chosen to pursue a policy where you break 
this issue into its component parts on the theory that you can 
make greater success faster. And I think this Congress has now 
proven that to be the point. We got consensus from this 
Congress on a level of ambition under a mandate on CAFE that 
people thought was inconceivable. This Congress is committed to 
a goal that was not as ambitious as the President called for--
but still quite ambitious--on alternative fuels to petroleum, 
that will leap us ahead to cellulosic ethanol and other 
technologies that have very low greenhouse gas profiles.
    This Congress adopted mandatory appliance standards, this 
Congress adopted just a breakthrough of provision on lighting 
systems, and I was pleased to work with Senator Boxer on the 
provision of the recent energy bill that's going to cut U.S. 
Government operation efficiency by 30 percent within 10 years, 
that's twice as fast as the historical average. Each one of 
those is a legal mandate.
    So, my view has been--and continues to be, both nationally 
and internationally--when you break the problem down into its 
smaller parts, you do the technical analysis that Senator 
Voinovich has talked about, you do the economic analysis that's 
critical, you can begin to set meaningful goals, and produce 
meaningful outcomes. It's only when you try to ball it up into 
one big basket that it makes the issue just much harder to 
advance.
    I will just end with one of your colleagues who will go 
unnamed, but from the Democratic side of the aisle said, ``You 
know, Jim, this climate change thing is kind of like the 
opposite of a snowball--the bigger it gets, the slower it 
goes.'' Perhaps if we deal with it in its component parts, we 
might be able to make more progress, faster.
    Senator Menendez. Well, let me ask you--that sounds simple 
enough, but the underlying issue doesn't get resolved simply by 
breaking it up. If not, we would have been there already.
    Do you accept what Senator Kerry said as the scientific 
premise? Let's start there.
    Mr. Connaughton. Well, the science has clearly 
strengthened, and the United States was instrumental in that 
occurring. We put $2 billion in annually----
    Senator Menendez. I'm not asking you if it's strengthened, 
I asked you, do you accept the proposition that Senator Kerry 
laid out at the beginning of his opening statement?
    Mr. Connaughton. Which proposition?
    Senator Menendez. That, in fact, where we're at with 
greenhouse gas emissions, where it's headed, and if you accept 
that science, then don't you have to respond to it?
    Mr. Connaughton. Absolutely, the President actually has 
made that clear, and consistently.
    Senator Menendez. So, if that's the case, it seems to me 
that you're talking about the Energy bill as an example of some 
of the responses. But the Energy bill was stronger until the 
President threatened to veto it, and it was weakened pretty 
significantly.
    I know in the past, the administration has talked about the 
Asian-Pacific partnership and the Montreal Protocol, but these 
efforts reduced the growth--the growth--of emissions that would 
have otherwise occurred. But even the most optimistic 
projections state that these policies do not result in actual 
reduced emission levels.
    And even to the extent that we're talking about the Energy 
bill, how vigorous are we going to hear from the President in 
the State of the Union Address, to get the funding necessary to 
make at least those goals successful.
    Mr. Connaughton. Well, first, Mr. Chairman, on the Energy 
bill, in fact the President's two goals for fuel and for 
vehicles were more stringent than that passed by the Congress. 
We wanted to see the targets hit--both of them--hit on much 
faster timelines than the ultimate compromise that was 
attained.
    We were happy to sign the bills, but I think----
    Senator Menendez. But he did threaten vetoes before, 
though.
    Mr. Connaughton. The vetoes did not relate to the car 
piece, the fuel piece, the appliances or the lights or the 
Federal Government operations----
    Senator Menendez. But there were veto threats.
    Mr. Connaughton [continuing]. We opposed the tax increases 
that were an underlying component of that bill. We didn't think 
tax increases, especially the sale that was talked about, were 
necessary to making the progress that we could achieve through 
those other programs. So----
    Senator Menendez. You mean the incentives toward moving 
toward renewable energy sources?
    Mr. Connaughton. No, actually; the tax credits and the 
other provisions dealt with other aspects. The President has 
been one of the strongest backers of incentives toward clean 
energy sources. We strongly supported the loan guarantee 
provision that is now over $35 billion to get deployment of 
clean energy out there. The President's budgets are now getting 
close to $4 billion annually on technology development and 
deployment, with strong support on a bipartisan basis from the 
Congress.
    So, there's a lot more common ground there than we'd like 
to talk about. Because we end up fixating on sort of the top 
tier set of issues.
    On the international level, Mr. Chairman, in the Asia-
Pacific partnership, which I think is something this committee, 
I would love this committee to, you know, learn even more 
about--I give you the example of the aluminum sector. When I 
set an 80-percent reduction of PFCs, that was an absolute 
reduction of PFCs in that sector. We were doing something 
called the Methane to Markets Partnership, where we're getting 
absolute reductions in natural gas, from landfills, from coal 
mines, from agricultural operations and from leaking natural 
gas production systems in the major developing world--these are 
all, in those categories, we can achieve an absolute emission 
reduction.
    You are correct, in the area of power, and in the area of 
fuel for personal transportation, you know, people driving 
their own cars, our current trajectory is to slow the growth at 
a more rapid pace. And that's why this new mandate in the 
Energy bill, is so important. And remember, the President 
called for that in the State of the Union last year.
    And so you are correct there but that, the Congress itself, 
has recognized that the first step with respect to fuel and 
power, the first step is actually to slow the growth, and we're 
working toward the technology advancement that allows us to 
stop it, and then reverse it. But that will take a little bit 
longer.
    Senator Menendez. Senator Hagel.
    Senator Hagel. Thank you, Mr. Chairman.
    Mr. Connaughton, welcome. In listening to Senators Lugar 
and Kerry, first with Senator Lugar's analysis of where he has 
been the last week, energy use--what Senator Kerry talked 
about, in regard to the Chinese and the use of coal, and--it 
seems to me, and it has always been, at least my sense of how 
we deal with climate change, is that you can not deal with 
climate change without dealing with the fundamental issue, and 
that is, the use and production of energy.
    How we use energy, what kind of energy we use--and if we 
were to bypass that, or as Senator Lugar noted, to work around 
that in some abstraction, or some theory, or some set of 
mandates that we will apply to this that we're missing the 
essence of the issue. I think Senator Lugar's points were 
exactly right--there is no nation on earth that is going to 
hold itself hostage to its own self-interests. Whether that's 
jobs or growth or development, and it will not hold itself 
hostage to an incidental that may not, in their list of 
priorities, be as important as developing their country. That 
happens to be a fact of life.
    So, I think the real issue is, then, how do we proceed? How 
do we, in effect, effectively deal with this issue? And we can 
have differences of opinion, to some extent within that range 
of how much are the glaciers leveling off and melting, but the 
fact is we've had climate change since the history of man, and 
we are now experiencing a significant degree of climate change.
    Now, in the conversations that you have noted, and what 
some of the other conversations have been around this table, we 
have applied some attention to technology, as Senator Kerry 
talked about, R&D, resources, money. And of course, Mr. 
Connaughton, you are well aware, because we work closely with 
you that the 2005 Energy Policy Act, as a title, referenced the 
environment title, title XVI.
    That was a title that I, essentially, wrote, along with the 
help of you and many colleagues. It was introduced in a 
bipartisan way, we had Democrats and Republicans, a significant 
amount of cooperation and what that title set up were loan 
guarantee programs, technology sharing, R&D, billions and 
billions of dollars to focus on this. Because, I don't know of 
an issue of this magnitude, certainly, or anything like it that 
has ever been solved without technology being the dynamic that 
produces the change required, in a world of 6\1/2\ billion 
people, where 40 percent of that demographic is under the age 
of 19 years old, and they don't know how they're going to 
exist, because they don't know what kind of work they're going 
to have, if they're going to have any jobs. And that just 
happens to be reality.
    And so my question is: How effective has that title been, 
at least in your opinion, to employ what we intended to be 
employed on R&D, sharing technologies with developing 
countries, doing what Senator Kerry has talked about, trying to 
stop those coal plants from being put in place, as much as we 
can, as much effect as we can have on another sovereign 
nation--what can we do? How have we used those resources? Are 
we funding those programs and those titles to the extent that 
we should be funding them?
    If you could frame that up a little bit, because we do 
have, it seems to me, some mechanism in place, Mr. Connaughton, 
to deal with some of the issues that we're talking about here. 
It's specifically technology, R&D and the sharing of that with 
developing countries?
    Mr. Connaughton. Thank you, Senator, and thank you for your 
long leadership and support and advice on this subject for now, 
for me, for almost 7 years.
    The--you're going to the heart of it which is the, we've 
had four energy bills, I'm sorry, four climate bills passed by 
this Congress since 2000. One was the Energy bill of 2005, one 
was the Energy bill of 2007, one was the Farm bill with 
billions of dollars in conservation incentives that will enable 
sequestration, and the other was the passage of the new tax 
rule on expensing and dividends that's allowed our industry to 
reinvest in much more efficient processes. Four major pieces of 
climate legislation, they just weren't titled, ``Climate.''
    But huge--in the bill you described, we are now at the 
point, it's taken us 2 years to pull the programs together and 
to now pull the budgets together to do what will be the world's 
largest commitment to advancing the technologies that matter, 
that we've ever seen. And again--bipartisan support, so this is 
not something which there's disagreement.
    At the top of that list has been how do we get from here to 
there on producing power from coal with low emissions? We did 
it with acid rain in the eighties, nineties, and now, how do we 
do it with coal in the, you know, 2010s and 2020s. That is at 
the top of the list--if we don't figure that out, adaptation 
becomes even more important--it's very important now, but it 
becomes even more important. And we now have the tools to do 
it--with the loan guarantees, the tax credits, and the beefed 
up R&D investment, Congress plussed that up last year, stay 
tuned for our new budget with relation to that.
    But we now need to take the U.S. commitment, and see if we 
can secure commitment in kind from all of the other major coal-
using countries of the world.
    We can't do this alone. We could prove it for America in 
the next 10 years, but if it's not ready to be deployed 
globally, you know, I think, Senator Kerry, you pointed out--a 
coal plant a week. You know, it's hard to go back from that.
    So, we have to do that fast--specifically on international 
cooperation. That title that you were one of the authors of, 
has laid the foundation for, I think, more than a dozen 
international partnerships that we're now carrying out on 
technology cooperation, but also on technology deployment.
    We were very disappointed this year when, at the last 
minute in the budget process, the leadership of the budget 
committees put some significant constraints on our ability to 
carry out these technology cooperation programs. And I don't 
know why that occurred, it was very disappointing, but it's 
critical to the next President, whichever party becomes next 
President--and I think we would like to work with this 
committee, perhaps, in speaking to the budget committees to 
remove some of those constraints, because one of the ways we 
get China and India, Brazil, South Africa, and Mexico to the 
table on making commitments, is our ability for very low-budget 
cost to provide the capacity-building and the sharing of our 
experiences and benchmarking of best practices. That's also 
good for our technology providers.
    I think some of the--you know, again, I don't know who put 
that provision in at the last minute, but it's really going to 
impede our ability to help sell good old fashioned technology 
coming out of New Jersey, coming out of Massachusetts, coming 
out of Ohio, coming out of California, because we're not able 
to get those private sector folks together the way we'd like.
    So, this is the core of that title--it's real, it's rolling 
up your sleeves, it's showing what can be done, it's great for 
American business, and it's also good for foreign business. So, 
it's a two-way street, so we'd like to do more with that title.
    Senator Hagel. Mr. Connaughton, thank you. Mr. Chairman, I 
appreciate your time. I might add that two members of the 
committee--and one of those members is here, Senator 
Voinovich--was one of the cosponsors of that bill, and added a 
tremendous amount in the actual drafting of the bill, as well, 
so thank you.
    Senator Menendez. Thank you.
    Senator Kerry.
    Senator Kerry. Thank you, thank you very much, Mr. 
Chairman.
    Mr. Connaughton, you lost Senator Hagel, because you failed 
to mention the technology coming out of Nebraska----
    Mr. Connaughton. Well, we're counting on them to be the 
Saudi Arabia of biomass.
    Senator Kerry. I got it.
    Mr. Connaughton. They're going to be powering all of our 
vehicles, very cleanly, we hope.
    Senator Kerry. We do; we do hope that.
    Mr. Connaughton, you and Andy Karsner gave a terrific 
briefing in Bali. In fact, people were sort of scratching their 
heads and saying, ``Wow. Where is the double world, here?'' 
Because you folks gave a--I'm sure you heard the reports--a 
solid briefing about the technologies and the ability to be 
able to respond and where we should go. But then your policy 
doesn't seem to match what you folks, technically, are capable 
of delivering.
    Why is there this gap, between what you can talk about 
cogently, articulately, such as what technology can do, and the 
administration's urgency of getting that technology out with 
efforts to accelerate it.
    Mr. Connaughton. Well, I think it goes to the core of any 
issue of this complexity, Senator, and thank you for pointing 
to this particular issue. All the subcomponents of what we're 
doing on an individual basis are actually very, very well-
received--whether it's coal, whether it's the fact that the 
United States installed more renewable power last year than any 
other nation. The new funding that came out of the Energy bill 
of 2005--I mean, Europe is stunned at the level of ambition 
that we're doing on biofuels. That this Congress just put into 
law on biofuels, Europe is now trying--they set a goal that 
they're now walking back from, because it's too hard.
    But it falls on the broader challenge that we faced when 
the President made clear, ``We can't do Kyoto.'' And that, you 
know, that creates its own negative impression, and then the 
fact that getting new negotiations restarted just--it took us 6 
years to get it restarted, so you have that----
    Senator Kerry. But you see the problem, don't you? I mean, 
first of all, almost every one of those initiatives was started 
in the Congress. They didn't come from the administration, 
initially. Or Congress surpassed, by far, whatever it was that 
the administration talked about. They never even got, for a 
moment, as far as we wanted to go, because of resistance from 
the administration. So, that's point number one about what 
lends credibility, in this sense.
    The other point is, rather than say, ``We can't do Kyoto,'' 
say, ``We can do better than Kyoto. We can do Kyoto-plus. Which 
is to get the less developed countries to be part of it. So, we 
want to do Kyoto, but we also want other people to 
participate.''
    That wasn't the message. It was, ``Kyoto is dead and there 
is nothing else.'' And there has been nothing else for 7\1/2\ 
years. That's why there's this sense of urgency about the 
United States leading.
    Which brings me to the next question. Why, if you are on 
board, did the administration resist at Bali an inclusion 
within the framework of the agreement of a reference to the 
IPCC goals? And the IPCC report?
    Mr. Connaughton. Well, on your first point, Senator, I 
think I would respectfully disagree. The President laid out a 
series of strategies in 2002 that unfolded over the next 4 
years. I was part of that process. And with bipartisan support 
we got, you know, almost all of that done. And I would also 
disagree, the President's level of ambition on a number of 
these areas exceeded the proposals from Congress, and others. 
In some, Congress exceeded the President's proposals. So, it's 
the give and take of that process.
    But, I think there's----
    Senator Kerry. Which proposal exceeded the Congress?
    Mr. Connaughton. The President wanted to see 36 billion 
gallons of alternative fuels by 2017, and ended up----
    Senator Kerry. And we have proposals to go well beyond 
that. We have a reputable portfolio goal of 20 percent, which 
you opposed. We have much more ambitious goals than that.
    Mr. Connaughton. My point, Senator, is--in some areas the 
President was more ambitious, in some areas the Senate----
    Senator Kerry. No; I can't find any area where he was more 
ambitious.
    Mr. Connaughton. Well, I'd be pleased--we could walk 
through that, and I'd be happy to tell you tick for tick.
    Senator Kerry. Well, I'm asking you to. I'm asking you to. 
I just answered the one that you gave me.
    Mr. Connaughton. The Congress passed a CAFE bill that was 
not as stringent as the President's.
    Senator Kerry. Senator McCain and I tried to get 40 miles 
per gallon a few years ago. We got 35 this year. That was more 
than what the President wanted--you guys opposed it. We tried 
to get it 3 years ago, 4 years ago. I led the effort on the 
floor with Senator McCain.
    Mr. Connaughton. I can show you the President's proposal 
and call for new CAFE standards back in 2001.
    Senator Kerry. Well, I don't want to, look, I don't want 
to----
    Mr. Connaughton. Let's--leaving that aside, Senator, I do 
want to rest on the----
    Senator Kerry. Ask Senator McCain, maybe he'll have more 
credibility with you on this. [Laughter.]
    Mr. Connaughton. I think we can find that we have already 
achieved a lot more common ground than people pay attention to, 
and on that we can build some steps forward.
    Senator Kerry. Well, let me come to this----
    Mr. Connaughton. You had your other point, on the----
    Senator Kerry. How possibly--I mean, coming back to the 
science. And you're a smart guy, and you understand this as 
well as anybody. If you're going to achieve the kinds of 
reductions we need to achieve, within a 10-year framework, or 
so. Jim Hanson says, ``You guys have got 10 years to get this 
right.'' If that's true--do you accept that?
    Mr. Connaughton. I don't want to accept it or reject it. 
The scientists speak for themselves----
    Senator Kerry. Well, do you think it's a sound warning? Do 
you think if one of the top scientists in the United States 
says to us, ``Based on the science, I think you guys have about 
10 years,'' we should listen to it?
    Mr. Connaughton. Let me put that into policy terms, because 
I don't want to speak for scientists. I find that always gets 
one in hot water.
    In policy terms, I think we need, and must dedicate, the 
next 10 years to figuring out this low-carbon, coal equation. 
We can't afford to wait.
    Senator Kerry. And at the rate that those pulverized coal 
plants are being built, do we not have to set a mandatory goal 
that will urge the economies, and the politicians, and the 
regulatory agencies all to move rapidly in the same direction?
    Mr. Connaughton. We are all--we've already set specific 
benchmarks in some key areas----
    Senator Kerry. Not a benchmark.
    Mr. Connaughton [continuing]. On power generation--no, no, 
mandates--you've done it for cars, you've done it for fuels----
    Senator Kerry. Do we have to set a mandatory reduction on 
emissions of greenhouse gases?
    Mr. Connaughton. We already have mandatory reduction 
requirements that will reduce emissions of greenhouse gases. I 
know the Congress is looking at more, we will be constructively 
engaged in that discussion.
    Senator Kerry. But you're not willing to say here, today, 
that we ought to set a mandatory goal----
    Mr. Connaughton. I'm not, but let me explain why, please, 
for a moment.
    When you worked with your colleagues on the acid rain 
provisions of 1990, that came after the 10-year effort to 
figure out if we could have a cost-effective control technology 
for sulphur dioxide.
    We are in the same point today on coal. We are now 
embarking on trying to figure out--as quickly as we can--how to 
produce power from coal with low CO2 emissions. We haven't be 
able to prove that yet. And until you know that technology is 
available, and until you know at what cost it's available, it 
is as difficult to set a goal for that and turn it into a 
regulation, as it would have been to do cap and trade on 
sulphur dioxide back in 1980, instead of 1990.
    Senator Kerry. Here's my respectful disagreement with that. 
The goal that we set in 1990, and as part of those negotiations 
did not have the kinds of warnings and catastrophic 
consequences of noncompliance that this does.
    We are currently looking at a situation where more than 
2,000 scientists, Presidents of countries, Finance Ministers, 
Environment Ministers, Trade Ministers, Prime Ministers, have 
all come together, and are currently changing their economies, 
and moving their policies, because they accept what those 2,000 
scientists have said to us. Whereas 2 years ago they said, ``We 
can allow 550 parts per million of greenhouse gases, and we can 
allow a 3-degree centigrade increase in the Earth before you 
reach the tipping point, tipping point of catastrophe, beyond 
which you can't come back.''
    Now they've revised it, because of all of that evidence 
I've talked about. And they're now telling us, those 2,000 
scientists and all of those other countries, ``It's a 2-degree 
centigrade increase, and it's a 450-parts per million.''
    We are, today, at 370 parts per million. We went up 100 
parts per million in the industrial revolution. We are looking 
at a rate of increase with these other things coming on that we 
will go beyond the tipping point very quickly if we do not 
impose mandatory targets.
    Now, either you see that potential and accept the science 
or, you just don't. You of put your head in the sand and say, 
``These guys are wrong,'' or their warnings aren't worth 
listening to. It seems to me it's one or the other.
    Mr. Connaughton. Well, Senator, first, I want to agree with 
you on the urgency of this, and the urgency of figuring this 
pathway out. We do have to be careful about unintended 
consequences. And that--this goes to the core, it's called 
``leakage.'' You know this well, Senator, but others who, you 
know, who aren't so steeped in this--Senator Voinovich has 
spent a lot of time on this--we have to be thoughtful about the 
policy to be sure that we're getting the outcome we want.
    Certainly, it would do us no good, for example, to put a 
cap on emissions from power generation that is so stringent 
that the only compliance choice is to fuel-switch to natural 
gas, or to move energy-intensive manufacturing to China and 
India and other places that don't take commitments. Because 
then the emissions go up over there.
    And so, that's why I want to be very hesitant before 
leaping in, because you have to look at the specifics of the 
policy proposals to figure out if that's what's going to occur. 
And I actually think we would agree that those are things to be 
avoided, given the natural gas prices in Massachusetts and how 
important that is--especially to the poor people on fixed 
incomes----
    Senator Kerry. Well, I understand that, it's----
    Mr. Connaughton. We just want to be careful about that--
that's all.
    Senator Kerry. I know I've gone over my time, but I surely 
understand all of that. Look, I'm not setting out here, and 
sitting here to go back to the voters of Massachusetts and say, 
``Hey, you know, I fixed global climate change, and by the way, 
you don't have a job and we've destroyed our economy.'' I 
understand all that.
    But, I just believe something different which folks at MIT, 
Cal Tech, Carnegie Melon, and many other places, are telling us 
we can do.
    And I see these technologies staring us in the face, but I 
don't see us grabbing them and putting them out there at 
commercial scale and putting them into the marketplace.
    You know, Vinod Khosla?
    Mr. Connaughton. Oh, yes.
    Senator Kerry. You ever met him?
    Mr. Connaughton. He spoke at the first Major Economies 
meeting, we brought him in to talk----
    Senator Kerry. He's now invested, along with others, in a 
solar thermal power plant out in Nevada. There's an Air Force 
base that's now being powered by it.
    Mr. Connaughton. Yes; President Bush's administration 
funded that----
    Senator Kerry. That doesn't take any fuel.
    Mr. Connaughton. Yes.
    Senator Kerry. With no fuel.
    Mr. Connaughton. Yes.
    Senator Kerry. The sun. That is providing electricity and 
turning the generators. There are things staring us in the face 
that would allow us to move more rapidly, and there's just a 
sense that, ``We don't want to upset this; we don't want to 
upset that.''
    When we make the decision, and move the money and the 
incentives in the right direction, you watch the private sector 
race to the money. That is always what has happened around 
here.
    Go back to water treatment facilities in the 1970s. We had 
90-10 money, and nobody had one, and then all of a sudden every 
community cleaned up their rivers and their streams and lakes. 
Now we're going backward again. I mean, this is doable, but you 
have to embrace it with a little bit of enthusiasm.
    Mr. Connaughton. On that point, we're in raging agreement, 
Senator.
    Senator Kerry. Let's get the money. Show me the money.
    Senator Menendez. On that point of agreement, then, 
Senator----
    Mr. Connaughton. Actually, we'll talk about that, I'll show 
you the programs. We're ready to go. We're at that exciting 
time. Especially on these challenges that have been overlooked.
    Senator Menendez. Senator Corker.
    Senator Corker. Well, thank you, I had to step out for a 
few minutes, and I hope I'm not being redundant in some of the 
questioning. But my understanding is you were asked a question 
by someone about how we, in fact, do create some sense of 
urgency, if you will, toward this and if you could just give 
me, sort of, 30 seconds to build off of--how do we, in fact, 
cause people that can solve the problems we're talking about, 
to have the kind of sense of urgency that is necessary, in the 
private sector--not in government--how do we do that without 
some forced goal, if you will?
    Mr. Connaughton. Well, I'm pleased that today--different 
from even 2000--the enthusiasm and interest of the private 
sector is at an all-time high. I think the bipartisan attention 
here in America and the global--leaders are talking about this, 
certainly President Bush has been talking about this on a 
regular basis with leaders, especially in the last 3 years.
    So, it's there, it's on the agenda. But now you get to the 
core of your question--sometimes a good old fashioned command 
and control mandate is the right tool. Sometimes a more 
innovative market-based system like a cap and trade is the 
right tool, and those both would impose regulatory costs.
    Sometimes an incentive is the right tool, and in particular 
when it comes to the area of these advanced technologies are 
really expensive--like nuclear, like advanced coal, or even the 
large, gigawatt-scale renewables, like you described, Senator 
Kerry. There's where incentives can make a really big 
difference, because the private sector is ready to put up most 
of the money, they just need that extra bit to get you over the 
investment hump.
    So, what I'm suggesting is, if you're thoughtful about what 
you're doing, you can pick the right tool for the right job. 
And, you know, one tool is not necessarily the right tool for 
all the jobs we need to do.
    You also--there are signals. I mean, I think it's very 
clear that people understand that real constraints on carbon 
are going to be necessary as we go forward in the future, 
across the board. We know we can make a certain amount of 
progress on cars. We know that we can make a certain amount of 
progress on renewables. We have some questions about how much 
progress we can make, for example, in America, on coal and on 
nuclear. Because it's just hard to get a nuclear plant built 
and sited.
    How do we get over those humps? You have to answer those 
questions first, because if you get too far ahead of yourself 
with the mandate, or you make the mandate, you know, out of 
alignment with the technology pathway, that's where you create 
these issues I described with Senator Kerry.
    Please take my remarks as--we have tools now. I mean, 
that's the beauty of it, we have a lot of support now. So, 
we're not debating whether to do something, we're not debating 
that it should be urgent. We're just debating the how, and how 
fast in particular sectors. And so that's what we're about.
    Senator Corker. You know, the time that we've spent on this 
has really--in our own office--has been to see if there's not 
some way to align the interests of reducing carbon in our 
atmosphere with growing our GDP, with making sure that we break 
through and have new technology so that we're not so dependent 
on foreign oil. And it seems to me that thinking people ought 
to be able to come up with a way of doing that. We spent time 
in Brussels, and Paris and London and saw that what you said is 
true, I mean, there has been fuel switching, which has actually 
caused countries to be less secure with their energy sources, 
because of the cap and trade program. But, it seems like, that 
we as thinking people, ought to figure out a way to create a 
program that aligns all three of those goals.
    One of those things that I think is so hurtful to us, as a 
country, is the way we pick winners and losers. And I've 
actually wondered whether the kind of cap-and-trade program 
that we've discussed would do away with that. That we would set 
standards, and whether it was nuclear or whether it was 
renewable or whatever, all would be in the game on the same 
basis.
    And I do wonder--I have to tell you--I wonder how we can 
move ahead with these new technologies that you're talking 
about and that all of us care about, without there being some 
cost associated with not doing that. And it seems to me, and 
again, I've not signed on, but it's interesting to me--the cap-
and-trade program might do that.
    So, certainly from the standpoint of leakage, I understand 
that any cap-and-trade program that allows us, as a country, to 
burn carbon here, or emit carbon into the atmosphere and plant 
trees someplace else, and for us to think that's neutral is not 
a good program, OK? But it seems that with the administration 
and with all of us, we could figure out a way to make sure that 
we're more energy secure, to drive technology and to make sure 
that we're doing something that's environmentally friendly.
    But, I don't think just wishing that to occur is going to 
make it happen. And in the process, we become even more 
dependent. And I'd like for you to talk about--in the minute, 
fifty-four I have left--some of the components that you think 
might make that work, and not be detrimental to our economy.
    Mr. Connaughton. Well, first, we know we can do it, because 
this Congress just did it. It came together on an alternative 
fuels standard, worked out the compromise and set a level. And 
I can translate that into greenhouse gas reductions for you, 
it's going to slow the growth and it's going to stop the 
growth. And over time, once you get out to 2025 and beyond--it 
will start reversing the growth. So that Congress has just set 
a trajectory for greenhouse gases when it comes to fuel.
    Now, we would have like to see that be performance based. 
It picks some winners and loser, it took--it's going to take 
longer to get to second generation, then--then we would have 
liked, but it was a good outcome.
    But there's an example of, when you do the--get everyone 
together, do the math, look at technical feasibility, you can 
produce a reasonable outcome.
    Now, that's supported by some incentives, as well. We're 
going to build, with the Congress's support, the world's 
first--we're going to join a number of other countries--in 
building the world's first cellulosic ethanol plants by 2010. 
We've got three of them going up, with that incentive. You 
know, the mandate wouldn't have produced that by 2010, we 
needed to do the incentive to do that by 2010.
    As a result, Europe's doing them, China now want to build 
some, India wants to build some, and if we get the funding to 
help do technical support on that, we can help them achieve 
that.
    So, that's why, again, we can be thoughtful if we look at 
the specific area where we want to make progress.
    So I, again, I'm an optimist. But, we should do the work 
necessary--one thing we should be careful to avoid is putting a 
mandate on a mandate. And there's a tendency in this area to 
want to do that.
    So, we now have five mandates--on fuel, cars, appliances--
it would not seem to make a lot of sense to then create another 
mandatory system on top of that. And so, that's the other thing 
you want to be careful of, because that thing creates a 
distortion in the effectiveness of your policy. I don't think 
the Congress, you know, I think that will be an important 
discussion this year, for the Senate and the House in 
evaluating the new mandates against some of these climate 
change proposals on caps and trades--you've just got to find a 
way to reconcile those. So, that's something to watch out for.
    Senator Menendez. Senator Cardin.
    Senator Cardin. Thank you very much, Mr. Chairman.
    I hear your rhetoric on urgency, but I don't see it matched 
by the policies of this administration. So, I agree, the issues 
of global climate change require urgency. I come from the State 
of Maryland, where we are one of the most vulnerable States to 
flooding, we've seen erosion on a lot of our waterfront areas, 
Smith Island is being lost right in front of our own eyes, an 
inhabited island on Chesapeake Bay. We see the water of the Bay 
warming, which is bad for sea grass and affecting diversity of 
the Chesapeake Bay. All of those reasons, there's an urgency, 
here, and you seem to embrace it, but then I take a look at the 
policy.
    So, let me just ask your opinion--we had a hearing, as I 
said earlier today--in the Environmental and Public Works 
Committee on the EPA's denial of the California waiver. An 
effort by the State of California to deal with greenhouse 
gases, as it did with smog, with a different standard on 
emissions.
    Now, this is not one State. The number of States that have 
passed the California waiver would be 45 percent of all the 
vehicles we have on the roads of America today. And we know--as 
Senator Kerry pointed out, and as you agree--our use of energy 
in our cars is unmatched anywhere else in the world.
    So, maybe you could just tell me--wouldn't it have been 
helpful to show some action, where we would have our States 
move forward--two standards in the country--one the Federal 
standard, the other California standard, where we could make a 
major impact on greenhouse gases, and show the international 
community that we are taking action to deal with the problems 
of global climate change?
    Mr. Connaughton. That goes to the core of your policy 
choice, Senator. And as a Baltimore boy, I've got the same 
sense of what happens to the great State of Maryland in this 
context. So--and I also care about the people that work in 
Maryland, to be sure that when we're moving forward with these 
policies, you know, that they're not losing jobs overseas where 
emissions are going up. So, we want to be careful about that.
    When it comes to the California situation, I understand you 
spent many, many hours with Administrator Johnson, so I 
probably--we don't want to go over that again and again. But, I 
would observe----
    Senator Cardin. But I think it's important for America's 
international leadership.
    Mr. Connaughton. Let me observe, Senator--action is 
required at all levels of government, across all sectors of the 
economy, over time, to address this. I will--let me give you 
this example--we opposed the RPS, the Renewable Power Standard 
in the Energy Bill--that is an area that we did oppose, because 
more than half the States covering the vast majority of our 
generation, had already set renewable power standards, 
consistent with their local circumstances.
    So there was an example where we did not think a Federal 
solution was the right one, because each State has a different 
electricity market, and a different capacity to do renewables--
Maryland has its own, and certainly Maryland's is different 
than California's. And so, having a one-size-fits-all for that 
didn't make sense.
    When it comes to fuel economy, however, I think the 
opposite is true. We now have a bipartisan agreement on the 
level of ambition that our national fuel, our national vehicle 
fuel efficiency should achieve, and because it's a national 
average, Senator, the nation will achieve that level of fuel 
efficiency and the greenhouse gases associated with it.
    Senator Cardin. I think I know where you're heading.
    Mr. Connaughton. But if you add California into the mix--
let's assume California's ``x'' amount more stringent. That 
gets averaged out nationally. So, from an environmental 
perspective, you're not actually changing the equation.
    Senator Cardin. All right, you're saying----
    Mr. Connaughton. So, so that's the issue.
    Senator Cardin. So you're saying that we shouldn't have 
individual policies as it relates to greenhouse gas emissions, 
it should be a Federal policy?
    Mr. Connaughton. No; sometimes the individual State-by-
State approaches are exactly the right way to go. Building 
codes is a good example of that.
    Senator Cardin. Thank you. And it also deals with 
developing the whole concept of federalism.
    Mr. Connaughton. Absolutely.
    Senator Cardin. You know, we can learn what the Feds are 
doing.
    So, I just would urge you to weigh in a little bit more on 
the EPA decisions in regards to these waivers. Because I think 
it's a critical--a huge mistake--that the administration has 
made in regards to these waivers. They're going to be litigated 
in the courts, they've already been rebuked once by the courts 
on the clean air--dealing with the dangerous effects of global 
warming, where the EPA denied it--you understand that, I 
understand that--it would be nice to have an agency working 
with us on a policy here, that's the Environmental Protection 
Agency.
    Mr. Connaughton. But, Senator, let me ask you a question. 
If the assessment is that the national emissions reduction that 
will come from CAFE will not be substantially affected one way 
or the other by a more stringent California standard with the 
other States--I'm the environmental effectiveness guy. If we're 
not achieving much more with additional regulations, that's 
going to harm your guys or make----
    Senator Cardin. But that's not what the technical 
information shows. I'd be glad to share it with you, the 
technical information shows that there would be substantial 
reductions in the States in addition to the CAFE standards, and 
it's certainly more dramatic, quicker than the CAFE standards 
that kick in.
    Mr. Connaughton. Yes; but those analyses didn't account for 
national averaging, that's all.
    Senator Cardin. Well, as Governor Rendell pointed out, for 
the people of Pennsylvania, they have good, scientific 
information.
    And all we're saying is it be based upon scientific 
information.
    Mr. Connaughton. I agree.
    Senator Cardin. That Pennsylvania acting on behalf of the 
citizens of Pennsylvania will affect the issues within the 
State of Pennsylvania, in addition to, of course, the whole 
region and international issues.
    My point is this--it seems like the administration takes 
convenient arguments. They say, ``Well, this is an area where 
we need uniformity, therefore the States can't act.'' And then 
the Federal Government can't act, because we need an 
international law or action before we do anything. We don't 
want to--and you sort of get into a situation where the United 
States is no longer a leader.
    And, we all understand that it takes time to implement 
these policies. And if we had half of our States prepared to do 
more aggressive actions with all of the bills dealing with 
greenhouse gas emissions, that makes them a lot easier for us 
to meet the targets that ultimately you think we need to meet, 
and I think we need to meet. We all agree we're going to need 
targets, we're going to have to negotiate that. So, move. Do 
things. When opportunities present itself, if we have the 
courage of all of those States, prepared to move forward--why 
pull the rug out from under them?
    Mr. Connaughton. Well, let's use Governor Rendell's program 
as an example on renewable power. He actually has very----
    Senator Cardin. I was talking about the California waiver.
    Mr. Connaughton. Yes; but I'm going to give you the 
example. He has a very innovative program that included nuclear 
and coal, low-carbon coal----
    Senator Cardin. I think you're changing the subject on me, 
but----
    Mr. Connaughton. No; I want to give this as an example, 
though. But the Federal renewable power mandate would have, 
basically, gotten rid of that. So, that's an example where the 
Federal approach would have actually harmed State action.
    On cars, a decision made by a Democratic Congress, by a 
Democratic President back in the 1970s made clear that when it 
comes to cars, a national market approach makes a lot more 
sense than a State-by-State approach.
    Senator Cardin. One final question--do you agree or 
disagree with the administrator?
    Mr. Connaughton. The decision of the Administrator was his 
to make, and I support it.
    Senator Menendez. Senator Voinovich.
    Senator Voinovich. Thank you, Mr. Chairman.
    I think that we're very fortunate to have Jim Connaughton 
chairing the Council on Enviroonmental Quality. You've done an 
outstanding job, you've really devoted yourself to this issue 
of climate change and what this country should do about it, and 
I appreciate the fact that you've given the President a lot of 
very good information about it. We wouldn't be where we are 
today without your effort and expertise.
    I'm going to read a couple of things to you, and I'd like 
to get your response. A recent Charles River Associates 
critique that came out of the EPA Committee estimated that by 
2020, S. 2191, Senator Lieberman's Climate Security Act, would 
result in a net loss in as many as 3.4 million American jobs, 
an annual decrease in disposable income by as much as $2,500, 
and annual losses in the GDP of $1 trillion.
    The EPA and the Energy Information Agency still have not 
done their analysis, but I'm interested to hear what they have 
to say.
    Now, one other thing. Fuel switching from coal to natural 
gas to generate electric power accounted for almost 94 percent 
of the increase in domestic demand for natural gas since 1992, 
sending a ripple effect through the economy, because of its use 
as both a fuel and feedstock for the production of everything 
from fertilizer to plastics, to heating homes. In fact, it has 
contributed to the loss of over 3.1 million manufacturing jobs.
    These price increases continue to impair the competitive 
position of the United States in manufacturing, and the 
domestic and world markets. What most Americans are not aware 
of is that the chemical industry has gone from having a $19 
billion trade surplus in 1997, to now being a net importer. Our 
environmental policies have had a dramatic impact on our 
economy and the loss of jobs.
    And the question I have is: How do we deal with this 
climate change challenge that we have without the downside of 
these kinds of statistics that I've just read to you, assuming 
that most experts agree with them?
    I remember dealing with the problem of acid rain when I was 
Governor of Ohio. I convinced American Electric Power to put on 
a scrubber that cost $650 million. We wanted them to burn high-
sulphur coal. We also gave them a subsidy of $1 per ton of 
coal, so they went ahead and did it.
    We encouraged AEP to put on a selective catalytic 
reduction, the new technology at the time. The plume from that 
caused them to have to buy out a whole town because the 
technology wasn't working properly.
    And we've talked about reducing mercury, but we all know 
that the technology, even for mercury, isn't as advanced as it 
should be, and we've been trying to reduce NOx and SOx, because 
that in tern helps reduce mercury.
    Now, the issue is, how do we get on with this, and move 
quickly, without the downside of some of these statistics that 
I have read? What are the options? How do we deal with this as 
quickly as possible? Are there alternatives to some of the 
things that Senator Kerry has supported, in terms of a cap and 
trade program, that are very much like the Lieberman-Warner 
legislation. Are there options that we can undertake to get the 
job done?
    Mr. Connaughton. The answer is yes. The first critical step 
is, coal accounts for more than 50 percent of the future growth 
of emissions. We have to figure out low-carbon coal emission 
technology, because if we don't, it's all over, anyway, because 
India and China are going to keep using their coal, South 
Africa, and the other places that Senator Kerry mentioned. And 
so we've got to do that, and we've got to do that as fast, and 
as appropriately as we can.
    Senator Voinovich. Some people think that we've already got 
the technology.
    Mr. Connaughton. Actually, we have--theoretically--have the 
technology. We've never actually built the darn things, put it 
up, put the CO2 under the ground, warranted it, have the 
liability regime, have the ability to be sure, when you turn 
that power plant on, people's lights stay on. You know, your 
constituents don't like it when the lights go off or when the 
homes don't get heated. So, there's a lot that has to be done 
to do that--the engineering services----
    Senator Kerry. That's why Senator Stevens and I have this--
--
    Mr. Connaughton. Yeah, no--it's good.
    Senator Kerry [continuing]. Five demonstration projects--
put them out there tomorrow.
    Mr. Connaughton. So, that's the most critical step. You at 
least have to do that. No real incentive, and no real mandatory 
program will make a difference until you figure that out. So, 
we have to know what that timeline is, and as I suggested, I 
think we should be pushing for a 10- to 15-year timeline on 
that. You can't go faster, but we should go at least as fast as 
we can. And so that's something we should focus on.
    Then, hopefully, you can prove that this thing comes in the 
same cost-effectiveness scale as a clean-coal plant, or as a 
nuclear plant, or as a renewable power. If it's commercially 
competitive, then our problems are solved. If it's not 
commercially competitive, if there's a bigger delta than we can 
deal with, then you have to start looking at the incentive side 
of the equation more, or the regulatory side of the equation 
more.
    But, until you figure out what that economic is, you'd be--
it's very dangerous to suggest today that you can predict what 
that's going to be.
    Senator Voinovich. Is there any way to harmonize a cap-and-
trade program with technology?
    Mr. Connaughton. Well, we've seen it sequenced in the acid 
rain example, where we knew the imperative--actually and 
perhaps I would--I think you would agree with me, Senator 
Kerry--the human health impacts of acid rain, and the natural 
resource impacts of acid rain were quite real and profound, and 
so I think there was urgency to that, too, just as there is 
urgency to this. I put them in--you know, American lives I put 
in the same category as long-term climate change, perhaps even 
more immediate--but we did the technology work first. We then 
designed the regulatory incentive policy around that. So, we 
didn't put the one in front of the other.
    And so, I think that's where we need to go. We also have 
the related issue that relates to your point----
    Senator Voinovich. What Senator Kerry is saying is that if 
you have some cap, he thinks that that would----
    Mr. Connaughton. See, but it's capital-intensive, these big 
technologies--you're talking about a power plant that's really 
a petro-chemical facility, with all the work of putting 
something underground. That's really expensive. It's so much 
cheaper to just build a natural gas turbine--even though it 
drives away the jobs, even though it causes the fluctuation in 
home heating prices, this Congress, then, has to subsidize home 
heating, which is largely because we're subsidizing natural 
gas----
    Senator Voinovich. By the way, I didn't mention it--the 
heating costs in the city of Cleveland are up 300 percent from 
what they were in 2001. It's really impacting substantially 
on----
    Senator Kerry. But, you know, Senator, I'm not proposing 
something out of the sky, by myself. In fact, I've met with the 
CEO of AEP. And AEP is now building another power plant with 
IGCC technology, and they've decided just to go ahead and do 
that. It's going to cost them more; it's about a 20-percent 
premium. But they understand the virtue of doing it. I met with 
the CEO Lou Hay of Florida Power & Light--they're moving in the 
same direction, and they're all part of U.S. CAP, which, you 
know, is the U.S. Climate Action Partnership, along with Dow 
Chemical, DuPont, Chuck Halliday and others.
    Senator Voinovich. But the IGCC is not really certain what 
the impact will be on sequestering it.
    Senator Kerry. But here's what I'm saying. Those CEOs, all 
of them, are pushing for this cap-and-trade regime. And the 
reason they want the cap-and-trade regime is because it creates 
a market structure, it creates certainty in the marketplace, 
they all know how they're being treated relative to each other, 
and it provides--assuming we accompany it with appropriate 
incentives, i.e., some tax credit, et cetera, or benefits--a 
rush to the technology which will then be, they believe, 
perfect.
    Now, I listen to these CEOs, these are their companies, 
they're responsible to their shareholders, and they believe the 
benefits will be that the technology is going to move them, and 
that they can do this. They want it.
    Senator Voinovich. I have to mention to you that the 
Department of Energy has 4 or 5 projects out right now, looking 
at the geology of sequestering----
    Senator Kerry. Correct.
    Senator Voinovich. And also looking at the issue of 
migration. And we're talking about 5 to 10 years to ascertain 
whether or not the geology----
    Senator Menendez. I appreciate the cross-discussion, and I 
know Senator Voinovich is controlling his time. And we have a 
second panel that has been waiting----
    Senator Voinovich. We're about 10 minutes over, Mr. 
Chairman, I apologize.
    Senator Menendez. No, no, no, no; that's not the issue. And 
I understand Senator Kerry's passion, but I do want to hear 
from the second panel that's been waiting nearly 2 hours. I 
think they have a lot to say on this subject, as well.
    So Senator Voinovich, if you want to finish up on your 
time----
    Senator Voinovich. You've given me more than I'm entitled 
to.
    Senator Menendez. All right, with that, Mr. Connaughton, 
thank you for your testimony. The record will be open for two 
days, there may be other questions and we certainly would ask 
you to respond to them in a timely fashion.
    Mr. Connaughton. Thank you, Mr. Chairman.
    Senator Menendez. Thank you very much for your testimony.
    Mr. Connaughton. We look forward to close, constructive 
engagement with the committee.
    Senator Kerry. Look forward to it. Thank you, Mr. 
Connaughton.
    Senator Menendez. Let me thank all of our distinguished 
second panel witnesses for their patience, let me ask them to 
join us at the witness table, and let me introduce them as they 
come up.
    Mr. Elliot Diringer, who is the director of International 
Strategies, Pew Center on Global Climate Change; Mr. Jim Lyons, 
who is the vice president for Policy and communication for 
Oxfam America; Mr. Glenn Prickett who is the senior vice 
president for Conservation International; and Mr. John 
Castellani, the president of the Business Roundtable.
    Again, we appreciate your patience, it's an important 
subject; it's great to have had Mr. Connaughton here, now it's 
great to have you here. And we would urge you to summarize your 
statements, and your full statements will be included in the 
record. With that, let me start with Mr. Diringer.

    STATEMENT OF ELLIOT DIRINGER, DIRECTOR OF INTERNATIONAL 
 STRATEGIES, PEW CENTER ON GLOBAL CLIMATE CHANGE, ARLINGTON, VA

    Mr. Diringer. Mr. Chairman, Senator Kerry, thank you for 
the opportunity to appear before you today. My name is Elliot 
Diringer and I'm director of International Strategies for the 
Pew Center on Global Climate Change.
    In summarizing my written testimony, I'd like to emphasize 
three points. First, we believe the post-2012 climate framework 
must establish binding international commitments for all major 
economies, although the type of commitment need not be the same 
for all countries.
    Second, the Bali roadmap presents an unprecedented 
opportunity to forge a fair, effective, and comprehensive post-
2012 agreement.
    And third, the success of the Bali roadmap will depend on 
decisive leadership by the United States, both at home and 
abroad.
    On the question of binding commitments--25 countries 
account for about 85 percent of global greenhouse gas 
emissions. Their participation is essential, not only from an 
environmental perspective, but from a political perspective, as 
well.
    All have concerns about fairness and competitiveness. And 
for that reason, none can sustain an ambitious climate effort 
without confidence that the others are contributing their fair 
share. This requires some measure of accountability at the 
international level, and that can only realistically be 
achieved through binding international commitments.
    The major economies are a very diverse group, however. 
Their per capita incomes and emissions range by a factor of 18. 
The post-2012 framework must, therefore, provide flexibility 
for different national circumstances and different national 
strategies. It can do so by allowing for different types of 
commitments.
    We believe the appropriate form of commitment for the 
United States and other industrialized countries is a binding, 
absolute, economy-wide emissions target. Stronger targets are 
absolutely critical to drive emission reduction and to drive 
the development and deployment of carbon-friendly technologies.
    At this stage, however, China, India, and other developing 
countries are very unlikely to commit to economy-wide emission 
limits. An alternative approach for them could be a policy-
based commitment; a commitment to undertake national policies 
that moderate or reduce emissions without a binding economy-
wide limit.
    China, for example, has ambitious energy intensity and 
renewable energy goals. As Senator Kerry noted, China also has 
auto fuel economy standards more stringent than those recently 
enacted by Congress. Some version of these domestic policies 
could be put forward as international commitments. Of course, 
to be credible and effective, such commitments would need to be 
measurable, verifiable, and binding.
    Another option is sectoral agreements, in which governments 
commit to targets, standards, or other measures to reduce 
emissions from a given sector. Sectoral agreements would be 
especially helpful to address competitiveness concerns in 
energy-intensive industries, whose goods are traded globally.
    I would emphasize the need to integrate these and other 
elements in a coherent, binding framework. An ad hoc 
agglomeration of nationally defined programs will not produce 
the level of effort that is needed. Strong global action 
requires binding international commitments negotiated and 
agreed as a package.
    We believe the Bali roadmap represents a historic turning 
point in the climate negotiations that initiates a process 
that, for the first time ever, offers the prospect of a 
comprehensive post-2012 package. While the process is less than 
ideal, we believe it is the best possible under the 
circumstances, in particular, given the reluctance thus far of 
the Bush administration to negotiate a binding international 
commitment.
    The Bali roadmap calls for measurable, reportable, and 
verifiable mitigation actions, supported--in the case of 
developing countries--by technology and financing. It leaves 
entirely open the nature of the actions and commitments to be 
negotiated. In this sense, the Bali roadmap puts no country on 
the hook for anything. But at the same time, it lets no country 
off the hook, either.
    Unlike the 1995 Berlin mandate, which launched the 
negotiations leading to the Kyoto Protocol, the Bali agreement 
does not preclude the possibility of developing country 
commitments. This presents an unprecedented opening, one we 
must seize.
    The success of the Bali roadmap depends ultimately on the 
willingness of each of the major economies to assume and 
fulfill a binding commitment, commensurate with its 
responsibilities and its capabilities. The willingness of other 
countries will depend, in large measure, on the willingness of 
the United States. As the world's largest economy and the 
largest historic emitter, the United States has a singular 
responsibility, not only to reduce its own emissions, but also 
to lead the international community in forging an effective 
global response.
    To date, we have not delivered on either score. In our 
view, the United States must do three things to reverse this 
record and set the stage for a post-2012 agreement.
    First, Congress and the President must move as quickly as 
possible to enact mandatory domestic limits on U.S. greenhouse 
gas emissions. Establishing a mandatory domestic program will 
enable the United States to negotiate with greater confidence 
and credibility. We will know what we can deliver and--having 
taking concrete action to meet our responsibilities--we can 
more credibly call on others to fulfill theirs.
    Second, the United States must state unequivocally that it 
is prepared to negotiate a binding international commitment. As 
long as that remains in question, other countries will have a 
legitimate excuse to avoid negotiating commitments of their 
own.
    Third, the United States should make clear the type of 
support it is willing to offer developing countries if they, 
too, assume appropriate commitments. Once we are prepared to 
negotiate a binding commitment, it will be reasonable for us to 
expect China and other major emerging economies to assume 
commitments, as well. That said, it also will be reasonable for 
these countries to expect that we and other industrialized 
nations will assist them in fulfilling their commitments.
    Finally, I would like to note the critical role of the 
Senate in mobilizing and setting the terms of U.S. engagement. 
The climate debate in Congress has thus far focused primarily 
on questions of domestic climate policy. As we enter a new 
round of negotiations, it is vital that the Senate--which will 
have the final say on U.S. participation in a new climate 
treaty--advise this and the next administration on the 
framework of an acceptable treaty and be closely engaged in its 
development.
    I thank you again for the opportunity to share our views, 
and I look forward to your questions.


    [The prepared statement of Mr. Diringer follows:]


   Prepared Statement of Elliot Diringer, Director of International 
     Strategies, Pew Center on Global Climate Change, Arlington, VA

    Mr. Chairman, Senator Lugar, and members of the committee, thank 
you for the opportunity to testify on the recent Bali climate change 
negotiations and the path toward a post-2012 climate treaty. My name is 
Elliot Diringer, and I am the director of International Strategies for 
the Pew Center on Global Climate Change.
    The Pew Center on Global Climate Change is an independent 
nonprofit, nonpartisan organization dedicated to advancing practical 
and effective policies to address global climate change.\1\ Our work is 
informed by our Business Environmental Leadership Council (BELC), a 
group of 44 major companies, most in the Fortune 500, which work with 
the center to educate opinion leaders on climate change risks, 
challenges, and solutions.
---------------------------------------------------------------------------
    \1\ For more on the Pew Center, see www.pewclimate.org.
---------------------------------------------------------------------------
    Mr. Chairman, I would like to commend you and the members of this 
committee for convening this hearing today. Over the past year, the 
U.S. Congress has for the first time engaged in a genuine debate over 
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. This is a critical first step. But as you 
know, meeting the challenge of climate change requires global solutions 
as well, and these are possible only with strong leadership from the 
United States. The U.S. Senate has a vital role in mobilizing and 
setting the terms of U.S. engagement in the global climate effort. This 
committee, with your leadership, can ensure the Senate is well prepared 
to fulfill that responsibility. We are very encouraged that you are 
initiating this process with this hearing today.
    In my testimony, I would like to address four topics. First, I will 
offer our perspective on the post-2012 international climate 
framework--both what it must achieve, and how it should be structured. 
Second, I will assess the recently agreed Bali roadmap and the 
opportunities it presents. Third, I will outline key steps the United 
States must take to seize these opportunities. Finally, I will suggest 
a diplomatic strategy working within and outside the U.N. negotiating 
process, and the potential role of the Bush administration's major 
economies initiative.
    My key points are as follows:

   A post-2012 international climate treaty must establish 
        binding international commitments for all the major economies. 
        However, the form of commitment can vary. While the United 
        States and other developed countries should commit to absolute 
        economywide emission targets, other forms such as policy-based 
        commitments are appropriate for the major emerging economies.
   The Bali roadmap represents a historic turning point in the 
        international climate negotiations. By not excluding the 
        possibility of developing country commitments, it for the first 
        time offers the prospect of a fair, effective, and 
        comprehensive post-2012 agreement.
   To ensure the Bali roadmap's success, the United States 
        must: Move as quickly as possible to enact mandatory domestic 
        limits on U.S. emissions; declare unambiguously its willingness 
        to negotiate a binding international commitment; and outline 
        the support it will provide to developing countries if they, 
        too, assume reasonable commitments.
   In addition, the United States should mount a major 
        diplomatic initiative, working both bilaterally and 
        multilaterally to clarify and advance the negotiating agenda 
        and find common ground. The administration's major economies 
        process could lay important groundwork with agreement on 
        elements such as a long-term climate goal and an international 
        technology fund.
(1) The Post-2012 International Climate Framework Must Be Flexible but 
        Binding
    The Pew Center's perspective on the post-2012 climate 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, a group of 
25 individuals from government, business, and civil society in 15 key 
countries, participating in their personal capacities. The group 
included senior policymakers from Australia, Brazil, Britain, Canada, 
China, Germany, India, Japan, Mexico, and the United States. It also 
included senior executives from companies in several key sectors, 
including Alcoa, BP, DuPont, Exelon, Eskom (the largest electric 
utility in Africa), Rio Tinto, and Toyota. The group's consensus report 
was released in late 2005 at an event in this room hosted by Senators 
Biden and Lugar.\2\ Since that time, we have produced a number of 
analyses further elaborating on the Pocantico recommendations.\3\ I 
would like to highlight several key points.
---------------------------------------------------------------------------
    \2\ ``International Climate Efforts Beyond 2012--Report of the 
Climate Dialogue at Pocantico'' is available at http://
www.pewclimate.org/pocantico.cfm.
    \3\ See Ian Burton, Elliot Diringer, and Joel Smith, ``Adaptation 
to Climate Change: International Policy Options''; Daniel Bodansky, 
``International Sectoral Agreements in a Post-2012 Climate Framework''; 
Joanna Lewis and Elliot Diringer, ``Policy-Based Commitments in a Post-
2012 Climate Framework''; and Daniel Bodansky and Elliot Diringer, 
``Towards an Integrated Multi-Track Climate Framework,'' at 
www.pewclimate.org.
---------------------------------------------------------------------------
    Engaging All Major Economies--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 75 percent of global population 
and 90 percent of global GDP. The participation of all the major 
economies is obviously critical from an environmental perspective, as 
all must take sustained action if we are to achieve the steep 
reductions in emissions needed in the coming decades to avert dangerous 
climate change. But the participation of all major economies is 
critical from a political perspective as well. All have concerns about 
fairness and competitiveness, and for that reason, none can sustain an 
ambitious effort against climate change without confidence that the 
others are contributing their fair share. We must agree to proceed 
together.
    The Need for Flexibility--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, and their per capita incomes, 
range by a factor of 18. The post-2012 framework must provide 
flexibility for these widely varying national circumstances. As the 
kinds of policies that can address climate change in ways consistent 
with other national priorities will vary from country to country, it 
also must accommodate different national strategies. To achieve broad 
participation, a post-2012 treaty must allow for variation both in the 
nature of countries' commitments and in the timeframes within which 
these commitments must be fulfilled.
    The Need for Binding Commitments--Allowing diverse approaches does 
not mean that each country should be entirely free to decide for itself 
how it will contribute to the global effort. The failure of most 
developed countries to reduce their emissions as pledged in the U.S.-
ratified U.N. Framework Convention on Climate Change demonstrates the 
inadequacy of a voluntary approach. A strong effort--one adequate to 
the challenge--will be possible only if national contributions are 
integrated in a common framework and reflected in binding international 
commitments. As I stated earlier, countries will deliver their best 
efforts only if they are confident that their counterparts and 
competitors also are putting forward their fair share of effort. To 
establish that confidence, there must be some measure of accountability 
at the international level, and that is best achieved through binding 
international commitments. If countries are accountable only to 
themselves, we will not achieve the critical mass of effort needed to 
deter global warming.
    Multiple Commitment Types--A country's commitment should be of a 
form appropriate to its level of responsibility and capacity and its 
national circumstances. For the United States and other developed 
countries, we believe the appropriate form of commitment is a binding 
absolute economywide emissions target. The United States was the first 
to advocate the use of targets and emissions trading to address climate 
change, based on its success in combating acid rain. This market-based 
approach also is reflected in most of the major bills before Congress 
aimed at limiting and reducing U.S. emissions. Within the international 
framework, stronger absolute targets for developed countries are 
absolutely critical to drive emission reduction and to sustain and 
strengthen the emerging greenhouse gas market.
    We must accept, however, that China, India, and other developing 
countries are very unlikely to commit at this stage to binding 
economywide emission limits. With standards of living just a fraction 
of our own, they are fearful of jeopardizing their growing economies, 
and will have to be persuaded by the example of developed countries 
that a cap on emissions is not a cap on growth. For now, economywide 
targets are also technically impractical for most developing countries: 
To accept a binding target, a country must be able to reliably quantify 
its current emissions and project its future emissions, a capacity that 
few if any have.
    As an alternative to binding economywide targets, developing 
countries could be encouraged to make policy-based commitments. Under 
this approach, countries would commit to undertake national policies 
that would moderate or reduce their emissions, without being bound to 
an economywide emissions limit. These commitments could be tailored to 
national circumstances and build directly on domestic policies. China, 
for example, has domestic energy efficiency targets, renewable energy 
goals, and auto fuel economy standards, and some version of these could 
be put forward as international commitments. Tropical forest countries 
could commit to policies to reduce deforestation. To be credible and 
effective, policy-based commitments would need to be measurable and 
binding, with mechanisms to ensure monitoring and compliance.
    A third potential element of the post-2012 framework is sectoral 
agreements, in which governments commit to targets, standards, or other 
measures to reduce emissions from a given sector, rather than 
economywide. In energy-intensive industries whose goods trade 
globally--the sectors most vulnerable to potential competitiveness 
impacts from carbon constraints--sectoral agreements can ensure a more 
level playing field. Sectoral agreements also may be a practical way to 
engage developing countries not yet prepared to take on economywide 
commitments. Sectoral approaches are being explored by global industry 
groups in the aluminum and cement sectors. We believe they also are 
worth exploring in sectors such as power and transportation, where 
competitiveness is less of a concern but large-scale emission reduction 
efforts are most urgent.
    In addition to these different types of emission reduction 
commitments, the post-2012 framework must address technology, finance, 
and adaptation. On technology and finance, it could include two types 
of agreements: The first, for joint research and development of 
``breakthrough'' technologies with long investment horizons; the 
second, to broaden access to existing and new technologies by 
addressing finance, intellectual property rights, and other issues 
impeding the flow of low-carbon technologies to developing countries. 
On adaptation, the top priority within the climate framework should be 
assistance to those countries most vulnerable to climate change for 
national adaptation planning and implementation. But broader efforts to 
reduce climate vulnerability also should be integrated across the full 
range of bilateral and multilateral development support.
    I would emphasize again the need to integrate these elements in a 
coherent framework. An ad hoc agglomeration of nationally defined 
programs will not produce the level of effort that is needed. Strong 
global action requires binding international commitments negotiated and 
agreed as a package. The framework must be flexible enough to 
accommodate different types of commitments, and reciprocal enough to 
achieve a strong, sustained level of effort.
(2) The Bali Roadmap is an Opportunity for a Fair, Effective Post-2012 
        Framework
    I would like to turn now to the Bali roadmap adopted by governments 
at the U.N. Climate Change Conference last month in Bali. In our 
judgment, the Bali roadmap initiates a process that, for the first time 
ever, offers the prospect of a comprehensive international climate 
framework of the type I have just described. The process is far less 
than ideal. However, we believe it is the best that could have been 
achieved given present political constraints--the first and foremost of 
these being the unwillingness to date of the Bush administration to 
negotiate a binding international commitment.
    The Bali roadmap in actuality encompasses two parallel negotiating 
processes. The first of these was launched 2 years ago under the Kyoto 
Protocol. Its aim is to negotiate post-2012 commitments for those 
countries that presently have binding targets under the protocol. As 
these countries are highly unlikely to assume new commitments on their 
own, however, a parallel process was needed to engage the United States 
and developing countries in the post-2012 negotiations. This second 
process, under the U.N. Framework Convention on Climate Change, was 
launched in Bali and is called the Bali Action Plan. Although these two 
processes are not formally linked, the expectation is that they will 
converge in a comprehensive agreement in 2009, with some commitments 
established under the Kyoto Protocol and others under the Framework 
Convention.
    In our analysis, the ideal outcome in Bali would have been a 
negotiating mandate clearly specifying the types of commitments to be 
negotiated by different groups of countries. The Bali Action Plan, by 
contrast, is very loosely framed. With respect to mitigation, it calls 
for ``measurable, reportable, and verifiable'' actions on the part of 
both developed and developing countries. In the case of developed 
countries, it speaks of ``mitigation commitments or actions,'' and 
identifies emission targets as one option. In the case of developing 
countries, it speaks of ``mitigation actions,'' not commitments, 
``supported and enabled by technology, financing, and capacity-
building.'' The Action Plan specifically identifies sectoral approaches 
and measures to reduce deforestation as potential mitigation elements. 
It also calls for the post-2012 agreement to include provisions 
addressing adaptation, technology, and finance and investment.
    In sum, the Bali Action Plan identifies the full set of issues that 
must be addressed but leaves entirely open the nature of the actions or 
commitments to be negotiated by any country or group of countries. In 
this sense, the Bali roadmap puts no country on the hook for anything. 
At the same time, however, it lets no country off the hook either. 
This, in fact, is what is most significant about the Bali agreement. 
The 1995 Berlin Mandate, which launched the negotiations leading to the 
Kyoto Protocol, explicitly excluded the possibility of new commitments 
for developing countries. Up until the Bali conference, developing 
countries had steadfastly maintained that posture. The Bali Action Plan 
does not expressly contemplate binding commitments for developing 
countries; with the United States not yet prepared to negotiate such 
commitments, developed countries can not reasonably be expected to. But 
the Bali Action Plan does not explicitly exclude the question of 
developing country commitments either. This presents a significant 
opening, one the United States must capitalize on if we are to achieve 
a fair and effective post-2012 agreement.
    Under the Bali roadmap, this agreement is to be reached at the 15th 
conference of the Framework Convention parties in Copenhagen in late 
2009. We believe that, even under the best of circumstances, this is an 
extraordinarily ambitious timeline. The reality is that negotiations 
will not begin in earnest until the United States is prepared to 
negotiate a binding commitment. Without a change in policy by the Bush 
administration, this can occur only when a new President takes office 
in January 2009. Even then, it will likely take the incoming 
administration a matter of months to appoint senior officials and 
develop a formal negotiating position. That will leave precious little 
time to meet the Bali deadline. We believe that as the deadline 
approaches, parties should revisit and revise it if necessary to allow 
time for a successful negotiation and avert what would be perceived as 
a dramatic failure at the Copenhagen conference.
(3) U.S. Leadership at Home and Abroad is Key to the Bali Roadmap's 
        Success
    I now would like to outline steps that the United States can take 
to ensure that the Bali roadmap leads to a fair, effective, and durable 
post-2012 agreement.
    The success of the Bali roadmap depends ultimately on the 
willingness of each of the world's major economies to assume and 
fulfill a binding commitment commensurate with its responsibilities and 
its capabilities. The willingness of other countries to assume such 
commitments will depend in large measure on the willingness of the 
United States. As the world's largest economy and largest historic 
emitter, the United States has a singular responsibility not only to 
reduce its own emissions but also to lead the international community 
in forging an effective global response. To date, the United States has 
failed to deliver on either score. In our view, the United States must 
do three things to reverse this record and set the stage for a post-
2012 agreement.
    First, Congress and the President must move as quickly as possible 
to enact mandatory domestic legislation to limit and reduce U.S. 
greenhouse gas emissions. As a founding member of the U.S. Climate 
Action Partnership, or USCAP, the Pew Center strongly supports the 
establishment of a cap-and-trade system as the centerpiece of a 
mandatory Federal program with the goal of reducing U.S. emissions 60 
to 80 percent by 2050. We are very encouraged by the progress achieved 
in the Senate toward enactment of such a program, and are fully 
committed to working with you and your colleagues toward that end. 
Domestically, a mandatory market-based program will stimulate 
technology development and deployment and give U.S. businesses the 
certainty and incentives they need to reduce emissions as cost 
effectively as possible. Internationally, a mandatory domestic target 
will enable the United States to negotiate with greater confidence and 
credibility. Having resolved what it is prepared to do at home, the 
United States will know far better what it is prepared to deliver 
abroad. And, having taken concrete action to meet its responsibilities, 
it can more credibly call on other countries to fulfill theirs.
    Second, the United States must state clearly and unambiguously that 
it is prepared to negotiate a binding international commitment. As long 
as that remains in question, other countries will have a legitimate 
excuse to avoid negotiating commitments of their own. As I stated 
earlier, we believe that the United States commitment, and those of 
other developed countries, should be in the form of a binding absolute 
economywide emissions targets.
    Third, the United States should make clear the type of support it 
is prepared to offer developing countries if they, too, assume 
appropriate commitments. Once we have demonstrated a willingness to 
reduce our own emissions and assume a binding international commitment, 
it will be reasonable for us to expect that major emerging economies 
such as China assume commitments as well. However, it also will be 
reasonable for these countries to expect that we and other 
industrialized nations will assist them in fulfilling their 
commitments. This is in part a matter of fairness, given our greater 
historic contribution to climate change and our greater capacity to 
address it. Indeed, we and other industrialized countries agreed in the 
Framework Convention to assist developing countries in their efforts to 
address climate change, and the Bali roadmap identifies such support as 
an essential element of a post-2012 agreement. However, providing such 
support is also very much in our self-interest, as we will bear the 
consequences if developing countries fail to act.
    Support can be provided both on a bilateral basis and as part of a 
post-2012 agreement. A domestic cap-and-trade program, for instance, 
could allow for crediting of emission reductions in developing 
countries; additional incentives could be conditioned on the acceptance 
by developing countries of reasonable international commitments. 
Congress also could provide tax and other export incentives to support 
the adoption of U.S. clean energy technologies. A post-2012 agreement 
could establish an international financing mechanism and address issues 
such as intellectual property rights. Determining the appropriate forms 
and level of support requires a far better understanding of developing 
countries' needs and the barriers to achieving them. To the degree 
feasible, however, we believe that support for developing country 
efforts should take the form of market-based incentives that leverage 
private financial flows.
    As I noted earlier, the Bali roadmap presents an unprecedented 
opening to engage developing countries more deeply in the climate 
effort. To seize this opportunity, the United States must come forward 
with an offer that fairly addresses the legitimate needs of developing 
countries, while being realistic about the nature and level of 
commitment that can be expected in return.
(4) Reaching Agreement Requires a Major U.S. Diplomatic Initiative
    We believe that these three steps by the United States--enacting 
mandatory domestic emission limits, declaring a willingness to 
negotiate a binding commitment, and offering a package of incentives 
for developing country action--are essential preconditions for a 
comprehensive post-2012 climate agreement. But these steps must be 
accompanied by vigorous and sustained U.S. diplomacy both within and 
outside the U.N. negotiating process.
    Within the U.N. process, the new Ad Hoc Working Group established 
by the Bali Action Plan must now agree on how it will take up the 
complex set of issues before it. Despite the tight deadline, it will 
not be feasible for the parties to go directly to negotiating 
commitments. First, they must come to a firmer common understanding of 
the central issues and the options for addressing them. Key among these 
are different commitment types and their potentials, specific 
technology needs, and financing mechanisms. The United States should 
fully engage in the Working Group process and help ensure that it 
focuses on the right issues in the right order.
    Simultaneously, the United States should engage in intensive 
bilateral diplomacy to better understand the perspectives of other key 
countries and to seek common ground for a comprehensive agreement. 
Within the negotiations, issues often are debated only in general 
terms. To fully understand the concrete needs and concerns of other 
countries, it is better to engage them one on one. Trust and 
understanding developed on a bilateral basis will make a comprehensive 
agreement far more feasible.
    The United States also can work outside the formal negotiating 
process to promote consensus among the group of major economies. The 
participants in the Pocantico dialogue I described earlier were among 
the first to urge a high-level dialogue among major economies as a 
prelude to formal post-2012 negotiations. The goal of the 
administration's major economies initiative is to reach consensus among 
these key countries in 2008 as a basis for a global U.N. agreement in 
2009. However, the administration brings to this initiative a specific 
vision of the post-2012 framework--one based on nationally defined 
programs, rather than binding international commitments. There was 
little indication at the first major economies meeting in September 
that other countries support this approach. Still, by aiming for 
agreement on discrete elements, rather than a comprehensive approach, 
the initiative could in the months remaining make a significant 
contribution. In particular, if the major economies were to achieve 
consensus on a long-term climate goal, or on an international 
technology fund, as the President has proposed, these could serve as 
important elements of the post-2012 agreement envisioned in the Bali 
roadmap.
    To summarize, I believe the Bali roadmap presents a historic 
opportunity to mobilize an effective multilateral response to climate 
change, and it is incumbent upon the United States to lead both at home 
and abroad to ensure its success.
    I again commend the committee for bringing the attention of the 
Senate to bear on these critical issues, and I thank you for the 
opportunity to present our views.

    Senator Menendez. Thank you very much.
    Mr. Prickett.

 STATEMENT OF GLENN PRICKETT, SENIOR VICE PRESIDENT, BUSINESS 
  AND U.S. GOVERNMENT RELATIONS, CONSERVATION INTERNATIONAL, 
                         WASHINGTON, DC

    Mr. Prickett. Thank you, Mr. Chairman. And thanks so much 
for the committee for having me here, but more importantly for 
convening this hearing. And, like Mr. Connaughton, I'd also 
like to salute and thank Senator Kerry, not only for coming to 
Bali and being such an important part of that meeting, but for 
the leadership you've provided over more than 20 years in 
elevating environment as a theme, and U.S. foreign policy, and 
all of us in the conservation community appreciate that 
leadership.
    I'm a senior vice president with Conservation 
International. I direct our climate team, which involves 
scientists and economists and communicators from over 45 
countries, where we work to help governments and communities 
protect and restore forests, coral reefs, other endangered 
habitat, that provide vital livelihoods to people--to poor 
people in particular.
    Climate change is one of our highest institutional 
priorities, both because climate change threatens that 
biodiversity and those human livelihoods, and also because the 
loss of biodiversity--particularly the destruction of tropical 
forests--is a major source of greenhouse gas emissions.
    The Bali Conference was a watershed for us, really for 
three reasons, most importantly, as we've already discussed, 
because for the first time the world really came together and 
agreed that we need to have a global solution to climate change 
involving all countries. But importantly for Conservation 
International--and this is really what the committee has asked 
me to focus on, so I will, just for the next few minutes--
because the world recognized for the first time that the 
conservation of forests and generally the conservation of 
natural ecosystems needs to be a critical part of that 
solution.
    This is a key recognition because as we focus, as we 
should, on the need for new energy technologies to attack the 
problem of climate change, we can't overlook the importance of 
nature's own technology, biological diversity, that diversity 
of genes, species, and ecosystems that can help the global 
community mitigate and adapt to climate change. If we don't 
take immediate action to incorporate forests and biodiversity 
into our approach to climate change, we run the risk, both of 
missing major opportunities to reduce emissions and also 
undermining the efforts of poorer communities to adapt.
    Let me just elaborate on those two points for a moment. Few 
people realize that the burning and clearing of forests and 
other changes in land use--especially in the developing 
countries--is the second largest source of greenhouse gas 
emissions after electricity generation. Because when trees are 
destroyed, the carbon contained in the biomass and in the soils 
is released into atmosphere, which contributes to global 
warming.
    In fact, 20 percent of the world's greenhouse gas emissions 
result from tropical deforestation and land use change. And to 
put that in perspective, that's roughly the share of emissions 
coming from the United States or from China. And in fact, it's 
more than twice the emissions coming from all the world's cars 
and trucks combined.
    For many developing countries--I would note in particular, 
Indonesia and Brazil--deforestation is the major source of 
their greenhouse gas emissions, and those amounts can be 
significant. If, for example, Brazil and Indonesia continue 
deforestation at current rates, the emissions from that 
deforestation could counteract some 80 percent of the emissions 
reductions agreed to in the current Kyoto Protocol.
    According to the Intergovernmental Panel on Climate Change 
in its fourth assessment report, forest conservation and 
reforestation and improved forest management can provide up to 
25 percent of the emissions reductions we need in the coming 
decades. The review by Nicolas Stern confirmed that finding. 
Forests are critical to taking carbon out of the atmosphere and 
mitigating the climate change problem.
    But forest carbon isn't just any kind of carbon. It also 
plays--forests and other natural ecosystems play a critical 
role--in helping people adapt to the impacts of climate change, 
particularly poor people. Of the more than a billion poor 
people living in extreme poverty worldwide, some 90 percent 
depend on forest ecosystems for the services they provide: 
Fresh water, protection from storms and floods, pollenization 
of crops, and other services.
    These healthy natural ecosystems and the services they 
provide will be increasingly important in the context of 
climate change, which--under which we anticipate more frequent 
droughts, floods, coastal storms, disease outbreaks. Nature 
provides the essential life support systems that poor people 
will rely on to adapt to climate change.
    This committee was actually one of the first to recognize 
this. In fact, as I was preparing for this testimony, I went 
back and looked at the Foreign Assistance Act. Thirty years 
ago, in 1978, the Congress expressed concern when it enacted 
provisions for tropical forests in the Foreign Assistance Act 
about ``the continuing, accelerating alteration, destruction, 
and loss of tropical forests in developing countries, which 
pose a serious threat to development and the environment. 
Tropical forest destruction and loss can result in, among other 
things, destabilization of the earth's climate.'' This was 30 
years ago, back in 1978. Properly managed tropical forests 
provide a sustained flow of resources essential to the economic 
growth of developing countries. So this is very much an 
American issue.
    So where do we stand? Two critical things happened at the 
end of last year. First, of course, Bali, and as part of the 
Bali action plan, governments agreed that the post-2012 
agreement should include policy approaches and positive 
incentives to reduce emissions from deforestation.
    But importantly here in Washington, in marking up the--and 
taking action here in the Senate on the--on the Lieberman-
Warner bill, important provision was made there to include a 
portion of the allowances under that cap-and-trade program for 
international forest conservation. We think more can be done 
there, but that action sent an important signal to the 
international community that forests need to be part of the 
solution.
    So what happens next? The Bali roadmap, if you will, at 
this point is still a big blank piece of paper with, perhaps, 
national capitals filled in, but there's a lot of detail left 
to be filled in, in between those national capitals if we're 
going to define how this program will work, particularly in the 
area of reducing emissions from deforestation.
    There are a lot of tough technical questions on the table, 
most importantly, how do you effectively provide incentives for 
developing countries to actually reduce deforestation on the 
ground?
    Some important technical questions--should we focus that 
support on countries where deforestation is a major problem 
today? That would give us the most verifiable reductions in 
emissions. But should we not also think about developing 
countries where deforestation pressures are not acute today, 
but will be in the future? This is an important debate that's 
going on.
    Should we address emissions only at the national level? We 
talked about leakage in the last panel. If you encourage a 
country to reduce deforestation at the national level, you 
reduce the risk that a protected forest in one place could 
displace pressure and create emissions somewhere else. At the 
same time, many poor, developing countries don't have the 
capacity today to take action effectively at the national 
level.
    Should we also not support project-level activity? That's 
another important issue on the table. We've been working 
closely with a group of other environmental organizations, 
including the Nature Conservancy, Environmental Defense, the 
Wildlife Conservation Society, and Defenders of Wildlife, on a 
set of principles that we think should be in place and that we 
would encourage the United States to promote. That we should 
allow and reward early action to encourage governments to take 
steps to reduce deforestation now, which relates to this 
question of national versus subnational activity.
    That we need to require forest protection activities to 
produce broad benefits, not only for reducing carbon, but also 
for other environmental values, including biodiversity 
protection and to promote benefits to local communities.
    To ensure that the forest carbon credits that result are of 
the highest quality, to make sure that we have a strong overall 
emissions cap and that these credits represent real, permanent, 
and verifiable emissions reductions with reliable measuring and 
monitoring. To ensure that the credits from these activities 
are tradable and existing in new market mechanisms. And to make 
international funding available to help build the capacity of 
developing countries to participate in the carbon markets.
    And I would note that other governments are already moving 
quickly to act on this, the Governments of the United Kingdom, 
Norway, Germany, Australia, Japan, and the World Bank have all 
announced major commitments in the last few months to support 
developing countries to reduce emissions from deforestation.
    And finally, we need to ensure that forest-dwelling 
communities, indigenous people, in particular, are included in 
this process. They have been the defenders of forests for 
centuries. They need to be involved in the decisionmaking on 
this and they need to benefit.
    So finally, to wrap up, I just have three recommendations 
I'd like to make for this committee on the role that the United 
States might play in this effort.
    First, is to strongly support the inclusion of reduced 
emissions from deforestation in the post-2012 agreement. This 
advances a number of U.S. national interests. First, it will 
enable the world to achieve far deeper emissions reductions at 
a reasonable cost than would otherwise be possible. It will 
allow developing nations to benefit economically by protecting 
their forests, rewarding them for a global service they 
currently provide for free, and reduce the financial incentive 
to liquidate vital natural resources for short-term gain. And 
it will allow developing countries to contribute to resolving 
the climate change problem without sacrificing their economic 
development.
    Second--and this will be taken up by my colleague from 
Oxfam--but we would really strongly encourage the United States 
to support full funding for adaptation efforts, and ensure that 
those adaptation efforts include protection of the forest, the 
coral reefs, the other healthy ecosystems that poor people will 
depend on increasingly in the future.
    And finally just to close, I would note that outside of the 
international negotiating process, there's a critical role the 
United States can play, and that's in providing direct support 
to developing countries, to protect their forests and their 
biodiversity, as well as to improve energy efficiency and 
develop and deploy environmentally sound, low-carbon energy 
technologies.
    As I mentioned before, this is an American issue. For 30 
years now the United States has led the world, as I believe, 
the first donor to recognize the importance of these 
investments. In the last few years, we haven't increased that 
support as much as we should have. We've been focused on some 
other priorities in our foreign assistance, and environment has 
sort of fallen by the wayside a little bit. There have been 
some important efforts, like the Tropical Forest Conservation 
Act. There's a very important bill in the Congress now, the 
Tropical Forest and Coral Conservation Act, but overall funding 
for international conservation activities has essentially 
remained flat, and it's actually been a challenge. And the 
Congress has been a--and this committee have been, tremendous 
supporters in encouraging the administration to maintain that 
funding.
    There's an important leadership opportunity now to 
significantly reinforce our leadership in international 
conservation and directly support developing countries to 
reduce emissions from deforestation.
    Thank you for the time.


    [The prepared statement of Mr. Prickett follows:]


  Prepared Statement of Glenn T. Prickett, Senior Vice President and 
   Executive Director of the Center for Environmental Leadership in 
          Business, Conservation International, Washington, DC

    Good afternoon, Mr. Chairman and members of the committee. I am 
Glenn T. Prickett, senior vice president and executive director of the 
Center for Environmental Leadership in Business at Conservation 
International. I lead CI's team on global climate change, which 
involves scientists, economists, policy analysts, and communicators 
from our many country programs around the world. Thank you for the 
opportunity to testify today.
             conservation international and climate change
    Conservation International believes that the Earth's natural 
heritage must be maintained if future generations are to thrive 
spiritually, culturally, and economically. Our mission is to conserve 
the Earth's living heritage, our global biodiversity, and to 
demonstrate that human societies can live harmoniously with nature.
    CI is an international organization with a board and a staff of 
nearly 1,000 people drawn from more than 45 countries where we work in 
the Americas, Africa, Asia, and the Pacific. We employ cutting-edge 
science to conserve threatened species and ecosystems in ways that 
contribute to human well-being, both of the communities where we work 
and of people around the world. We work in partnership with local 
governments, communities, nongovernmental organizations, and the 
private sector. Business partnerships are particularly important to us. 
We work with corporate leaders ranging from Wal-Mart, to Starbucks, to 
Bank of America to demonstrate that the private sector can be a force 
for conservation and economic growth through better business practices.
    Climate change is one of our highest institutional priorities, both 
because climate change threatens biodiversity and the benefits that 
people derive from healthy ecosystems, and because the loss of 
biodiversity--especially the destruction of tropical forests--is one of 
the largest causes of human-induced climate change. We have been a 
leader for nearly a decade in helping to address both the impacts of 
climate change on biodiversity--how to anticipate those impacts and 
design appropriate conservation responses--and to reduce emissions from 
deforestation and land-use change.
    The Bali Conference was a watershed event in creating new momentum 
for a global solution to climate change. CI had a significant presence 
in Bali, primarily to advise and support national delegations from the 
countries in which we work. Many important questions were on the table 
in Bali, including emissions targets, technology transfer, funding for 
adaptation and others. While CI has an interest and a point of view on 
all of these issues, at the request of the committee, I will focus my 
comments on the issue of forests.
                    importance of healthy ecosystems
    All people and all societies depend on the Earth's natural bounty 
for survival. Of the 1.2 billion people living in extreme poverty 
worldwide, nearly 90 percent depend on forest ecosystems and the 
services they provide, such as freshwater, protection from storms and 
floods, and crop pollination, for their livelihoods. Forests provide 
billions of dollars in benefits to the rural poor that would otherwise 
be required from local governments or international assistance 
organizations.
    Healthy natural ecosystems and the services they provide will be 
increasingly important in helping poor communities adapt to the impacts 
of climate change, which will include more frequent or intense 
droughts, floods and coastal storms, and disease outbreaks. Natural 
forests and biodiverse landscapes help to moderate droughts, severe 
storms, floods and the spread of pests and diseases. As tragic examples 
of this, neither Hurricane Katrina nor the Asian tsunami would have 
been as devastating to coastal communities had mangroves and coral 
reefs not been cleared years earlier.
    This committee was among the first to recognize the strategic value 
of healthy tropical forests and other ecosystems over two decades ago. 
In enacting sections 117 and 118 of the Foreign Assistance Act, the 
Congress expressed its concern about

          [T]he continuing and accelerating alteration, destruction, 
        and loss of tropical forests in developing countries, which 
        pose a serious threat to development and the environment. 
        Tropical forest destruction and loss . . . can result in . . . 
        destabilization of the earth's climate. Properly managed 
        tropical forests provide a sustained flow of resources 
        essential to the economic growth of developing countries.
                         climate change impacts
    Human-induced global climate changer\1\--upsetting the balance of 
nature--is the greatest threat to our long-term health and security. 
The IPCC's fourth assessment report documents impacts that are already 
occurring and will worsen in coming decades. Sea level rise and warming 
of the oceans subject coastal areas to flooding and more intense 
storms. Changes in climate, particularly rainfall patterns, threaten 
food security in some of the world's poorest regions. Expanded ranges 
for infectious diseases worsen public health crises. As these incidents 
escalate, they will tax global humanitarian efforts and scarce funding 
sources, as well as threaten global security and diplomatic relations.
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    \1\ ``Global warming'' is most traditionally used to refer to the 
increase of the Earth's average surface temperature, due to a buildup 
of greenhouse gases in the atmosphere. ``Climate change'' is a broader 
term that most often refers to long-term changes in climate, including 
average temperature and precipitation.
---------------------------------------------------------------------------
    A large and expanding body of scientific evidence indicates that 
biological and ecological systems may be among the most sensitive to 
climate change. CI believes that stabilizing the concentration of 
carbon dioxide in the atmosphere at or below 450 ppmv \2\ is crucial in 
order to restrict temperature increases to less than 2 +C above 
preindustrial levels. Limiting climate change to this degree will help 
avoid significant risk of intolerable environmental disruptions and 
irreversible species loss. Every day we postpone reductions in CO2 
emissions and maintain current trends, we increase the need for more 
costly and restrictive emissions reductions. Stabilization will require 
immediate, aggressive, and innovative action.
---------------------------------------------------------------------------
    \2\ ppmv (parts per million by volume).
---------------------------------------------------------------------------
    Even with immediate, aggressive, and innovative climate change 
mitigation actions, we know that significant climate change is expected 
due to the 1 trillion tons of greenhouse gas emissions released to the 
atmosphere over the past two centuries. As a result, the world is 
already committed to at least a 1 +C global mean temperature rise, with 
some regions potentially experiencing several times higher temperature 
increases.
    Signs that climate change is already occurring, and having drastic 
impacts on biodiversity and human welfare, include:

--Amphibian extinctions in Costa Rica resulting from changing rainfall 
    and air temperature patterns;
--Drastic reductions in Adelie penguin populations around Antarctica 
    due to ecosystem changes resulting from melting polar ice;
--Listing of the polar bear on the U.S. endangered species list due to 
    decreased polar ice coverage;
--Threats to livelihood strategies of artic peoples from melting ice 
    shields and permafrost;
--Increasing desertification impacting rural lifestyles in Africa.
                  putting nature's technology to work
    We stand at a critical point in history. The twin challenges of 
climate change and energy security require us to innovate, to reduce 
our environmental footprint, and to become more efficient and 
productive in the way we use energy and natural resources. As we pursue 
new technologies to tackle these challenges, we must not overlook the 
opportunity to harness nature's own technology--the biological 
diversity of species, genes, and ecosystems--to help the global 
community mitigate and adapt to climate change cost effectively and 
immediately. If we don't take immediate action to incorporate forests 
and biodiversity into our approach to climate change, we run the risk 
of missing major opportunities to reduce emissions and undermining the 
efforts of poor communities to adapt.
    Few people realize that the burning and clearing of tropical 
forests and other land use changes is the second largest source of 
greenhouse gas emissions, after electricity generation. Tropical 
forests store more carbon than any other terrestrial ecosystem. When 
they are destroyed, the carbon they contain is released into the 
atmosphere and contributes to global warming. With 19 million tons of 
CO2 entering the atmosphere from deforestation each day, tropical 
deforestation and other land use changes produce some 20 percent of all 
the world's greenhouse gas emissions. To put that in perspective, 
tropical deforestation accounts for more than twice the emissions 
produced by all the cars and trucks in the world.
    For many developing countries, deforestation is the largest source 
of greenhouse gas emissions, and in many instances, these deforestation 
emissions are globally significant. Brazil and Indonesia, for example, 
are the third and fourth largest sources of greenhouse gas emissions, 
after the United States and China, and land use change accounts for 70-
90 percent of their total emissions. If deforestation in Brazil and 
Indonesia continues at current rates, their emissions alone could 
counteract 80 percent of the carbon emissions reductions agreed to in 
the Kyoto Protocol.\3\
---------------------------------------------------------------------------
    \3\ Santilli et al., ``Tropical Deforestation and the Kyoto 
Protocol,'' pg. 268 (2005).
---------------------------------------------------------------------------
    According to the IPCC, forest conservation, reforestation, and 
improved forest management, particularly in developing countries, can 
provide up to 25 percent of the emissions reductions needed in the 
coming decades. The Stern Review reinforced this finding and concluded 
that ``curbing deforestation is a highly cost-effective way of reducing 
greenhouse gas emissions and has the potential to offer significant 
reductions fairly quickly.'' Protection and expansion of forests will 
also provide numerous additional environmental, economic, and social 
benefits, particularly in some of the world's poorest countries, 
including protection of biodiversity, restoration of degraded lands and 
watersheds, clean water, and enhanced and diversified incomes for the 
rural poor (which may provide communities with a safety net to protect 
against the impacts of climate change).
                         what happened in bali?
    In December, two important events--one international and one 
domestic--created new momentum behind using nature's technology to 
combat climate change by protecting and restoring forests.

   In Bali, the Parties to the U.N. Framework Convention on 
        Climate Change (UNFCCC) adopted the ``Bali Action Plan,'' which 
        outlines the scope, timeline, and process for governments to 
        reach agreement over the next 2 years on a post-2012 
        international framework to avoid dangerous impacts from climate 
        change. A key element of this Action Plan will be negotiation 
        on the role that forests will play in a post-Kyoto agreement, 
        including incentives to reduce emissions from deforestation and 
        forest degradation (REDD). While we recognize that there are 
        still tough decisions to be made on the road to Copenhagen in 
        2009, this is a tremendously important development for climate 
        stabilization, sustainable development, and biodiversity 
        protection.
   In Washington, the Senate Committee for Environment and 
        Public Works voted to advance America's Climate Security Act. 
        The bill includes significant steps to reduce emissions from a 
        variety of sources, including measures aimed at preventing 
        deforestation and promoting forest restoration. While we 
        believe that these provisions can be strengthened, the 
        committee's vote sent an important signal to the negotiators in 
        Bali that protecting tropical forests can and should play an 
        important role in the world's response to climate change.

    This important new focus on forests should not distract attention 
from the need to reduce emissions in the energy sector through improved 
energy efficiency and the development and deployment of low-carbon 
energy technologies. We need a comprehensive set of strategies to take 
on what may be the greatest challenge of our time with every tool at 
our disposal.
        creating an effective program to reduce emissions from 
              deforestation and forest degradation (redd)
    The inclusion of REDD in the Bali Action Plan is a welcome sign 
that all governments are committed to a more prominent role for forest 
conservation as a legitimate mitigation strategy in a post-2012 
agreement. The discussions at Bali highlighted a number of outstanding 
questions about how such a system would operate, which will need to be 
resolved in the negotiations over the next several years. It will be 
important for the United States to have a clear position on these 
questions to ensure that the REDD mechanism results in effective forest 
protection on the ground that makes a measurable difference for the 
climate, for local communities, and for biodiversity. These questions 
include:

    Should the financial incentives to compensate for reduced 
deforestation come from market or nonmarket sources, or both? Market 
sources offer the most promising, long-term and sustainable financing 
flows to compensate REDD activities in developing countries. There may 
be circumstances, however, where nonmarket financial sources are more 
appropriate. For the United States, this should mean an increase in the 
bilateral and multilateral support that we provide for forest 
conservation and restoration. It will be essential to develop a REDD 
mechanism that: (a) Delivers real and verifiable emissions reductions 
that abate climate change; (b) generates confidence in the carbon 
markets to promote investment in these types of mitigation strategies; 
(c) delivers fair and competitive prices for REDD credits, on par with 
fossil fuel-based credits; and (d) is designed in such a way that 
biodiversity and people are positively impacted. In particular, the 
interests and rights of forest peoples and other poor and vulnerable 
groups that depend on forests must be addressed and they must be 
included in the discussions.

    Greenhouse Gas Accounting--should national reference scenarios be 
the only baseline reference, or should there be a combination of 
national and subnational approaches? Leakage \4\ is one of several 
issues that must be incorporated into a REDD framework. National 
reference scenarios offer a viable structure that can help minimize the 
risk of leakage within a given country; however, getting to national 
reference scenarios may take time, and in that time period, significant 
forests will be lost. The recent Bali decisions on REDD include 
modalities to test national and subnational approaches, based on 
country circumstances. We believe that these provisions are critical to 
allow participation of countries that are unable to assess and mitigate 
deforestation at the national level immediately; however, these 
activities would need to be carefully measured, monitored, and reported 
to ensure they lead to overall national emissions reductions.
---------------------------------------------------------------------------
    \4\ Leakage: Changes in emissions that take place beyond the 
boundary of the project but are attributable to the project activity 
are called emissions leakage. We need to quantify new and additional 
emissions occurring offsite and take them into account in assessing the 
emissions reductions achieved.
---------------------------------------------------------------------------
    Given the magnitude of current deforestation emissions and the 
threat of continued and even increasing emissions, and given that the 
knowledge and technology exists to stop deforestation and thereby 
drastically reduce GHG emissions immediately, we strongly recommend a 
system that:

   Allows and rewards early action to encourage governments to 
        take steps to reduce deforestation quickly. Without this 
        incentive for early action, significant time (and biodiversity) 
        will be lost and potential emissions avoided will not be 
        realized as quickly and at the scale required.
   Requires forest protection activities to produce broad 
        benefits for the environment, including biodiversity 
        protection, and to promote sustainable development objectives 
        to the greatest extent possible.
   Assures that forest carbon credits are of high quality in 
        order to bolster a strong overall emissions cap by requiring 
        that such credits represent real, permanent, and verifiable 
        emissions reductions, with reliable measuring and monitoring 
        and appropriate accounting for leakage.
   Ensures that REDD credits are included and tradable in 
        existing and new market-based mechanisms to stimulate emissions 
        reductions.
   Makes international funding available to help build the 
        capacity of developing countries to participate in REDD 
        activities and in forest carbon markets more generally, which 
        will allow for more rapid and effective emissions reductions. 
        Others are beginning to act:

    --The United Kingdom, Norway, Germany, Australia, Japan, and other 
            countries are directing large sums of money toward 
            international forest protection and adaptation efforts.
    --The World Bank's Forest Carbon Partnership Facility is one global 
            mechanism that will support capacity-building for national-
            level activities.

   Involves indigenous and other forest-dependent peoples in 
        the process of decisionmaking, planning, and implementation 
        related to REDD, including benefit distributions, and addresses 
        traditional and formal tenure.
     conservation international's forest carbon project experience
    The conclusions and recommendations detailed above are drawn from 
CI's extensive experience providing leadership and working with diverse 
partners to understand the important role of forests and to develop 
effective and innovative mechanisms to optimize their potential for 
climate change mitigation and adaptation. Our engagement covers a broad 
spectrum, including:

   Partnerships with governments, NGOs, and other groups on 
        over 20 innovative forest carbon initiatives underway or in 
        development across three continents (Africa, Asia, and South 
        America). These include forest protection, restoration and 
        reforestation activities.
   A partnership to develop the first approved small-scale 
        afforestation/reforestation project under UNFCCC's Clean 
        Development Mechanism, a native forest restoration project in 
        China. With the Government of Madagascar and local partners, CI 
        also contributed to the development of the first avoided 
        deforestation project selected by the World Bank's BioCarbon 
        Fund.
   Convener and founding member of the Climate, Community & 
        Biodiversity Alliance (CCBA), a partnership among some of the 
        world's leading companies, NGOs, and research institutions. 
        This Alliance produced and promotes a set of standards that can 
        be used to evaluate land-based carbon mitigation projects in 
        the early stages of development. The CCB Standards foster the 
        integration of best-practice and multiple-benefit approaches 
        into project design and evolution. To earn approval under the 
        CCB Standards, projects must satisfy 15 required criteria to 
        demonstrate compelling net benefits for fighting climate 
        change, conserving biodiversity, and improving socioeconomic 
        conditions for local communities. They are now the leading 
        international standards giving assurance of high quality of 
        multiple-benefit forestry, agroforestry, and avoided 
        deforestation carbon projects.
   Establishment of the Indigenous and Traditional Peoples 
        Initiative (ITPI) which focuses specifically on the 
        intersection of indigenous issues, rights and policy, and 
        conservation. Currently ITPI is working with international and 
        regional indigenous groups to build a coalition to address 
        indigenous capacity on climate change related topics at local 
        to international scales.
                     the role of the united states
    The inclusion of international forest protection and restoration in 
a post-Kyoto Framework and in U.S. climate policy will enable the world 
to achieve far deeper emissions reductions, at a reasonable cost, than 
would otherwise be possible. It will allow developing nations to 
benefit economically by protecting their forests--rewarding them for a 
global service they currently provide for free--and it will reduce the 
financial incentive to liquidate vital natural resources for short-term 
gain. It will also allow developing countries to contribute to abating 
climate change without sacrificing economic development. The United 
States should be a strong advocate for including effective, 
environmentally sound, and socially equitable mechanisms to protect and 
restore forests in a post-2012 agreement.
    The Bali Action Plan also emphasizes the need to support developing 
countries in their adaptation efforts. Healthy, diverse ecosystems will 
play a vital role in helping both people and nature cope with the 
inevitable impacts of climate change. Ensuring adequate funding, and a 
strong programmatic focus on biodiversity protection, through the 
Adaptation Fund and other mechanisms should be a priority for the 
United States.
    At this time, there is a great need for the international community 
to come together, and particularly for the major economies to develop a 
common approach, to ensure that we provide a stable climate and a 
livable Earth for our children and for future generations. In the year 
ahead, there will be important opportunities to discuss with other 
nations' goals, targets, and strategies needed to reduce emissions. 
These opportunities include the U.S.-led Major Economies Meetings, the 
G-8 summit in Japan, and many intercessional meetings of the UNFCCC. 
The goal of the United States in all of these meetings should be to 
provide leadership to encourage adoption by governments of an 
aggressive target and effective strategies to reduce emissions 
significantly in the years to come.
    Outside of the international negotiating process, the United States 
should renew its leadership in providing support to developing 
countries to protect forests and biodiversity, to improve energy 
efficiency, and to develop and deploy environmentally sound, low-carbon 
energy technologies. The United States led the world as one of the 
first donor nations to recognize the importance of these investments 
for developing countries themselves and for the world. Sadly, we have 
fallen behind in our commitment to these vital priorities. We can and 
should restore our leadership on international conservation.
    As a global leader, the United States has an opportunity to promote 
new and innovative climate solutions--both in scope and scale--that are 
cost effective and efficient. This should be done here at home, in our 
bilateral relationships, and as a key player in the international 
process.
    We look forward to working with the administration and with 
Congress to ensure that a comprehensive, inclusive, and verifiable 
structure is put in place to achieve these multiple benefits to the 
global community.

    Senator Menendez. Thank you.
    Mr. Lyons.

     STATEMENT OF JIM LYONS, VICE PRESIDENT FOR POLICY AND 
          COMMUNICATION, OXFAM AMERICA, WASHINGTON, DC

    Mr. Lyons. Thank you, Mr. Chairman, Senator Kerry, Senator 
Voinovich. It's a pleasure to join you this afternoon.
    I'm vice president for Policy and Communications at Oxfam 
America, and I have to tell you, Mr. Chairman, I'm also a 
native son of New Jersey, and at the risk of alienating Senator 
Kerry, a big Giants fan.
    Let met state at the outset that we believe that this 
committee can play a critical role in overseeing and shaping 
the United States participation in the negotiations to follow 
from Bali. And we certainly look forward to working with you 
and your colleagues in that endeavor.
    We've come to see climate change as a true global threat, 
and certainly one of the greatest challenges that we face in 
attempting to promote sustainable development and to reduce 
global poverty. In our operations from Africa and Latin 
America, to East Asia, and in the southeastern United States, 
our staff and partners are already seeing the consequences of 
climate change, and attempting to respond to its impacts.
    Over time, the science indicates that weather extremes, 
food and water scarcity, and climate-related public health 
threats are projected to displace between 150 million and 1 
billion people as climate change unfolds. Thus, the lives of 
millions of people around the world are likely to be threatened 
by climate change. Beyond the obvious and immediate impacts on 
the poor and vulnerable communities, the consequences of global 
warming could undermine global stability and ultimately 
national security.
    The Bali action plan or roadmap sets out a framework for 
international negotiations on a post-2012 agreement that will 
focus on four key areas: Emissions reductions, adaptation, 
finance, and technology. And I'll briefly address all of those 
elements.
    Oxfam agrees with many countries that advocated Bali for 
emissions levels that would keep total warming as far as 
possible below the 2 degrees Celsius mark above preindustrial 
levels, and that total emission levels should reflect that 
global warming threshold. This is consistent with the report of 
the IPCC, which indicates that the needs of developing 
countries, to adapt to climate impacts, are likely to much more 
severe beyond that threshold.
    The broad outlines of a global deal on climate change did 
become evident in Bali. It will require developing countries to 
commit to take nationally appropriate steps to cut emissions. 
But it will also require developed countries to shoulder their 
fair share by leading the way in undertaking emissions cuts and 
by providing the necessary assistance to developing countries 
to adopt lower emissions pathways and to adapt to severe 
climate impacts. In this regard, I believe the Bali agreement 
is truly a global framework for action.
    I'd like to briefly focus on a critical part of the path 
forward, and that is the way in which the United States and 
other developed nations help developing countries adapt to the 
consequences of climate change. Financing and other assistance 
for vulnerable countries facing the impacts of climate change 
is the central element of this global deal. This seems fair and 
appropriate, since those around the world who are least 
responsible for the emissions causing climate change, will bear 
many of the consequences of climate change and suffer the 
greatest burdens.
    And, according to the IPCC, even with significant 
reductions in global greenhouse gas emissions, climate impacts 
in vulnerable developing countries will far outstrip their 
ability to cope.
    The Bali action plan provides a solid basis for creating 
the necessary adaptation assistance, calling for improved 
access to adequate, predictable, and sustainable financial 
resources, and financial and technical support in the provision 
of new and additional resources for both adaptation and 
emission reduction activities in developing countries.
    The plan emphasizes the need for innovative sources of 
funding to assist developing countries in meeting the cost of 
adaptation. In fact, we believe an opportunity is at hand for 
the Congress to take a bold and innovative step in helping 
developing countries adapt to global warming consequences.
    As has already been alluded to, the climate legislation 
that recently was reported by the Environment and Public Works 
Committee designates a portion of revenues to deal with two 
important issues--one is the issue of deforestation.
    But a second--and we think, essential--issue, is 
redirecting a portion of auction revenues to be used for 
adaptation funding and assistance in developing countries. If 
approved by the United States, this approach could serve as a 
model for the kind of adaptation funding mechanisms developed 
countries could adopt as a part of any international agreement.
    Ultimately, to achieve substantial shifts in emissions 
trajectories in developing countries, an effective post-2012 
global deal will require countries with greater economic 
capacity--including the United States--to help developing 
countries meet their growing energy needs in a more 
environmentally friendly way.
    All of you today have addressed the important opportunities 
for the United States to provide clean energy technology to 
developing countries, and to invest in the development and the 
implementation of that technology.
    We believe U.S. businesses and workers can benefit from the 
technological innovation and green jobs, generated by a push to 
provide clean energy technology, goods, and services to 
developing countries seeking to transform their energy use. 
Moreover, by playing a global leadership role in the expansion 
of clean energy technology, the United States can help reduce 
greenhouse gas emissions while alleviating poverty and 
promoting international development, stability, and security. 
This is a clear opportunity for U.S. leadership and an 
effective partnership between government, business, and 
nonprofits working in the developing world.
    In conclusion, Mr. Chairman, as I noted earlier, this 
committee can play a particularly important and unique role in 
moving the Bali negotiations forward and ensuring U.S. 
engagement and leadership in that effort. The Lieberman-Warner 
climate change bill provides an important first step in 
financing adaptation work in developing countries and the means 
of alleviating global warming effects. This is good for those 
in greatest need, and good for the United States from a 
national security, and economic standpoint.
    As a final note, we believe that it's particularly 
important for this committee to pay close heed to the major 
economies meeting process that has been launched by the Bush 
administration. Our primary concern is that most climate-
vulnerable countries are not at the table, and therefore have 
no opportunity to express their concerns about climate impacts, 
emission reduction targets, and adaptation needs. And I think 
you would agree, Mr. Chairman, that this approach to 
negotiating is like trying to make an important policy decision 
in the Senate, with only one party at the table. It's just not 
going to happen.
    Thank you for the opportunity to address you today, we look 
forward to working with you to ensure that the United States is 
at the forefront of efforts to provide global leadership on the 
environmental challenges that are presented to us by climate 
change, and also captures the important opportunities that can 
result from a creative and innovative approach to dealing with 
this challenge.


    [The prepared statement of Mr. Lyons follows:]


  Prepared Statement of James R. Lyons, Vice President for Policy and 
             Communications, Oxfam America, Washington, DC

    Good afternoon, Mr. Chairman and members of the committee. I am Jim 
Lyons, Vice President for Policy and Communications of Oxfam America. 
Oxfam is an international development and humanitarian organization. 
This afternoon, I am pleased to be able to discuss with you the 
outcomes from the 13th Conference of the Parties to the United Nations 
Framework Convention on Climate Change and the 3rd Meeting of Parties 
to the Kyoto Protocol, in Bali, Indonesia, in December, and a way 
forward from those negotiations.
  climate change: a significant threat to the world's most vulnerable 
                                 people
    We have come to see climate change as one of the greatest 
challenges to our efforts to promote sustainable development and reduce 
global poverty. In our operations spanning Africa, Latin America, East 
Asia, and the United States itself, our staff and partners are already 
responding to the serious impacts of climate change, from increasingly 
severe weather events to water scarcity.
    Ninety-seven percent of all natural disaster-related deaths already 
take place in developing countries, and the estimates of climate 
change's contribution to worsening conditions are disturbing. By 
midcentury, more than a billion people will face water shortages and 
hunger, including 600 million in Africa alone. Weather extremes, food 
and water scarcity, and climate-related public health threats are 
projected to displace between 150 million and 1 billion people as 
climate change unfolds.
    As the science indicates, poor and vulnerable communities around 
the world will increasingly bear the brunt of the consequences of 
global warming, threatening the lives of millions of people and 
potentially undermining global stability and security. Oxfam is 
committed to addressing both the causes of climate change and the 
consequences for those least able to adapt to its impacts. These 
impacts, and the resulting increases in global poverty, will undermine 
global stability and security.
                 the global deal made possible by bali
    Following two weeks of intensive talks on a wide range of issues, 
the negotiations in Bali resulted in a Bali Action Plan, or 
``roadmap,'' that sets out a framework for international negotiations 
on a post-2012 agreement updating the Kyoto Protocol and the Framework 
Convention on Climate Change. Negotiations on a post-2012 agreement are 
scheduled to be concluded in December 2009.
    The Bali Action Plan frames a new effort to address climate change. 
A rough guide to the road for global negotiations has been established 
in four key areas--mitigation (emissions reduction), adaptation, 
finance and technology. The Senate, and the Foreign Relations Committee 
in particular, will play a crucial role in overseeing and shaping the 
United States role in those negotiations, We hope to be able to work 
with you to ensure that those who are most deeply affected by climate 
impacts are at the center of the global discussions.
    The exact destination for the Bali roadmap, and the speed at which 
countries will travel to get there, still remain highly uncertain. 
Indeed, we were disappointed by aspects of the Bali Action Plan that 
left unsettled some key guidelines for the way forward. In particular, 
the representatives of the United States, aided at key moments by 
Canada and Japan, refused to allow the inclusion of clear, science-
based objectives for the total reductions in greenhouse gas reductions 
that the negotiations should achieve.
    Oxfam agrees with the many countries that advocated at Bali for 
emissions levels that would be consistent with keeping total warming as 
far as possible below 2 degrees C/3.6 degrees Fahrenheit above 
preindustrial levels and that total emissions levels should reflect 
that global warming threshold. The Intergovernmental Panel on Climate 
Change (IPCC) reports indicate that the impacts of climate change, and 
the needs of developing countries to adapt to climate impacts, are 
likely to be much more severe beyond that threshold. Unfortunately, the 
United States said repeatedly, to the consternation of many other 
countries, that it did not want to ``prejudge'' the outcome of a post-
2012 agreement by including total emissions objectives.
    Nonetheless, the Bali roadmap is unprecedented and offers 
significant opportunities that can be seized upon in the coming 2 years 
of negotiations. For the first time in international climate 
negotiations, a process has been established in which all countries--
both developed and developing--will discuss their respective 
responsibilities to cut emissions. This creates an opportunity for the 
United States to fully reengage in international climate talks. And it 
also means that developing countries have become a central part of 
discussions around emissions, although the Bali roadmap also makes 
clear that their obligations will be different in nature from rich 
country obligations and that their actions should be clearly contingent 
on the provision of financing and technology by developed countries.
    This outcome is largely due to one of the most important 
developments that occurred in Bali: An insistent and powerful 
determination on the part of developing countries to shape the 
negotiating agenda, including a willingness to be flexible when it was 
required. To move negotiations forward, developing countries made clear 
that they were prepared to engage in addressing emissions, but that 
other key issues for them must also be addressed in a forthright and 
substantive manner. The dramatic final moments of the Bali summit 
illustrated the readiness of developing countries to take ``measurable, 
reportable, and verifiable'' actions regarding emissions, supported by 
developed country assistance to developing countries with ``measurable, 
reportable, and verifiable'' financing, technology, and capacity 
building.
    At many points, the desire of developing countries to find a way 
forward was met by resistance from United States representatives on 
issues such as funding for developing countries harmed by climate 
impacts. In the end, however, the broad outlines of a global deal on 
climate change become evident in Bali. It is a deal that will ask 
developing countries to take ``nationally appropriate'' steps, but also 
must fundamentally require developed countries to shoulder their fair 
share both by leading the way in undertaking, emissions cuts and by 
providing the necessary assistance to developing countries to adopt 
lower emissions pathways and adapt to severe climate impacts. As we 
move into these negotiations, the ability of the United States to play 
a leading role in shaping a future global agreement will depend on our 
readiness to recognize the concerns and perspectives of developing 
countries.
                               adaptation
    For many developing countries, the provision of financing and other 
assistance for vulnerable countries facing the impacts of climate 
change is a central element in this global deal. As countries such as 
Bangladesh, Uganda, and the Alliance of Small Island States underscored 
at Bali, those around the world who are least responsible for the 
emissions causing climate change will bear many of its greatest 
burdens. The IPCC has noted that, even with significant reductions in 
global greenhouse gas emissions, climate impacts in vulnerable 
developing countries--including severe weather events, water scarcity, 
flooding, decreases in agricultural productivity, spread of disease, 
and migration and refugee crises--will far outstrip the available 
resources in those countries to cope.
    Based upon World Bank data and other relevant analyses, Oxfam has 
estimated that globally poor countries will require at least $50 
billion a year to address the consequences of global warming. Just 
prior to the Bali negotiations, the United Nations Development Program 
estimated in the most recent Human Development Report that the 
adaptation needs of developing countries will be more than $80 billion 
a year.
    The Framework Convention on Climate Change already obligates 
developed countries, including the United States, to provide assistance 
to developing countries adversely affected by climate change. However, 
thus far financing through international funding mechanisms has not 
topped $150 million. The United States contribution to the Least 
Developed Country Fund and the Special Climate Change Fund established 
under the auspices of the Framework Convention has been ``zero.'' 
Developing countries have therefore stressed that an equitable post-
2012 global agreement must involve substantial new and additional 
resources to meet these adaptation needs.
    At Bali, Bush administration negotiators strongly objected to 
references to new funding sources, once again arguing that outcomes of 
a post-2012 agreement should not be prejudged. In spite of these 
objections, the Bali Action Plan provides a solid basis for creating 
the necessary adaptation assistance. The negotiating mandate includes 
``improved access to adequate, predictable and sustainable financial 
resources and financial and technical support, and the provision of new 
and additional resources'' for both adaptation and emissions reduction 
activities in developing countries, and specifically calls for 
``innovative means of funding to assist developing country Parties that 
are particularly vulnerable to the adverse impacts of climate change in 
meeting the cost of adaptation.''
    The Bali roadmap also outlines a number of adaptation issues that 
will be addressed in negotiations, including providing support for 
vulnerability assessments, financial needs assessments, capacity-
building and response strategies, and the integration of adaptation 
actions into sectoral and national planning. The negotiating mandate 
also addresses the development of risk management and risk reduction 
strategies, including insurance, as well as disaster reduction 
strategies.
    Much work remains to be done to bring these opportunities to 
fruition over the next 2 years of negotiations. It will be especially 
crucial to develop what the Bali Action had itself calls ``innovative'' 
funding mechanisms for adaptation in addition to more conventional 
government funding.
    Perhaps most important, the United States Congress may be able to 
provide one of the most effective tools for enhancing resources for 
developing country adaptation. The climate legislation recently 
reported by the Senate Environment and Public Works Committee, titled 
the Lieberman-Warner Climate Security Act, designates a portion of the 
revenues from the auction of greenhouse gas emission permits to be used 
for adaptation assistance in developing countries. Similarly, Germany 
has signaled its intention to designate a portion of auction proceeds 
from a cap-and-trade system to developing country adaptation. If 
approved in the United States soon, this type of mechanism could serve 
as a model for the kind of adaptation funding mechanisms developed 
countries could adopt as part of an international agreement.
    In addition to recognizing the need for new, additional resources 
for adaptation, negotiators in Bali also reached agreement on 
implementation of the Adaptation Fund for developing countries that was 
created under the Kyoto Protocol. The Bali decision enables this 
special Adaptation Fund to get up and running in 2008 with initial 
funding from a small 2-percent levy on all transactions under the Clean 
Development Mechanism, a mechanism which allows entities in developed 
countries to offset excess emissions by purchasing carbon credits from 
projects in developing countries.
    Implementation of the Adaptation Fund was an issue that had 
remained unresolved from earlier negotiating sessions, in large part 
because of a dispute between developing and developed countries about 
which institution should oversee its operations. At Bali, a compromise 
was reached. The Global Environment Facility, which many developing 
countries felt has not adequately met their needs and is governed by a 
council controlled by developed countries, will be the day-to-day 
implementing body for the fund. But the adaptation operations of the 
GEF, including its choice of projects and programs, will be overseen by 
an executive board comprised of a majority of developing country 
representation from the countries that belong to the Kyoto Protocol. 
Although the United States is not a Party to the Kyoto Protocol and 
thus does not participate in the Adaptation Fund, we should certainly 
take note of this significant step forward in making the fund 
operational.
             emissions reduction and clean energy transfer
    In addition to adaptation issues, the Bali roadmap also creates 
important negotiating opportunities involving clean energy technology 
transfer to developing countries. In the Bali Action Plan, the transfer 
of clean energy technologies is closely linked to a broader set of 
objectives around emissions reductions in developing countries.
    In Oxfam's view, producing meaningful outcomes regarding 
``nationally appropriate'' emissions levels for developing countries 
will require a clear delineation of the appropriate roles and 
responsibilities of different countries at different levels of 
development. For instance, it should be kept in mind that India has 
approximately only one-quarter of the total and per capita greenhouse 
gas emissions of China. China, whose emissions levels, in total, are 
currently at or exceeding U.S. emissions by some estimates, still has 
only one-quarter of the per capita emissions of the United States. 
Further, many developing countries are already undertaking significant 
efforts to increase energy efficiency and the use of clean energy 
technologies.
    Ultimately, to achieve substantial shifts in emissions trajectories 
in developing countries, an effective post-2012 global deal will 
require countries with greater economic capacity, including the United 
States, to provide financing to help developing countries transform 
their emissions pathways. From the first day of the Bali meeting, when 
developing countries pressed for the inclusion of technology transfer 
in implementation negotiations for the Framework Convention and Kyoto 
Protocol, it was clear that clean energy technology issues would be a 
central concern of the negotiations. The concluding moments of the Bali 
negotiations underscored the concern. The conference ended with 
adoption of the language proposed by India and other developing 
countries that technology, financing and capacity-building support from 
developed countries would be provided in a ``measurable, reportable, 
and verifiable manner.''
    The agreements reached at Bali also call for the development of an 
energy technology transfer ``programme'' at the Global Environment 
Facility and a negotiating mandate on ``effective mechanisms and 
enhanced means for the removal of obstacles to, and provision of, 
financial and other incentives for scaling up of the development and 
transfer of technology.'' As with adaptation, the challenge now is to 
ensure that these negotiating opportunities are brought to fruition 
with significant commitments in a post-2012 agreement and that 
implementation provides real environmental and social benefits on the 
ground in developing countries. Technology transfer for clean energy 
can be a key dealmaker as the negotiations move forward.
    Moreover, the United States stands to gain tremendously from an 
effort to provide clean energy technology to developing countries. Our 
economy and workers can benefit from the technological innovation and 
``green jobs'' generated by a push to provide clean energy goods and 
services to developing countries seeking to transform their energy use. 
Moreover, by playing a global leadership role in the expansion of the 
clean energy sector, the United States can help reduce greenhouse gas 
emissions while alleviating poverty and promoting international 
development, stability, and security. We should view the challenge of 
addressing developing countries' role in climate change as an 
opportunity for U.S. leadership rather than a threat.
                               conclusion
    As I noted earlier, the Senate and this committee, in particular, 
have an important role to play in guiding and overseeing the U.S. 
engagement in the negotiations that follow the recent meeting in Bali. 
The United States has a new and unique opportunity to engage with 
developing countries and to assist them in adapting to the serious 
climate consequences they face while moving to lower emissions 
pathways. We can create a global deal, but only if the United States is 
proactive and responsive to developing countries' concerns and 
perspectives.
    It will be particularly important to watch the Major Economies 
Meeting process that the Bush administration has created in order to 
ensure that it does not distract from the central task at hand in the 
post-2012 multilateral negotiations in the United Nations framework. 
One of our central concerns with the Major Economies' structure is that 
the vast majority of the most vulnerable countries are not at the table 
and are therefore unable to raise their concerns regarding climate 
impacts, adaptation assistance, and urgently needed emissions reduction 
targets. At the end of the day, only a process that is inclusive of all 
countries and responsive to their needs and concerns will produce the 
global agreement needed to address the global crisis that climate 
change presents.
    Thank you for the opportunity to address you today. We very much 
look forward to working with you to ensure that the United States is in 
the forefront of addressing the enormous challenges presented by 
climate change and recognizes, as well, the global opportunities that 
can result.

    Senator Menendez. Thank you very much.
    What part of New Jersey were you from?
    Mr. Lyons. Fort Lee.
    Senator Menendez. Fort Lee?
    Mr. Lyons. And a Rutgers graduate.
    Senator Menendez. Well, you're hitting all of the 
cylinders, here. [Laughter.]
    Senator Menendez. Mr. Castellani--we won't even go there.
    Mr. Castellani.

          STATEMENT OF JOHN J. CASTELLANI, PRESIDENT, 
              BUSINESS ROUNDTABLE, WASHINGTON, DC

    Mr. Castellani. Thank you, Mr. Chairman. Senators Voinovich 
and Kerry, I too appreciate the opportunity to testify here 
today and I'm neither from Massachusetts, Ohio, nor New Jersey.
    I'm president of the Business Roundtable, and the Business 
Roundtable----
    Senator Menendez. Now we know where you're from. 
[Laughter.]
    Mr. Castellani [continuing]. Is an association of Chief 
Executive Officers of leading U.S. companies, collectively 
these companies represent more than $4.5 trillion in annual 
revenues, and employ more than 10 million people.
    In the last few years, climate change has vaulted into the 
top two of issues that these CEOs have engaged in, and has 
gotten their direct attention. Roundtable members agree that 
there is increasing evidence that the Earth's climate has been 
warmed over the last century, and that greenhouse gas 
concentrations have increased in the atmosphere due to rising 
worldwide emissions of them.
    We believe that steps to address global warming are prudent 
now, even while science continues to evolve, and our goal 
should be one of slowing increases in greenhouse gas 
concentrations in the atmosphere and ultimately stabilizing 
them at levels that will address the risk of climate change.
    How we achieve these reductions is a much-debated issue 
within our membership. While we have many members who support 
cap and trade legislation, many others favor different 
approaches, including a carbon tax. But nonetheless, there is 
strong agreement that we must adopt an emissions reduction path 
that allows for continuing economic growth in the United States 
and globally.
    And that's why the Roundtable has emphasized the need to 
design any new framework to encourage the development of new 
technologies, avoid unnecessary costs, and maintain affordable 
energy supplies.
    We also need the ability to adjust the pace of emissions 
reductions, as we better understand the capabilities, 
limitations, and costs of new technologies, and the timetable 
for their employment.
    No discussion of climate change can look at the United 
States in isolation from the rest of the world. Climate change 
is global in both its causes and impacts and we believe 
requires a global response.
    We have called for a comprehensive international agreement, 
which establishes an equitable and effective global framework 
for addressing climate change that maintains U.S. and global 
economic growth. Under this agreement, all major emitting 
countries should commit to appropriate emission reductions, and 
the role of developing nations is critical, because their 
emissions are growing at a rapid pace, and will soon exceed 
those of the developed world.
    We think the just-concluded conference of parties, the COP 
in Bali, was a positive and constructive step toward a new 
global framework. We are pleased that the United States 
supported the Bali roadmap, and we will be actively engaged in 
the process going forward. The Roundtable believes that U.S. 
leadership in international climate negotiations is essential.
    We also believe that the Bali roadmap opens the door to 
meaningful developing nation participation in the climate 
change agreement, with key developing nations committee to take 
actions to reduce emissions that are measurable, reportable and 
verifiable.
    The Bali roadmap does not address what steps either 
developing or developed countries will agree to take, and this 
will be a difficult subject which will be the focus of the 
negotiation process, and we understand that the obstacles to 
reaching agreement are large.
    We believe the United States needs to lead by example in 
this process, but we need to be mindful of the complex economic 
interrelationships we have with other major emitters. We need 
to challenge developing nations to take tangible and meaningful 
actions, but not insist on impossible measures that would 
damage their economies.
    At the same time, we need to set realistic milestones for 
developed nations that assure that economic growth is not 
stifled, and that technological innovation is encouraged. In 
the end, the successful transfer of technology from developed 
to developing nations, may be the best tool to achieve emission 
reduction progress around the globe.
    Our government faces the difficult task of negotiating an 
international agreement at a time when there are some divisions 
over what the policies are that we should adopt domestically. 
In particular, we don't have a consensus on what emission 
reduction targets should be set, and whether we should achieve 
these targets through a cap and trade program, a carbon tax, or 
some other approach.
    But unfortunately, this debate may not be resolved until 
2009, well into the implementation of the Bali roadmap. During 
this interim period, we need to proceed on parallel tracks, 
both internationally and domestically. We believe this will 
require close and continuing coordination between the executive 
branch officials representing the United States in the 
international negotiations, and the congressional leadership, 
so that evolving policies here in the United States are well-
aligned with our negotiating positions.
    Business leaders like our CEO members should be--and want 
to be--as part of that process. We believe it will be very 
important for smaller groups of countries to meet outside of 
the U.N. process, to develop areas of agreements and work 
through difficult issues.
    We do support the continuation of the major economies 
dialog. We will support a dialog in other venues, such as the 
upcoming G-8 meeting in Japan. In fact, business leaders from 
the G-8 countries--including the Business Roundtable leaders--
are planning a series of meetings in 2008 in parallel with the 
G-8 process, and climate will be an important part of that 
agenda.
    Now, let me reiterate that no matter how complex the 
negotiations, and difficult the challenges, the members of the 
Business Roundtable recognize and support the fact that action 
must be taken.
    Thank you for the opportunity to testify, and I look 
forward to your questions.


    [The prepared statement of Mr. Castellani follows:]


         Prepared Statement of John J. Castellani, President, 
                  Business Roundtable, Washington, DC

    Good afternoon, Mr. Chairman and members of the committee. I 
appreciate the opportunity to testify today. My name is John 
Castellani. I am President of Business Roundtable (BRT).
    Business Roundtable is an association of chief executive officers 
of leading U.S. companies with $4.5 trillion in annual sales and more 
than 10 million employees. Member companies comprise nearly a third of 
the total value of the U.S. stock market and represent more than 40 
percent of all corporate income taxes paid to the Federal Government. 
Roundtable companies are technology innovation leaders, with $90 
billion in annual research and development (R&D) spending--nearly half 
of total private R&D spending in the United States.
                                summary
    In my testimony, I will first discuss Business Roundtable CEOs' 
work on the important and interrelated issues of climate change and 
energy security. Then I will turn to the subject of today's hearing: 
The international dimension of climate change and the path toward an 
international agreement following last month's Conference of the 
Parties in Bali, Indonesia.
    Roundtable CEOs agree that there is increasing evidence that the 
earth's climate has been warming over the last century and that 
greenhouse gas (GHG) concentrations have increased in the atmosphere 
due to rising worldwide emissions of GHGs. We believe that steps to 
address global warming are prudent now even while the science continues 
to evolve. Our members have a range of views and preferences regarding 
the policy tools that should be used to address the warming threat. 
However, we agree on the need for collective actions that will lead to 
the reduction of GHG emissions on a global basis with the goal of 
slowing increases in GHG concentrations in the atmosphere and 
ultimately stabilizing them at levels that will address the risk of 
climate change.
    Collectively, the Roundtable believes that climate change is global 
in both its causes and impacts and requires a global response. We have 
called for a comprehensive international agreement which establishes an 
equitable and effective global framework for addressing climate change. 
Under this agreement, all major emitting countries (including China, 
Brazil, and India) should commit to appropriate emission reduction 
goals.
    The 13th Conference of the Parties (COP) which occurred in Bali, 
Indonesia, from December 3-15, 2007, represented a positive and 
constructive step toward a new global framework which BRT applauds. 
This conference was at times acrimonious and divisive but in the end 
resulted in agreement on a negotiating roadmap for achieving a new 
global climate agreement by the end of 2009 that would be in place by 
2012. For the first time, key developing nations committed in Bali to 
take ``nationally appropriate mitigation actions . . . in a measurable, 
reportable and verifiable manner.'' This commitment is nonspecific and 
could encompass many different options but it opens the door to 
meaningful developing nation participation in a climate change 
agreement.
    We are pleased that the United States supported the Bali roadmap 
and will be actively engaged in the process going forward. BRT believes 
that U.S. leadership in international climate negotiations is 
essential. Nonetheless, we should be under no illusion that the 
upcoming negotiation process will be easy or free from conflict. The 
obstacles to reaching agreement remain large. In Bali, an impasse was 
reached between the U.S. and EU over whether common emission reduction 
targets should be set for developed countries and what level of 
reduction these targets should achieve. The debate at Bali over 
emission targets for developed nations mirrors in many ways the debate 
we are having domestically in Congress over climate legislation. 
Unfortunately, that debate may not be resolved until 2009, well into 
implementation of the Bali roadmap. During this interim period, there 
needs to be close and continuous coordination between the executive 
branch officials representing the United States in the international 
negotiations and the congressional leadership so that evolving policies 
here in the United States are well aligned with our negotiating 
positions. Business leaders, like our CEO members, should be an 
integral part of this process. We believe that all venues--including 
the major emitter's initiative launched by President Bush and the G-8 
summit in Japan--should be used to encourage dialogue among the major 
players.
             business roundtable's climate policy statement
    In the last few years, climate change has vaulted into the top tier 
of issues that have engaged the direct attention of our CEOs. Many of 
our CEOs have devoted considerable time to understanding the science 
with the help of outside experts on climatology and atmospheric 
chemistry; they've talked to policymakers to understand the range of 
options under consideration domestically and internationally; and 
they've looked hard at their product portfolios and investment 
strategies to understand how they might be affected in a world of 
carbon constraints. Working closely with many Members of Congress, the 
administration, NGOs, and others, several prominent CEOs within our 
ranks have taken highly public positions on the seriousness of the 
climate challenge and what to do about it.
    With interest rising across the business community, early last year 
we at Business Roundtable convened a dialogue among CEOs from a diverse 
set of economic sectors, including utilities, oil and gas, chemicals, 
autos, manufacturing and financial services. We did our homework by 
surveying the range of views among CEOs and consulting with scientists, 
NGOs, congressional leaders and the administration. Additionally, many 
companies have had conversations with employees to gain their 
perspective. Then our CEOs sat down to hammer out a statement that 
merged their differing perspectives. We did not achieve common ground 
on all the issues but made progress in some very important ways. 
Development of our policy statement was spearheaded by Chad Holliday, 
chairman and CEO of DuPont and chair of BRT's Environment, Technology & 
the Economy Task Force.
    The BRT policy statement, issued on July 17, 2007, is attached to 
my testimony. It represents one of the first times that a broad cross-
section of business leaders from every sector of the U.S. economy has 
reached consensus on the risks posed by climate change and the need for 
action. The statement acknowledges that ``there is increasing evidence 
that the earth's climate has been warming over the last century and 
that increases in the earth's temperature are affecting many global 
ecosystems, especially the polar areas.'' It notes that, concurrent 
with this warming trend, ``greenhouse gas (GHG) concentrations have 
increased in the atmosphere due to rising worldwide emissions of 
GHGs.'' The statement then emphasizes that ``the consequences of global 
warming for society and ecosystems are potentially far-reaching'' and 
steps to address the risks of such warming are prudent now even while 
the science continues to evolve.While recognizing the remaining 
uncertainties, the statement calls for ``collective actions that will 
lead to the reduction of GHG emissions on a global basis with the goal 
of slowing increases in GHG concentrations in the atmosphere and 
ultimately stabilizing them at levels that will address the risk of 
climate change.''
    Our CEOs also agreed on many of the elements of an effective long-
term strategy to achieve this goal. Our statement highlights the many 
opportunities to improve energy efficiency that exist throughout the 
economy--in residential and commercial buildings, motors and other 
industrial equipment, home appliances, cars and trucks, and the 
production, distribution, and use of electricity. We also highlight the 
importance of accelerating the development of efficient, low carbon 
technologies and the need for increasing R&D investment in the public 
and private sectors to speed the process of technological change and 
innovation. These technologies are essential to reducing GHG emissions 
while meeting rising energy demands to support economic growth. We make 
clear that the responsibility for taking action lies not just with 
government but with the private sector and that our companies should 
act now without waiting for legislative mandates. Thus, the statement 
calls on our members to make commitments to reduce their emissions, 
report publicly on their progress and spend more on climate-related 
R&D.
    In fact, we are now in our fifth year of implementing a program to 
motivate our members to take voluntary action to reduce emissions and 
track their accomplishments. Business Roundtable's Climate RESOLVE 
(Responsible Environmental Steps, Opportunities to Lead by Voluntary 
Efforts) is the only broad-based business initiative dedicated to 
helping its members reduce their GHG emissions through one-on-one 
counseling, learning sessions, workshops, networking opportunities and 
exposure to member company best practices. The initiative has spurred 
greater awareness of climate issues in the business community and 
motivated many companies to develop policies and strategies for 
managing their emissions. More than 70 percent of Business Roundtable's 
membership has enrolled in Climate RESOLVE. A list of these companies 
is attached to my testimony.
    Our members understand that the United States is moving toward a 
new policy framework on global warming and that Congress is considering 
bills that will demand substantial reductions in GHG emissions. Within 
our membership, there is a range of views and preferences on the policy 
tools that will best achieve that objective. Some members support cap-
and-trade programs; others are partial to carbon taxes, technology 
initiatives or other approaches. Similarly, some members support 
mandatory approaches; others do not.
    In an organization as diverse as Business Roundtable, it would be 
surprising to have unanimity on an issue this complex and far-reaching 
in its impact. Nevertheless, without recommending specific policies, 
our climate change statement outlines specific benchmarks that should 
be used to judge policy proposals by Congress or the administration. 
These benchmarks are in large part focused on assuring that we can meet 
the challenge of global warming without harming our economy or U.S. 
competitiveness.
    For example, our statement stresses the need to align emission 
reduction targets with the expected timelines for deploying advanced 
technologies and the ability of our economy to reduce its carbon 
footprint in an economically sustainable manner without increasing 
shortages of energy and raw materials, price spikes or other threats to 
economic growth. It also outlines key criteria for all policy 
proposals, including whether they are flexible and maximize the use of 
markets, minimize complexity and transaction costs, operate in a 
transparent manner, provide predictability and certainty to business, 
and foster innovation and business opportunities. Finally, our 
statement urges that our policy framework be flexible enough to make 
course correction as climate science evolves and we better understand 
the economic consequences of climate policies.
              business roundtable's energy recommendations
    While the subject of today's hearing is climate change, I would be 
remiss if I did not underscore the important connections between energy 
and climate policy. Concerns about energy security are a top priority 
for our CEOs. In our latest economic survey, unveiled in early December 
2007, 32 percent of CEOs said that energy costs were their greatest 
cost pressure, tied with health care costs (also 32 percent). This is 
not a surprising finding in light of the recent spike in crude oil 
prices to nearly $100 per barrel. In June 2007, we released a 
comprehensive set of energy policy recommendations developed through a 
consensus-driven process led by CEOs from multiple sectors of the 
economy. Entitled ``More Diverse, More Domestic, More Efficient: A 
Vision for America 's Energy Future,'' this report calls for a more 
diversified and domestic-based energy supply mix, increased energy 
efficiency and a greater investment in new energy technologies. Our 
CEOs feel strongly that we cannot afford to ignore any pathway that 
will contribute to stable, clean, and affordable energy supplies. This 
includes ethanol and other biofuels, nuclear power, greater access to 
conventional domestic oil and natural gas reserves, coal-to-liquids, 
coal gasification, and energy efficiency.
    As we address climate change, we must devote equal attention to 
maintaining reliable and affordable world supplies of energy, which are 
essential to reduce poverty, improve public health, and raise living 
standards around the globe.
      the bali roadmap: what was accomplished and what lies ahead
    Climate change poses a daunting political and economic challenge to 
the world community. As our policy statement recognizes, climate change 
is global in both its causes and impacts and requires a global 
response. Focusing on the United States or all developed countries 
alone will not achieve sufficient reductions in worldwide GHG emissions 
to stabilize atmospheric concentrations at meaningful levels and 
therefore could cause the world's developed nations to incur large 
economic dislocation without any corresponding benefit.
    The Kyoto Protocol imposes emission reduction obligations only on 
the developed (or Annex I) countries. As members of this committee are 
well aware, the absence of commitments by developing nations was a 
major factor behind the Senate's 1997 Byrd-Hagel resolution 
overwhelmingly opposing the Protocol's ratification. Since then, the 
leading developing countries--notably China and India--have experienced 
surging economic growth, with a corresponding growth in their GHG 
emissions. China has now overtaken the United States as the world's 
largest GHG emitter, and developing nations will account for a growing 
percentage of total worldwide emissions as their economic growth and 
energy consumption continue to outpace those of the developed world. 
Excluding major developing economies from an international climate 
change framework--which was unacceptable 10 years ago--is even less of 
an option today.
    Our climate policy statement unequivocally calls for a 
comprehensive international agreement: ``An equitable and effective 
global framework for addressing climate change should be put in place, 
under which all major emitting countries (including China, Brazil, and 
India) are committed to appropriate emission reduction goals.'' We also 
emphasize that U.S. leadership in establishing this global framework is 
essential.
    The 13th Conference of the Parties (COP) which occurred in Bali, 
Indonesia, from December 3-15, 2007, represented a positive and 
constructive step toward a new global framework which BRT applauds. 
This conference was at times acrimonious and divisive but in the end 
resulted in agreement on a negotiating roadmap for achieving a new 
global climate agreement by the end of 2009 that would be in place by 
2012. We are pleased that the United States supported this roadmap and 
will be actively engaged in the process going forward.
    There are many issues that were left unresolved at Bali but a 
number of aspects of the roadmap represent a promising point of 
departure for further negotiations:
    1. For the first time, key developing nations committed to take 
``nationally appropriate mitigation actions . . . in a measurable, 
reportable, and verifiable manner.'' This commitment is nonspecific and 
could encompass many different options, but it opens the door to 
meaningful developing nation participation in a climate change 
agreement. As our statement reflects, BRT believes that tangible 
emission reduction commitments by developing nations are essential for 
U.S. acceptance of a new climate agreement.
    2. Equally important is the roadmap's recognition of the importance 
of addressing deforestation in developing nations through ``policy 
approaches and positive incentives,'' including a framework for pilot 
initiatives, signaling that an effort to prevent deforestation will be 
part of the post-2012 package. This is consistent with BRT's climate 
policy statement, which recommends that a new international framework 
should ``address tropical deforestation, which contributes roughly 20 
percent of total anthropogenic GHG emissions.''
    3. Also positive is the roadmap's recognition of the role of 
technology development and transfer in supporting emissions reduction 
progress in developing countries through the use of financial and other 
incentives. This focus is consistent with the recognition in BRT's 
statement that ``expanding penetration of [new] technologies in 
developing economies where emissions are rapidly increasing is an 
urgent priority.''
    4. The roadmap does not prescribe a one-size-fits-all approach to 
reducing GHG emissions but recognizes the value of ``various 
approaches, including opportunities for using markets to enhance the 
cost-effectiveness'' of reduction measures. Given the interest of our 
members in a broad range of emission reduction tools which minimize 
costs, we were pleased by this recognition.
    5. We were glad to see encouragement in the roadmap for 
``cooperative sectoral approaches and sector-specific actions.'' We 
believe there is promise in encouraging industries with global scale 
and reach (particularly those which are energy-intensive) to work 
together on common technology platforms, metrics, and targets for 
reducing emissions. Initial steps in this direction have already been 
taken under the auspices of the Asia-Pacific Climate Initiative and 
bilateral exchanges between the United States and some of its trading 
partners. Sector-based approaches could play an important role in an 
international agreement in bridging the gap between developed and 
developing nations.
    Although these areas represent important progress, we should be 
under no illusion that the upcoming negotiation process will be easy or 
free from conflict. The obstacles to reaching agreement remain large. 
In Bali, an impasse was reached between the United States and European 
Union over whether common emission reduction targets should be set for 
developed countries and what level of reduction these targets should 
achieve. The final Bali roadmap attempts to place bounds on this debate 
without resolving it. The roadmap calls for the parties to consider:

          Measurable, reportable, and verifiable nationally appropriate 
        mitigation commitments or actions, including quantified 
        emission limitation and reduction objectives by developed 
        country Parties, while ensuring the comparability of efforts 
        among them, taking into account differences in their national 
        circumstances.

    This language encompasses a broad range of actions--including 
voluntary and differentiated individual country commitments at one end 
of spectrum to binding and uniform reduction targets at the other--and 
therefore leaves a broad field for negotiation between now and the end 
of 2009.
    The debate at Bali over emission targets for developed nations 
mirrors in many ways the debate we are having domestically in Congress 
over whether to adopt a cap-and-trade system and at what levels and by 
what dates to reduce emissions under that system. Ultimately, a 
consensus here in the United States would go far to shape our 
international negotiating position. That consensus does not exist 
today--among our Members in the Congress or between the administration 
and the Congress--but the U.S. political process over the next 2 years 
will move us toward greater clarity in one direction or another. There 
needs to be close and continuous coordination between the executive 
branch officials representing the United States in the international 
negotiations and the congressional leadership so that evolving policies 
here in the United States are well-aligned with our negotiating 
positions. Business leaders, like our CEO members, should be an 
integral part of this process.
    As the Bali roadmap is implemented, we should not lose sight of the 
complex web of economic relationships between the United States and 
China, which is key to the outcome of climate negotiations because of 
its role as the world's top emitter. China is both a competitor and 
economic partner. Our members both export products to China and rely on 
Chinese manufacturing operations. U.S. companies have major investments 
in Chinese enterprises while China is becoming an investor in U.S. 
financial institutions. China, like the United States, is a large 
importer of petroleum products and natural gas and shares our interest 
in moderating increases in energy costs. U.S. consumers benefit from 
low-cost Chinese exports and these exports are an important source of 
jobs for Chinese workers. There are obviously stresses in the United 
States/Chinese relationship, but there are mutual benefits. We need to 
carefully weigh the full range of strategic issues between the United 
States and China as we examine what commitments each country should 
make to tackle GHG emissions under a new climate treaty.
    The Bali roadmap sets in motion a negotiating process under the 
U.N. 1992 Framework Convention on Climate Change, with the goal of 
reaching an agreement under the Convention between all the signatories, 
including developing and developed countries. This process will of 
necessity be cumbersome and difficult to manage because of the large 
number of participating countries. We therefore believe it will remain 
very important for smaller groups of countries to meet outside of the 
formal U.N. process to develop areas of agreement and work through 
difficult issues. President Bush took an important step in this 
direction by convening the ``major economies'' in Washington, DC, in 
September. We strongly support continuation of the major economies 
dialogue and note that it has been endorsed by the two major Democratic 
Presidential candidates. We support dialogue in other venues such as 
the upcoming G-8 meeting in Japan. Business leaders from the G-8 are 
planning a series of meetings in 2008 in parallel with the G-8 process 
and climate will be an important agenda item. BRT will take a 
leadership role in these meetings.
    Thank you again for the opportunity to testify here today and I 
look forward to your questions.

    Senator Menendez. Thank you for that very constructive 
statement.
    We're going to go through a round of 7 minutes. Since it 
seems there will be a few of us, and certainly I have a few 
questions I'd like to pick the brains of everybody who's on 
this panel.
    Generic question to any of you--you heard Mr. Connaughton. 
From my perspective, he painted a very rosey picture. I'm 
wondering where you might have a divergence of views as where 
we be moving towards, particularly as we consider the Bali 
process and moving towards a treaty that can pass in the 
Senate. So, I'd open that up to anyone who wants to make a 
comment.
    Mr. Lyons. Since you're reaching.
    Mr. Lyons. Well, I alluded to this in my testimony, Mr. 
Chairman, but our concern with the major economics dialog is 
that it adequately recognize the impacts of climate change on 
developing countries and the stake that developing nations have 
in a global solution to climate change. It's all well and good 
to have that dialog, and hopefully it leads to some creative 
solutions. But it must take into account the consequences for 
developing nations. It must recognize the role that developed 
nations play, and have played in terms of affecting climate 
change. And it needs to ensure that solutions are found so that 
developing countries impacted--through no fault of their own, 
as a result of the increase in greenhouse gases--are given the 
assistance, whether financial, through technical support, or 
through the transfer of technology, to find a way to deal with 
the consequences.
    Senator Menendez. Anyone else?
    Mr. Diringer.
    Mr. Diringer. I think we would differ on the fundamental 
nature of the type of framework that's needed in the post-2012 
context. The vision that's been put forward by the 
administration is essentially a voluntary framework. The 
President would like to achieve consensus on a long-term goal, 
but in their vision, individual countries would then be left 
free to decide for themselves what types of actions they would 
take to contribute to that goal. There would be no negotiation 
of those actions, and they wouldn't be reflected in binding 
international commitments. And as a consequence, we don't think 
it really would generate a critical mass of effort.
    That vision was reflected in the negotiating position the 
administration took in Bali. The text that it put on the table 
talked about domestic and national actions, no reference at all 
to commitments. This same vision is what animates the major 
economies process.
    On the conceptual level, we support the idea of a major 
economies dialog. We ourselves convened a dialog called ``The 
Climate Dialogue at Pocantico'' back in 2005, and one of the 
specific recommendations from this group of 25 individuals from 
15 countries, was convening a high-level dialog among the major 
economies as a way of developing consensus. With the explicit 
understanding that that consensus would then be carried over 
into the formal negotiations within the U.N. framework.
    Now, that is the presumed goal of the administration's 
major economies initiative, as well. It is meant to contribute 
to a global agreement under the U.N. system in 2009. But the 
agenda, as it's been framed by the administration, is again 
with a vision toward a voluntary approach.
    So, in the time that's left, I don't think that the 
administration really is in a position to achieve a broad 
consensus on a comprehensive approach, through the major 
economies initiative.
    At the same time, it's possible that this initiative could 
produce agreement on some discrete elements that might, in 
fact, make a constructive contribution to the U.N. 
negotiations, in particular, if the major economies process 
were to produce agreement on a long-term climate goal, or if 
there were to be agreement on some form of international 
technology fund, as the President has proposed--each of these 
would be a significant contribution that would, then, make it 
easier to conclude a U.N. agreement establishing binding 
commitments.
    Senator Menendez. Mr. Prickett, let me ask you, many 
developing forested nations argue that they must be 
compensated, if they're going to forgo certain economic 
opportunities in favor of protecting a rainforest.
    Do you have any sense of the amount of money that would be 
needed worldwide for a program to be successful?
    Mr. Prickett. Thank you, Mr. Chairman. The--that's actually 
a research project that we and others have started to work on, 
but I should say no--no one has come up with a single dollar 
figure on what it would take.
    To elaborate a little on that, however, the----
    Senator Menendez. Well, since there's not a hard dollar 
figure, do you envision aid being given potentially in the form 
of emissions offsets?
    Mr. Prickett. Yes. So, the inclusion of forests in the Bali 
action plan may seem pretty straightforward if you read it on 
the face of it, but it was actually a big watershed change in 
where the process had been. And if you go back to the 
negotiation of the Kyoto agreement, forest conservation was 
left out of that, quite deliberately, there was concern at the 
time that we didn't know how to ensure that we could do 
effective forest conservation in a way that could be verified. 
But there was also concern that to invest in protecting forests 
might take the focus off needed investments and action in 
improving energy efficiency, and deploying clean energy 
technologies.
    That changed with, really, some hard work, and particularly 
by some developing countries, known as the Coalition for 
Rainforest Nations, led by the governments of Costa Rica and 
Papua-New Guinea. They, with the support of NGOs, some of the 
ones I've mentioned, some very important individuals, like Stu 
Eisenstadt, who had actually negotiated the Kyoto treaty for 
the Clinton administration--Nicholas Stern, many people began 
to realize that that was a mistake, and forests need to be 
taken out of the picture.
    Compensation is a word that sounds like the developing 
countries would be getting something for nothing. In our view, 
it's actually the other way around--they've actually been 
providing something for nothing for many years, they've been 
providing a service to the world, in terms of sequestering 
carbon, and minimizing the greenhouse--minimizing climate 
change, in the form of protecting their forests. The sad 
reality is they have a lot of financial incentives to deforest, 
they don't have a lot of very concrete financial incentives to 
conserve. So, this is really about rewarding developing 
countries for an environmental service that they have been 
providing for free.
    As I said, there are a lot of tough questions, not the 
least of which is, how much will it cost? But also in terms of 
how do you structure the program, so that while in principle it 
makes sense, in practice you actually get real conservation on 
the ground, and the money doesn't evaporate.
    But, we think it's--from a standpoint of principle and 
policy, it's absolutely the right thing to do. Our commitment 
as an organization, and we would encourage the United States to 
really focus--both the Congress and the administration--on 
answering some of these tough questions, about how do you 
actually get it done effectively on the ground.
    Your question about markets versus foreign assistance--we 
think the answer is both. We need to have continued and 
increased foreign assistance, but the amount of funding 
available through the carbon markets, will likely be an order 
of magnitude more than the amount of funding available through 
official development assistance. So, if we're really going to 
attack the problem at scale, we need to find a way to get 
forest conservation creditable in both current carbon markets, 
and new carbon markets that will emerge in the post-2012 
timeframe.
    Senator Menendez. Thank you.
    Mr. Lyons, let me ask you very quickly; we talked about 
adaptation funds, and you testified over $50 billion per year 
would be needed to do that. Do you see that being a potential--
not just adaptation, but development?
    Mr. Lyons. Well, actually, the estimate that we generated, 
Mr. Chairman, the $50 billion, which was trumped, if you will, 
by a UNDP study that came out right before Bali that estimated 
the adaptation costs in excess of $80 billion. This estimate 
was in addition to existing development aid.
    That's a sizable investment. So, I would concur that some 
creative means need to be found not only for financial support, 
but also through the transfer of technology and other tools, to 
provide that additional assistance.
    I think with regard to the forest issue, I just want to 
comment that I concur--I was actually responsible for 
negotiating that component of the Kyoto Treaty in The Hague. 
Unsuccessfully, I might add. At that time, frankly, there was 
simply a great deal of disbelief and an unwillingness to accept 
adaptation as a solution because many people believed that it 
would make it too easy for developed countries and business 
interests to put off the tough decisions required to reduce 
emissions.
    I think times have changed, and we've come to recognize 
that we need more creative solutions, and that the science 
clearly indicates that there's a benefit in retaining forests. 
Our only concern is that local peoples and local communities 
impacted by a decision to conserve forests, be a part of that 
discussion. They still need to make a living from those forest 
resources, and hopefully, will do so in a sustainable way.
    Senator Menendez. Thank you.
    Senator Voinovich.
    Senator Voinovich. Mr. Chairman, you had an opportunity, 
all of you, to hear the statistics that I gave in terms of the 
Charles River Associates critique of the Lieberman-Warner Bill, 
and as I mentioned, we still haven't got an analysis by the EPA 
or the Information Agency.
    If, when they come back with their study, those statistics 
are the same as what I've just quoted, would that have any 
impact on your position on the kind of legislation that we 
should adopt to deal with the climate change situation?
    Mr. Castellani, you represent the business community. I've 
made some comments about the cost of natural gas. I don't know, 
whether you folks have ever captured what impact that's had on 
the U.S. economy, but I'd sure be interested.
    Is there another way of getting this job done without the 
downside of some of these, the numbers that I've just shared 
with you?
    And last is the issue of public diplomacy. If you really 
think about where we are today, we are probably at our lowest 
in terms of public diplomacy, we've been hurt substantially. I 
think one of those things that has hurt us is the fact that we 
didn't sign on to the Kyoto Treaty, and I would be interested 
in your thoughts, if we really aggressively move forward with 
this, what impact would that have on our public diplomacy in 
terms of some of these countries that don't think very much of 
us?
    Mr. Castellani. Senator, the numbers you cited on the 
impact of the natural gas situation is both something we should 
see institutionally of the unintended consequences of a well-
meaning public policy action. We went into the role of 
utilizing greater natural gas for power generation, when we 
thought natural gas was unlimited in its supply, and found out 
that it was quite the opposite.
    Interestingly enough, when I was an executive at Tenaco, at 
that time, we couldn't give it away at a buck ninety a million. 
And, now we are approaching in the $7 and $8 range at its 
peaks.
    We think the regimes--we don't know the exact answer, we've 
got to the point, you know we got to the happy point, that I 
think the chairman recognized that we're no longer arguing 
about whether or not this is real, what we're arguing about is 
what the best way to achieve----
    Senator Voinovich. I agree--I want to get the job done. I'm 
very very concerned about this and the urgency of it, but the 
issue is how do we get it done in the most effective way?
    Mr. Castellani. We think to the extent that it can be done 
by mechanisms that mimic market actions. They are most 
effective, but they are not complete. There has to be some 
other subsidization. But what we do know is that whatever path 
is chosen has to be flexible enough so that if it turns out to 
be needed to be modified because of better science or better 
understanding of its impact, but that flexibility is built in. 
I think the biggest fear we have is we would rigidly go do a 
path, even if that path takes us down the wrong--into the wrong 
direction. So, I can't tell you now whether cap and trade is 
better than carbon tax, we have members on both sides and very 
thoughtful members. Senator Kerry mentioned some of them on the 
cap and trade. They are leaders. We have as equally----
    Senator Voinovich. I have seen some of them about cap and 
trade. They've been in my office, and they say ``I'm for it, 
but'' and their ``but'' interferes with somebody else's 
``but.''
    Mr. Castellani. Right. What we're trying to do is do the 
kind of detailed economic analysis that tries to do that, but 
there is a bias for action, and I think you saw that with 
American Electric Power and their investment in other companies 
making, and they've been leaders in it. I guess we would ask 
for flexibility as close to mimicking market actions, and 
driving at market actions, as possible, but understanding that 
we're still all learning the best approach.
    Senator Voinovich. Anybody else?
    Mr. Diringer. Senator Voinovich, I first would want to 
stipulate that yes; there will be costs, I wouldn't suggest 
otherwise. I recently saw an overview of a number of economic 
studies, including the Charles River Associates study, and 
these were analyses of a number of bills before Congress with 
target levels in the general range of those in the Lieberman-
Warner bill. And looked at collectively, these analyses suggest 
GDP impacts of less than 1 to 2 percent in 2050.
    At the same time, the GDP is projected to nearly triple in 
that timeframe. So they seem to suggest a fairly modest impact 
at the economy-wide level.
    The other thing we need to keep in mind is that these cost 
analyses, these models don't take into account the benefits of 
action, and economics suggest that, in fact, the benefits of 
avoiding climate change impacts will far outweigh the costs of 
taking that action. There was an analysis, not too long ago, 
from OMB, which looked back over environmental regulation in 
the United States----
    Senator Voinovich. But are there any other alternatives to 
this that would get us to the goal sooner? Well, I mean----
    Mr. Diringer. Well, one of the lessons that comes from the 
models, and putting aside the specific number that might come 
from any particular analysis, one thing they all tend to agree 
on is that a market-based approach, like a cap and trade 
approach, is far more cost-effective than a command and control 
approach, and that's something that's consistent across the 
models.
    Now, at the same time, we have to recognize there are going 
to be costs, and those are going to fall most heavily on 
certain regions and on certain sectors, and we need to design 
our cap-and-trade program in a way that takes that into 
account. And one way Congress can deal with that is through the 
allocation process. We think that ultimately really, what we 
need to address the competitiveness issue, is an international 
agreement ensuring that all countries are, in fact, 
contributing their fair share, and providing a level playing 
field.
    On your question about public diplomacy, certainly I think 
taking a leadership posture on this issue would go a long way 
toward helping to reestablish the multilateral credentials of 
the United States. I wouldn't put that just in a public 
diplomacy context. I think that if we are serious about getting 
to a post-2012 agreement, apart from whatever we do within the 
formal negotiations, we're going to need a very vigorous 
bilateral diplomatic strategy. There's no substitute for 
meeting one on one with countries to understand better their 
needs and concerns and finding common ground. And that will 
have to be an essential component of our diplomatic strategy.
    Senator Voinovich. Mr. Chairman, I just finished the Joe 
Nye's book ``Soft Power.'' He presents a number of options we 
ought to consider in terms of public diplomacy and enhancing 
our position in the world. I think we are going to be looking 
at some of those ideas. Certainly, the next President must. 
That means we're going to have to reallocate some of the 
resources that we now are putting to other areas, and put them 
into public diplomacy efforts.
    Mr. Prickett. Senator Voinovich, I wanted to tackle both of 
those questions together, they're both very good.
    Senator Voinovich. Your mike is off.
    Mr. Prickett. Is that louder----
    Senator Voinovich. That's fine. Go ahead--my hearing aids 
are on.
    Mr. Prickett. The two questions together, the public 
diplomacy and the other question, to hit the goal in a less 
expensive way. We were supportive of the Lieberman-Warner bill, 
because in part, it takes a strong stand on the U.S. leading a 
reduction in emissions. At the same time there needs to be a 
global solution, and one of those things to get the most cost-
effective solution is to really think about how you invest in 
emission reductions outside of the United States.
    I talked about capital--being an good example that is both 
a relatively inexpensive source of CO2, but also very important 
program in its own right for the development and the 
environmental benefits it provides for developing countries. 
Energy efficiency is another tremendous example of this, 
McKinsey, last year I believe just released a study saying that 
more than half of all the new power plants that the world 
expects to build could be made unnecessary by aggressive 
investments in energy efficiency.
    In the United States, we started to pursue that, but 
there's tremendous opportunity to help developing countries 
India, Indonesia, Brazil, even China deal with some of their 
energy problems by improving energy efficiency.
    Senator Voinovich. Mr. Chairman, one thing I would like to 
mention is that I think the PEW study that talked about energy 
efficiency right here in this country. One thing that's been 
really stymieing it is new source review. If we could make 
these plants more efficient, we would, I think, substantially 
reduce the amount of carbon that's going into the air. But as 
of now, we have not done that. That's low-hanging fruit that we 
could move on rapidly if we were willing to come up with a 
policy that's understandable and doesn't cause the problems 
associated with new source review that we have today.
    Mr. Prickett. If I could, just to close on the public 
diplomacy points. I fully agree with that. Unfortunately, we've 
tended to see the international climate debate as ``for Kyoto'' 
or ``against Kyoto.'' What happens in the next round of 
negotiations, independent of that, the United States were to 
amount a major effort to help developing countries invest in 
climate solutions that also make a lot of sense for their 
economy, for their environment, for our economy that would be 
tremendous asset in the public diplomacy.
    This administration has done a tremendous job for example, 
boosting our commitment to Africa and foreign assistance, 
boosting our commitment to HIV/AIDS and infectious disease. A 
program like that to invest in climate solutions and 
international energy security and natural resource conservation 
can be a very powerful tool of public diplomacy, as well as, a 
way to get to the climate solution in the most economically 
efficient way.
    Mr. Lyons. If I could just add one point for you to think 
about. The origins of our modern aid development system, go 
back to the sixties--creation of the Foreign Assistance Act, 
the Agency for International Development and the Peace Corps. 
These institutions were all designed to help provide assistance 
to developing countries, in part to address a moral obligation, 
but also to address the U.S. security interests in a cold-war 
era where the United States wanted to lead in a new direction. 
I think it's important to recognize that climate change 
actually provides us a unique opportunity to demonstrate that 
once again. With regard to climate change, we have more 
knowledge and we certainly have more tools--the markets, 
financial assistance, other approaches--to address the problem. 
So, if we're creative about this, I think it would benefit U.S. 
interests and benefit developing countries, if the United 
States were willing to assert leadership on climate change.
    Senator Voinovich. Thank you.
    Senator Menendez. Thank you, Senator. Let me thank all of 
our witnesses who testified on this most important topic. On 
this last round of discussion here, I would say that having 
spoken with Senator Biden, I know that he has a very 
significant interest in this and will be pursuing it as the 
chair of the full committee, certainly myself as the chair of 
the subcommittee, we will be working with him on this issue. 
And obviously, you have seen there is some significant interest 
by the members.
    We appreciate all of your testimony and your responses, 
this is just the first of a series of hearings the committee 
will hold on the post-2012 climate change treaty.
    The record is going to remain open for 2 days so that 
committee members may ask other questions.
    Senator Menendez. If you do receive a question, we ask that 
you answer it in a timely fashion.
    Once again, we give our thanks. And with that if there are 
no other comments, the committee is adjourned.


    [Whereupon, at 5:17 p.m., the hearing was adjourned.]
                              ----------                              



                            A P P E N D I X

                              ----------                              


              Additional Material Submitted for the Record

 Prepared Statement of Hon. Barbara Boxer, U.S. Senator From California

    Thank you, Mr. Chairman, for holding this hearing on the 
international climate change negotiations in Bali.
    Global warming presents a great threat to our planet. This is a 
problem that will affect not only us, but people all around the world 
and for generations to come.
    I am very pleased that the recent talks in Bali have put the world 
in a path to develop a new international agreement to this global 
problem.
    It is important that the new agreement be comprehensive and strong 
in order to adequately forestall catastrophic global warming.
    As chairman of the Environment and Public Works Committee I have 
worked to further Congress's work on global warming. Last year, we held 
23 global hearings culminating on December 5 when we voted to send the 
Lieberman-Warner Climate Security Act to the full Senate for 
consideration.
    This historic vote signals a rapidly growing commitment to take 
meaningful action on global warming by capping emissions. We look 
forward to seeing the bill on the floor of the full Senate in the near 
future.
    I am hopeful that strong action from Congress to compliment the 
action already being taken at the State and local level around the 
country can encourage other nations to act as well and ultimately lead 
to a strong international agreement on this issue.
    In Bali we made some progress but this was in spite of the foot-
dragging from the Bush administration. The President tried to treat the 
world the way he consistently treats Congress--his way or the highway.
    The main difference in this instance is that in Congress he has 
supporters, but in Bali he had no supporters. Thankfully, at the last 
minute the administration relented and we now have a chance to resume 
our environmental leadership in the world.
    The Bali roadmap establishes a framework for the negotiations to 
proceed for a new agreement to address global climate change. It is a 
good first step, but that is all it is: A first step. We still have a 
long road ahead and we cannot achieve our goal without firm reductions 
in our global warming pollution.
    It will take resolve and strong commitment to develop an adequate 
response to fully address global warming but we can and we must do it.
    I continue to face this issue with hope, not fear and believe that 
we can solve this problem and be better for it.


                                 ______
                                 


 Responses to Additional Questions Submitted for the Record by Members 
                            of the Committee

                              ----------                              


  Response to Additional Question for the Record Submitted by Senator 
  Menendez toJim Lyons, Vice President for Policy and Communication, 
                             Oxfam America

    Question. Mr. Lyons, you have testified that over $50 
billion per year will be needed to fund adaptation efforts. If 
history is any guide the United States could be providing a 
quarter of these funds. Is it possible that these funds can 
both help address the issues of adaptation and also promote 
development or is this a zero sum game?

    Answer. Providing assistance to the most vulnerable 
communities in developing countries to adapt to the 
consequences of climate change is essential to economic 
development in those countries and can also create important 
synergies with development. Developing countries will face many 
of the most devastating consequences of climate change, 
including water scarcity, severe weather events, floods, 
declining agricultural productivity, and increases in disease. 
In addition, these impacts in many cases will lead to many 
broader problems--economic and social destabilization, 
migration and refugee crises, and conflicts over natural 
resources. As has been noted by many observers, including the 
Intergovernmental Panel on Climate Change, developing countries 
will be hardest hit by these impacts because of a lack of 
financial resources to respond, impacts on natural resources 
that disproportionately affect rural communities, and the 
geographic locus of many impacts in tropical and subtropical 
areas.
    The result will be declining economic standards in 
vulnerable developing countries. In order to address the 
widespread economic consequences of climate change, it will be 
essential to assist developing countries in building their 
resilience to face climate impacts. Without that assistance, 
efforts already underway to promote economic development and 
poverty reduction will likely be stalled or even reversed. 
Additionally, in most cases, efforts to build resilience and 
the ability of communities to adapt to climate change will also 
strengthen economic development and growth. For example, 
adaptation and resilience-building should include improved 
irrigation systems and water conservation techniques to address 
water scarcity; improved sanitation and water control systems 
to address flood impacts; crop diversification and improved 
types of seeds to cope with food security impacts; restoration 
of critical ecosystems, including coastal buffers, to provide 
protection from severe weather events; and strengthened primary 
health care systems to address increased disease threats. In 
addition, adaptation requires increased access for affected 
communities to climate and weather information and access to 
new tools such as micro-insurance.
    All of these approaches to adaptation in developing 
countries will help to strengthen economic development--and 
will often, in fact, be necessary to improving the economic 
prospects of developing countries. Indeed, one of the principal 
objectives of adaptation and resilience-building should be to 
fully incorporate climate responses into national development 
planning. This will help to create the greatest level of 
synergies possible between economic development and efforts to 
adapt to climate impacts. Moreover, taking these actions can 
also create tremendous benefit for U.S. businesses in 
developing countries, particularly for those that can provide 
critically needed products for adaptation, such as water 
sanitation technology, or that act to protect their supply 
chains from climate impacts, such as water scarcity, in ways 
that also benefit local communities.


                                ------                                


 Responses to Additional Questions for the Record Submitted by Senator 
 Menendez toElliot Diringer, Director of International Strategies, Pew 
                    Center on Global Climate Change


    Question. Mr. Diringer, what can this committee do to 
ensure that we do not face another situation where the rest of 
the world has ratified a climate treaty, but the United States 
is left behind? What do you believe the U.S. Senate and more 
specifically this committee should do over the next two years 
to ensure that whatever agreement that is signed can also be 
ratified here in the United States?

    Answer. We believe there is little risk of countries 
bringing into force a new climate treaty without the United 
States. While other developed countries were willing to assume 
binding targets under Kyoto without the United States, most are 
unwilling to do so again without U.S. and developing country 
commitments. The greater risk is that, without effective U.S. 
leadership, there will be no new climate treaty.
    The U.S. Senate and the Foreign Relations Committee can 
play a vital role in ensuring that the negotiations launched in 
Bali lead to an agreement that can be ratified by the United 
States. Specifically, with the committee's leadership, the 
Senate can develop and express its view on the broad terms for 
U.S. participation in a new climate agreement, and can press to 
ensure that this view is reflected in the U.S. negotiating 
position. In addition, in its consideration of domestic climate 
legislation, the Senate can include provisions to encourage 
major emerging economies to assume some form of binding climate 
commitment.
    It is important that the United States' negotiating 
partners have clear and realistic expectations of the terms 
under which the United States will join a binding climate 
treaty. A principal means of expressing the Senate's view of 
those terms is S. Res. 30, passed by the committee in March 
2007. With new negotiations now underway, the resolution's 
passage by the Senate should be a priority. Hearings by the 
committee can help prepare for this vote by examining key 
issues, such as ongoing mitigation efforts in other countries, 
global technology and finance needs, and options for 
structuring a post-2012 agreement. One key objective should be 
a realistic assessment of the types and levels of commitment 
that developing countries could undertake. The committee also 
should consider establishment of a formal or informal Senate 
observer group to closely monitor the negotiations.
    We believe domestic climate legislation provides another 
important opportunity to promote an effective international 
agreement. Under the Bali Action Plan, the United States and 
other developed countries agreed that future mitigation actions 
by developing countries are to be ``supported and enabled by 
technology, financing and capacity-building.'' The United 
States can begin to provide that support, pending completion of 
an international agreement, through domestic climate 
legislation. Specifically, we believe legislation should: 1) 
provide market-based incentives by recognizing in a U.S. cap-
and-trade system verified emission reduction credits from 
developing countries; and 2) provide support for capacity-
building and technology deployment in developing countries.
    Domestic legislation could provide additional incentive for 
developing country commitments by clearly signaling the United 
States' intent to increase such support upon entry into force 
of a comprehensive new climate agreement. This could be done by 
establishing that U.S. emitters would be allowed greater user 
of emission credits from developing countries; by declaring 
Congress' willingness to accept a binding international target 
more stringent than the domestic cap-and-trade target, with the 
additional reductions to be achieved through international 
offsets; or by pre-authorizing an enhanced level of assistance 
to be provided by the United States bilaterally or 
multilaterally.


    Question. Can the Major Economies Process serve a useful 
role going forward? How does the rest of the international 
community view this process? In pushing this process and 
pushing agreements within individual economic sectors has this 
administration put the cart before the horse? In other words 
should we be embracing binding emissions targets before we try 
to get developing nations to embrace other binding policy 
commitments?

    Answer. Based on the conclusions of our Climate Dialogue at 
Pocantico (www.pewclimate.org/pocantico.cfm), the Pew Center 
has for some time encouraged a high-level dialogue among the 
major economies with the goal of reaching a consensus as a 
basis for a formal agreement under the UN Framework Convention 
on Climate Change. That is the stated objective of the Major 
Economies Process. However, the process is unlikely to achieve 
consensus on the fundamental elements of a post-2012 agreement, 
in part because of the administration's timeline, and in part 
because the administration has not proposed a level of effort 
by the United States sufficient to induce stronger action by 
developing countries in particular.
    Many other governments were initially concerned that the 
Major Economies Process could undermine the UN negotiations. At 
this stage, it appears such concerns have subsided and the 
process is seen as a potentially valuable forum for exchanging 
views among the major economies and scoping out potential areas 
of agreement. Other governments--both those participating and 
those not among the major economies--will continue to be 
vigilant about the process not deterring the UN negotiations.In 
order for a post-2012 agreement to be effective, the major 
economies must assume commitments simultaneously, although the 
forms of those commitments and the compliance periods may vary. 
Therefore, it is not premature to be discussing developed and 
developing country commitments simultaneously, whether in the 
negotiations or in forums such as the Major Economies Process. 
However, it is likely that in order for the major economies to 
agree on commitments, the United States must first establish 
mandatory domestic emission reduction targets.


    Question. Mr. Diringer, at the end of the day what can we 
realistically expect China to commit itself to? Are binding 
emissions targets possible? If not what other forms of policy 
commitments might they put on the table?

    Answer. In our judgment, China is unlikely to assume a 
binding economy-wide emissions limit in a post-2012 agreement 
for a number of reasons. One important reason is that it and 
most other developing countries presently lack the capacity to 
measure their emissions with sufficient rigor to enforce or 
demonstrate compliance with an economy-wide target. For that 
same reason, even if China were prepared to assume such a 
commitment, it would be a mistake for other governments to 
accept it as a basis for China trading international emission 
allowances.
    We believe China and other countries are more likely to 
assume other types of commitments that do not entail binding 
economy-wide emission limits. For some, it may be possible to 
accept targets (absolute or intensity) on specific sectors, 
rather than economy-wide. Another option is policy-based 
commitments, in which a country commits to implement a specific 
national policy or set of policies that will deliver emission 
reductions. China, for instance, has a national energy 
intensity goal, renewable energy targets, and vehicle fuel 
economy standards--none of which were enacted for climate 
reasons, but all of which help to reduce or avoid greenhouse 
gas emissions. Some version of these policies could be the 
basis of policy-based commitments. To be credible, such 
commitments would need to be measurable, reportable, and 
verifiable--the criteria agreed to by all countries in the Bali 
Action Plan.
    In seeking commitments from China and other major emerging 
economies, it is important to be open to commitment types that 
fit their national circumstances, capacities, and policy 
cultures. In the final analysis, whatever form a commitment 
takes, our aim with China, as with all countries, should be a 
commitment to do more than it would without an agreement. Only 
when countries see that others are prepared to do their fair 
share will they put forward their best efforts. What China will 
commit to, therefore, depends in part on what the United States 
and others are prepared to put on the table, in terms of both 
their own efforts and their support for stronger developing 
country action.


                                ------                                


  Response to Additional Question for the Record Submitted by Senator 
     Menendez to John J. Castellani, President, Business Roundtable


    Question. Mr. Castellani, most commentators seems to 
believe that China and India will not be willing to accept 
binding emissions targets, but they might be willing to accept 
increased efficiency standards, higher fuel mileage standards 
or other measures that can result in emissions reductions. Do 
you think our business community will be able to accept a 
situation where the U.S. is subject to mandatory emissions 
reductions and emerging economies such as China and India are 
not?

    Answer. The Business Roundtable believes that a new 
international agreement on climate change must impose 
responsibilities on developing as well as developed countries. 
As I indicated in my testimony, the Bali roadmap takes an 
important step in this direction, calling on developing 
countries to take actions to reduce emissions that are 
enforceable, verifiable and measurable. It is unrealistic to 
expect that developing countries will commit to identical 
emission reduction targets and timetables to those agreed to by 
developed countries. At the same time, we are at an early stage 
in the negotiations and believe a broad range of options should 
be on the table. We would not want to rule out the possibility 
that developing countries would accept credible emission 
reduction targets under appropriate circumstances, recognizing 
that the stringency of these targets would need considerable 
discussion.
    Meaningful progress toward global emission reduction goals 
will not be possible unless developing countries at some point 
stop emissions growth and achieve absolute reductions. In 
addition, the economic interests of the United States require 
that emission reduction burdens be apportioned fairly among 
major economies. What this means in practice will require 
considerable analysis and discussion as we continue to develop 
domestic legislation and engage in further dialogue with our 
principal trading partners. Our members intend to be active 
participants in that process as it progresses.


                                ------                                


 Responses to Additional Questions for the Record Submitted by Senator 
Menendez to Glenn Prickett, Senior Vice President of Business and U.S. 
            Government Relations, Conservation International


    Question. Mr. Prickett, many developing forested nations 
argue that they must be compensated if they are to forgo 
certain economic opportunities in favor of protecting the rain 
forest. Do you have any sense as to the amount of money needed 
worldwide for such a program to be successful? And do you 
envision such aid being given in the form of emissions offsets 
for developed nations?

    Answer. I cannot say with confidence at this time what 
magnitude of financial incentive would be required to reduce 
CO2 emissions from deforestation to safe levels. 
This will be analyzed and negotiated over the next few years in 
the context of the Bali Plan of Action. As a general point of 
reference, the Stern Report estimated that the opportunity cost 
of halting deforestation in 8 countries responsible for 70 
percent of global CO2 emissions from deforestation 
would amount to $5-10 billion per year. This estimate includes 
only the direct costs associated with forgone revenue from 
alternative land uses (e.g. agriculture, timber, livestock, 
etc.). It does not include the costs of administering forest 
conservation programs or the opportunity costs associated with 
forgone revenue from secondary processing of the commodities 
that would have been produced on the protected lands. So the 
actual costs for an effective global forest conservation 
program may be higher.
    Financial incentives for developing countries to reduce 
emissions from deforestation could come from the purchase of 
emissions credits by private-sector actors in regulated and 
voluntary carbon markets or from government-to-government aid 
programs and other public sources of funidng. Most likely a 
combination of the two will be required. Only carbon markets 
will likely mobilize the magnitude of resources needed. This 
will require that international REDD (Reduced Emissions from 
Deforestation and Forest Degradation) be explicitly included in 
the post 2012 international agreement and in U.S cap-and-trade 
legislation. Additional funding will also be required from 
government aid programs and other public sources to fund forest 
protection efforts that don't qualify for emissions trading 
(because of questions about additionality, for example) or for 
which carbon credits alone do not provide sufficient funding. 
The United States has an opportunity to lead in this area by 
expanding its support for forest conservation through USAID and 
other development assistance programs.


    Question. Mr. Prickett, on December 19, 2007 you were 
quoted by the New York Times as saying:


          This is a problem of economic transformation, not 
        environmental regulation.

          The transformation needed .  .  . will require the 
        same level of focus and initiative that the Bush 
        administration is devoting to the war on terror. No 
        political leader in the U.S. is approaching this issue 
        yet with anywhere near the seriousness required.


    What in your estimation would a politician have to do or 
say to exhibit the seriousness you believe this problem 
requires?

    Answer. My comment to Tom Friedman, made during our trip to 
the Bali Climate Conference, was referring to the lack of 
discussion of climate change in the current Presidential 
campaign. I appreciate the leadership that members of the 
Senate Foreign Relations Committee and other members of 
Congress have taken on this issue, particularly Senator Kerry 
for his presence in Bali and his many years of leadership on 
this issue. But I was referring specifically to this year's 
Presidential candidates, and I continue to believe that the 
issue is not receiving the leadership it deserves in the public 
debate.
    Solving the climate change problem will require a 
transformation in the way the world produces and uses energy, 
as well as the elimination of tropical deforestation. In the 
U.S., this will require a significant price on carbon-in the 
form of a steep carbon tax, an aggressive cap on emissions, or 
both-complimented with stronger efficiency standards for 
buildings, electrical appliances, and automobiles. It will 
require increased public investment in research and development 
of technologies for production of carbon-free energy and 
greater productivity in the use of energy and natural 
resources. It will require modernization of the U.S. electric 
transmission system. On the international front, the United 
States must negotiate aggressively for a more effective, long-
term international agreement to replace the Kyoto Protocol when 
its first commitment period ends in 2012. The United States 
must also expand dramatically (at least five-fold) our 
bilateral assistance to developing countries-the fastest-
growing sources of emissions-to protect and restore tropical 
forests, to improve energy efficiency, to develop carbon-free 
energy technologies, and to promote sustainable agriculture.
    The American people need to be mobilized to support this 
ambitious set of policies. Solving the climate problem will not 
be easy, and it will cost money. But investing in clean energy, 
in resource productivity, and in biodiversity conservation will 
strengthen our economy, enhance our national security, and 
restore America's standing in the world. Achieving these goals 
will require focused and sustained leadership from the American 
President. It will require the same level of focus that the 
current Administration is devoting to the global war on terror. 
We have yet to see any of our candidates for President exhibit 
this degree of focus on the issue.



                          

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