[Senate Hearing 111-183]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-183
 
                 GLOBAL CLIMATE CHANGE: U.S. LEADERSHIP
                       FOR A NEW GLOBAL AGREEMENT

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

                                HEARING

                               BEFORE THE



                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 22, 2009

                               __________

       Printed for the use of the Committee on Foreign Relations


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

             JOHN F. KERRY, Massachusetts, Chairman        
CHRISTOPHER J. DODD, Connecticut     RICHARD G. LUGAR, Indiana
RUSSELL D. FEINGOLD, Wisconsin       Republican Leader designee
BARBARA BOXER, California            BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey          JOHNNY ISAKSON, Georgia
BENJAMIN L. CARDIN, Maryland         JAMES E. RISCH, Idaho
ROBERT P. CASEY, Jr., Pennsylvania   JIM DeMINT, South Carolina
JIM WEBB, Virginia                   JOHN BARRASSO, Wyoming
JEANNE SHAHEEN, New Hampshire        ROGER F. WICKER, Mississippi
EDWARD E. KAUFMAN, Delaware
KIRSTEN E. GILLIBRAND, New York
                  David McKean, Staff Director        
        Kenneth A. Myers, Jr., Republican Staff Director        

                              (ii)        

  
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                            C O N T E N T S

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                                                                   Page

Camuti, Paul, president and CEO, Siemens Corporate Research, 
  Princeton, NJ..................................................    42
    Prepared statement...........................................    46
    Responses to questions submitted by Senator Russell Feingold.    79
    Response to question submitted by Senator Robert P. Casey, 
      Jr.........................................................    81
Gayle, Helene, president and CEO, CARE, Atlanta, GA..............    33
    Prepared statement...........................................    36
    Responses to questions submitted by Russell Feingold.........    71
Helme, Ned, president, Center for Clean Air Policy, Washington, 
  DC.............................................................    49
    Prepared statement...........................................    53
    Paper on financing from the Center for Clean Air Policy......    65
    Responses to questions submitted by Senator Russell Feingold.    73
Kerry, Hon. John F., U.S. Senator from Massachusetts, opening 
  statement......................................................     1
    Article from the New York Times, April 2, 2009, ``China Vies 
      To Be World's Leader in Electric Cars''....................    17
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening 
  statement......................................................     5
Stern, Todd, Special Envoy for Climate Change, Department of 
  State, Washington, DC..........................................     7
    Prepared statement...........................................     9
    Responses to questions submitted by Senator Russell Feingold.    67
    Responses to questions submitted by Senator Robert P. Casey, 
      Jr.........................................................    80

              Additional Material Submitted for the Record

Boxer, Hon. Barbara, U.S. Senator from California, prepared 
  statement......................................................    64

                                 (iii)

  


   GLOBAL CLIMATE CHANGE: U.S. LEADERSHIP FOR A NEW GLOBAL AGREEMENT

                              ----------                              


                       WEDNESDAY, APRIL 22, 2009

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:39 a.m., in 
room SD-419, Dirksen Senate Office Building, Hon. John F. Kerry 
(chairman of the committee) presiding.
    Present: Senators Kerry, Menendez, Casey, Webb, Shaheen, 
Lugar, and Corker.

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

    The Chairman. The hearing will come to order. Good morning, 
everybody. I apologize for starting a few moments late. 
Washington seems to get paralyzed when there's a tiny bit of 
moisture on the road. It's bizarre.
    Happy Earth Day to all, and I think it is an appropriate 
topic, obviously, for us to be grappling with today.
    And we're delighted to have Todd Stern come before the 
committee. As everybody knows, he is the designated hitter for 
the President of the United States and the Secretary of State 
and the State Department on the subject of Copenhagen and the 
climate control negotiations. And I appreciate the closeness 
with which he is working with us, and the cooperation of the 
administration on this topic.
    I would just mention; Senator Boxer, who is a member of 
this committee and also chairs the Environment and Public Works 
Committee and is more than a full partner, a leader, and really 
a very key part of our efforts up here in the Senate, is not 
able to stay, because she is chairing her own committee 
shortly, but we'll put her full statement in the record, and I 
thank her for being here at the beginning of this.
    Today's hearing comes at a really critical juncture in our 
global effort to address climate change. The clock is literally 
ticking on the best chance that countries of the world will 
have to marshal an effective global response. And I think all 
policymakers need to remember, all of those who are involved in 
this process need to realize, that if we aim too low, America 
and the global community will fail to do what is necessary to 
meet this challenge. It is that simple.
    Russian officials, as I've been meeting with them, have 
promised me that their per capita emissions will never exceed 
those of the United States and I think they've probably 
suggested this to the administration too. Now, whether that's 
going to meet the test or not, because per capita is obviously 
not the full measurement, is yet to be determined. But, in 
fact, Russia could become the site of disastrous new greenhouse 
gas emissions.
    Many people are not aware of this, and I just want to put 
this out. Methane is 20 times more powerful than carbon 
dioxide. Experts say that the total amount of methane beneath 
the Arctic is greater than the total amount of carbon stored in 
the world's coal. Today, methane is beneath a lid of 
permafrost, on land and under water, but that lid, folks, is 
disappearing. It's melting.
    Last year, the International Siberian Shelf Study measured 
the highest ever levels of methane in the Arctic Ocean and 
found methane bubbles coming out of chimneys on the sea floor. 
There are places on land and at sea where lighting a match in 
the open air actually causes an explosion from free-floating 
methane.
    Alongside any thought of economic gain from climate change 
that Russia is going to have, consider the reality that these 
changes will bring with them dramatic changes, but they are 
dramatic for all of us, because, as we--Lisa Murkowski, Senator 
from Alaska, and Mark Begich will tell you, ``Just go to Alaska 
and walk around and see what's happening to the permafrost 
there.'' And both of them have suggested that Senators ought to 
come and visit Alaska if they want to see a living laboratory 
with respect to climate change.
    So, our challenge is, obviously, enormous. And today we're 
less than 9 months from the 15th Conference of Parties in 
Copenhagen; a summit to negotiate a successor treaty to the 
Kyoto Protocol. Within this make-or-break year, this week is a 
crucial, but little noticed, turning point. This is the 
deadline for countries to submit their input to the draft 
treaty that will be circulated by early June. So, while the 
Copenhagen meeting is in December, the standards that we're 
going to take to Copenhagen are being defined now--this week, 
next week, and in the next months. And I know that our team, 
under Todd Stern's leadership, is hard at work crafting our 
input. Our submission this week represents a crucial 
opportunity to ensure that America's perspective on financing, 
on the structure of mitigation commitments, and countless other 
issues, is maintained and reflected in the draft document.
    Our essential challenge in crafting a global deal is, how 
do we give life to a couple of phrases? One phrase is ``common, 
but differentiated, responsibilities.'' That phrase was 
codified by the United Nations and ratified by the U.S. Senate 
in 1992. And under that phrase, we all agree, all the nations 
participating, to accept common, but, on the other hand, 
differentiated, responsibilities. And this will be the key to 
bringing the G77--China and other countries--to the table.
    This largely, in fact, boils down to a debate over how much 
action is required from the United States and how much from 
China, because what we decide to do will set the tone for the 
Copenhagen discussions.
    While much has changed in the past 17 years, we're still 
struggling to answer that fundamental question. Now, Senator 
Lugar and I, and Senator Gregg, Senator Voinovich, Senator 
Bayh, were all at a 4-day conference, sponsored by the Aspen 
Institute, on climate change, and we heard a lot of very useful 
information regarding this. But, one of the things that is 
clear is, China is moving. China is moving, in many ways, more 
rapidly than the United States. And again, many people are not 
aware of that. The debate is sort of stuck in ``several years 
ago.'' The fact is that, in a few years, China is going to 
surpass us, and they're going to be grabbing the technologies 
and creating the jobs, because they understand the greening of 
their economy is the future. And it's critical for us to 
understand that, too.
    China is implementing policies to address its energy use--
in some cases, as I said, more ambitious than ours. They will 
actually exceed their goal of a 20-percent reduction in energy 
intensity, and they will have done it faster than they thought 
they could, and, in fact, they weren't even sure they could 
meet the goal. But, they're putting into practice what many of 
us have said, which is, once you set a goal and begin to move 
down the road, the technology begins to take over, and then the 
marketplace begins to take over, and things happen faster than 
you think.
    So, we have to reconcile two imperatives. On the one hand, 
China requires a treaty that gives it room to develop, and, on 
the other hand, unless we convince the world's most populous 
nation to pursue a sustainable low-carbon development path, 
none of us can hope to solve the problem of climate change.
    So, these two constraints define the scope and the 
structure of any viable agreement. That's the reality, and 
that's why the Copenhagen agreement must both secure aggressive 
emission cuts from developed countries and also support 
verifiable low-carbon-growth pathways that will allow 
developing nations to begin reducing emissions within the next 
10 and 15 years. This will only be possible if we develop 
financing mechanisms and structures to facilitate technology 
transfer and to energize global markets in clean energy 
technologies.
    The agreement must also help countries adapt to a changing 
environment. I just came from Darfur, and I can't tell you what 
an impact coming back here and just seeing trees and green had 
on me; in contrast to the desertification that is taking place 
in parts of the world, is stunning. The agreement needs to 
understand these dire impacts are going to be felt by people 
who did the least to bring this about and who are the least 
capable of managing its impacts. All over the world, millions 
of people are going to be affected by the practices that the 
developed industrial nations put into place over 150 years.
    A study in science warned that climate change may 
exacerbate megadroughts in West Africa, and we have to agree on 
a global mechanism to support poor countries as they struggle 
to relocate their citizens and reorient their agriculture 
patterns and resource use in response to a warming planet.
    Let me remind everybody, just a few years ago the Pentagon 
and the Joint Chiefs of Staff, all concurred that climate 
change is not an environmental issue alone, not an economic 
issue alone, it's a national security issue. And the fact is 
that if you have 200,000,000-plus climate refugees, 10 times 
the numbers we have today, you're going to have an 
extraordinary challenge, in terms of failed states, the burden 
of--the humanitarian burden, and conflict resolution.
    The time has come for the United States to reclaim our 
rightful role as a diplomatic leader within the U.N. framework 
on climate change.
    I'm pleased that the State Department will be convening a 
major economies forum here in Washington next week. While any 
agreements reached in these meetings should be reflected and 
formalized in the official U.N. negotiating process, I believe 
next week's forum can strengthen the final deal by offering the 
17 largest emitters a venue to explore areas of agreement in a 
smaller, more focused setting.
    We, here in Washington, need to understand that the world 
is really--and I don't say this is any form of arrogance; it's 
a matter of the reality that I found when I went to Poznan and 
met with countless environment ministers, and, likewise, 
Foreign Ministers and environment ministers who have been 
coming to Washington in the last months--they're all looking to 
the United States, they're looking to Washington, to take its 
cue from us. In the meetings that I've had over the past 
months, with ministers from Germany, China, Bangladesh, all 
across the globe, I've been struck by the extent to which the 
eyes of the world are focused on the United States Congress and 
our domestic policy process.
    Without a clear signal from Congress on the scope, format, 
and ambition of our domestic program, our negotiators are going 
to lack the leverage to secure the participation of all the 
major contributors to climate change. And ultimately, the 
strength of our domestic policy will be a critical factor to 
galvanizing the world to enter into a global agreement in 
Copenhagen.
    This particular challenge is one that America cannot meet 
alone, and we should not try to. Not when the developing world 
is going to be responsible for three-quarters of the projected 
increase in energy use worldwide over the next two decades. 
Even if we cut our emissions to zero tomorrow, those increases 
will more than nullify our progress. So, we are in this 
globally, and we all have responsibilities.
    Also, by structuring a global deal that steers developing 
economies into low-carbon pathways, we actually have an 
opportunity, folks, to invigorate global markets and to 
revitalize all of our economies around energy products and 
services that are sustainable and that make a longer term 
difference to the quality of jobs and the quality of our 
economies, and that will give America a chance to lead 
economically once again, because of the power of our research 
and development. Remember, we developed solar and wind. But, 
because, in the 1980s, we drew back from our commitment and 
support to it, Japan and Germany and others, took the lead, 
with respect to photovoltaics and alternative renewable fuel. 
We lost hundreds of thousands of jobs by turning our back on 
that market. We can't repeat that mistake.
    And so, the fact is that this country needs to understand 
that today the top 30 companies in the world, in solar, wind, 
and advanced batteries--of the top 30, only 6 are based in the 
United States. So, if we do this right, I believe that the next 
four or five Googles equivalents will emerge in the energy 
sector, and I want them to be based here in the United States 
of America.
    We also need to take a risk-based approach to climate 
change policy. Surveying the existing models, Harvard economist 
Martin Weitzman found that there is approximately a 5-percent 
chance that world temperatures will rise by more than 10 
degrees Celsius, or 18 degrees Fahrenheit. I wonder how many 
people in this room would board an airplane if you were told 
there's 5-percent chance it's going to crash. I don't think we 
can afford to take that 5-percent risk with our planet, where 
there are irreversible--irreversible--consequences to what is 
happening.
    We're running out of time. Earlier this month, a 25-mile-
wide ice bridge connecting the Wilkins Shelf to the Antarctic 
land mass shattered, disconnecting a shelf the size of 
Connecticut from the Antarctic Continent, and it's the first 
time in measured history that this has happened. We are seeing 
our world change in realtime in ways that ought to trouble all 
of us and mobilize the world to take quick and decisive action. 
Frankly, the greatest risk that we face is that we will trim 
our sails and do too little now, and face enormous consequences 
later that cost us an awful lot more in order to mitigate and 
remediate.
    If we fail to confront the full scale of this threat, 
today's global challenge is poised to become a global 
catastrophe.
    Our first witness, Todd Stern, Special Envoy for Climate 
Change at the State Department, is on the front lines of these 
efforts. I've known him for many years. We worked closely 
together in the leadup to the Kyoto negotiations. He has deep 
background and knowledge in this area, and I'm confident in his 
ability to be able to help get us where we have to go. So, I'm 
pleased to welcome him before the committee today.
    And, Senator Lugar, look forward to your comments.

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

    Senator Lugar. Well, thank you very much, Mr. Chairman. I 
join you in welcoming Todd Stern and our other distinguished 
witnesses. This hearing offers an opportunity for the Obama 
administration to provide details on its intentions with regard 
to climate change policy and negotiations.
    At the recent climate talks in Bonn, it was announced that 
four or more additional negotiating sessions are planned before 
the Copenhagen Conference of Parties. It's my understanding 
that the deadline for nations to submit negotiating text for 
Copenhagen, as you've just pointed out, Mr. Chairman, is April 
24, just 2 days from now. The United States may be able to 
delay its submission for a short period of time, I'm advised, 
but, under the rules of the Framework Convention, the 
negotiating text must be agreed on by June 8. I'm hopeful that 
Mr. Stern will shed light on when the administration will make 
its submissions, and what it will contain. I also hope we will 
receive clear answers concerning the nature of the agreement 
we're negotiating.
    There is a great deal of discussion about a negotiated 
architecture in which various nations make new commitments to 
reduce emissions. Under this architecture, various funds are 
contemplated to help developing countries adapt to climate 
change and to obtain clean technologies. It's not apparent, 
however, how nations would be bound to these new commitments or 
what type of ratification would be required.
    I also understand that China and India have already 
declared they will not make binding emissions reductions. 
Clearly, the absence of credible commitments from China, India, 
and other major developing countries would constitute a severe 
obstacle to climate change legislation in the United States and 
elsewhere.
    More generally, the challenge for the Obama administration 
is that the American political debate on this issue has not 
progressed on the same timetable as international negotiations. 
Although there is a growing opinion in the United States that 
climate change is a problem that requires a response, most 
Americans don't fully appreciate what this means or how such a 
response would affect their daily lives.
    Results of opinion surveys indicating concern about climate 
change may bear little resemblance to public reaction to the 
specific steps required to implement an international 
agreement. Public response to sudden utility rate increases 
stemming from a
cap-and-trade agreement, for example, would likely be severely 
negative without an extraordinary education effort led, first 
of all, by the President.
    Even with such an effort, the American people and their 
representatives in Congress will be skeptical of any agreement 
that is perceived as overly burdensome or unfair to the United 
States or even to the region of the country in which they live. 
If the administration intends to gain support this year for an 
international arrangement on climate change, which almost 
certainly will have far-reaching implications for the American 
people, it must vastly expand its efforts to explain what it is 
attempting to accomplish and how this will affect Americans. It 
must also recognize the steps that exacerbate the current 
recession or significantly expand the deficit will likely cause 
an erosion of support among many in the American public.
    I'm hopeful that the United States climate change response 
can be centered on steps that simultaneously reduce our 
reliance on foreign oil, promote soil and water conservation, 
contribute to rural development, leverage new energy 
technologies, and create jobs. Public support will be strongest 
for emission-cutting measures that are seen as contributing to 
additional United States economic or national security 
priorities.
    I applaud the Obama administration for continuing the Bush 
administration's initiative to hold forums on climate and 
energy with a smaller group of economic powers. These forums 
strike me as the best way to engage China and India, and I look 
forward to monitoring those discussions.
    I also look forward to working with the administration on 
how the United States can better assist developing countries to 
adopt low-carbon economic growth strategies and improve 
agricultural production. Senator Casey and I have authored 
legislation to elevate the priority of global food security in 
American foreign policy. Climate change will surely impact the 
most vulnerable regions of Africa and Asia, and biotechnology 
will have to play a role in developing seeds resistant to the 
effects of climate change.
    I thank the witnesses for being with us today. I look 
forward to their testimony.
    I thank you, Mr. Chairman, for calling this hearing.
    The Chairman. Thank you very much, Senator Lugar. I 
appreciate your comments.
    Let me just mention, everybody, we do have a second panel, 
so we're going to try and proceed through expeditiously, if we 
can. The three expert witnesses on the second panel are, Ned 
Helme, the president of the Center for Clean Air Policy, Paul 
Camuti, president and chief executive officer of Siemens Global 
Research, and Helene Gayle, president and chief executive 
officer of CARE. And we also welcome them here.
    Todd, thank you for being here with us, and we look forward 
to your testimony. If you could summarize and then leave us the 
time to get as many questions in, I think that would be 
helpful, and your full testimony will be placed in the record 
as if read in full.

  STATEMENT OF TODD STERN, SPECIAL ENVOY FOR CLIMATE CHANGE, 
              DEPARTMENT OF STATE, WASHINGTON, DC

    Mr. Stern. Sure. Thank you very much, Mr. Chairman, for 
inviting me to testify today. I want to commend, first of all, 
you and----
    The Chairman. Is the mike on?
    Mr. Stern. [continuing]. Senator Lugar.
    The Chairman. Is the mike on? I think you have to press a 
button there. Is it on?
    Mr. Stern. Take it from the top.
    The Chairman. There you go.
    Mr. Stern. Thank you very much for inviting me today to 
testify, Mr. Chairman. I want to commend you and Senator Lugar 
for the outstanding leadership you've shown over the years on 
the issues of climate change and clean energy, and I look 
forward to working with you and other members of your committee 
as we move forward on this issue.
    That we must meet this challenge is absolutely clear. The 
basic science of climate change is no longer in doubt, and what 
is perhaps most disturbing is that the more we learn about the 
issue, the more urgent the situation becomes, as you described 
in your testimony. Emissions are rising far more quickly than 
expected. Sea-level projections are being revised upward. The 
summer ice cover in the Arctic is disappearing much more 
rapidly than was projected even a few years ago. And, as a 
result, we are at risk of creating a world where climate change 
disasters will drive millions of people to migrate across 
borders, droughts and wildfires will threaten homes and 
ecosystems, more frequent extreme weather events will threaten 
communities, and conflicts are likely to arise over scarce 
natural resources. In addition, the diplomatic cost of inaction 
is becoming increasingly severe. Our Nation's pursuit of a 
range of foreign policy and national security objectives has 
surely been compromised by our failure, to date, to meet the 
energy and climate change crisis head on.
    The United States thus has an interest, as well as a 
responsibility, in leading on this issue. We are the world's 
largest historic carbon polluter, and our emissions, on a per 
capita basis, are much higher than those of China and more than 
double those of even the EU and Japan. But, just as 
importantly, we are unique in our capacity to meet this 
challenge. Our scientists, engineers, and entrepreneurs can and 
must develop innovative solutions and technologies that will 
lead America forward, and they're waiting to do so. If they get 
the right signals, there is enormous pent-up energy and 
excitement among, in particular, the next generation. We can 
set it loose if we take the right steps.
    The Obama administration and Congress have already taken a 
number of important steps in this direction. For example, the 
stimulus package provided tens of billions of dollars in clean 
energy investment and loan guarantees. This truly was a 
historic downpayment on our clean energy transformation. And 
now, in order to create millions of clean energy jobs, become a 
global leader in the clean energy industry, reduce our oil 
dependence, and combat climate change, we must also pass 
legislation that caps carbon pollution and allows market forces 
to drive innovation in the clean energy sector.
    And let me be clear, unless we stand and deliver by 
enacting strong, mandatory, nationwide climate and energy 
legislation, the effort to negotiate a new international 
agreement will come up short. There will be no new global deal 
if the United States is not part of it, and we won't be part of 
it unless we are at least on track toward enacting our own 
domestic plan.
    Of course, it is also absolutely essential that others do 
their part. Eighty percent of greenhouse gas emissions are 
produced outside the United States. And that number, by the 
way, is growing. And that's why we need a new international 
agreement that will include significant commitments from all 
major countries.
    I'm heartened by the fact that the thinking of our country 
and others around the world has evolved since the time of the 
Kyoto negotiations. Developing countries, such as Mexico and 
South Africa, have charted low carbon-development pathways that 
are quite impressive. And it is now, I think, much more widely 
understood that clean energy can become a catalyst rather than 
a burden on the economy.
    And yet, there is no question that the challenges we 
confront in seeking to negotiate a viable new accord are quite 
real. If you spent much time in Bonn in the recent negotiating 
session--and I know, Mr. Chairman and Mr. Ranking Member, that 
you had staff there--you would have been treated to a lot of 
old-style North-South rhetoric of the kind that doesn't do much 
for finding common ground.
    At present, we are actively pursuing our strategy on three 
related fronts:
    First, we are fully engaged in the Framework Convention 
negotiating process itself. I went to Bonn to speak on behalf 
of the United States at the beginning of the meeting, and our 
reengagement and the President's clear commitment cannot 
conjure away substantive differences, but they do dramatically 
change the negotiating environment that we inherited.
    Second, we are intensifying the dialogue among 17 of the 
largest economies in the world, including China, India, Brazil, 
Mexico, South Africa, and Indonesia, through the Major 
Economies Forum that the chairman alluded to. This forum can 
help to build both the requisite political consensus for a 
strong agreement in Copenhagen and a commitment for cooperation 
on clean energy technologies and policies.
    We plan to convene three preparatory sessions for the Major 
Economies Forum during the next 3 months, and the first will be 
held on the 27th and 28th of this month in Washington. There 
will be a leaders meeting in Italy immediately following the G8 
in July.
    Third, we're focusing on key bilateral relationships. In 
the past 2 months, I have met, probably, with more than 30 
different countries. Relationships with developing countries, 
the majors, are going to be particularly crucial. And, of 
course, none is more important in this regard than China. China 
has demonstrated a growing commitment to clean energy in the 
past several years. Their current 5-year plan includes a goal 
of reducing energy intensity by 20 percent by 2010, a goal to 
increase the share of renewables in their economy to 15 percent 
by 2020, and many other initiatives. At the same time, China 
must do significantly more if we are to have a chance to solve 
the problem. And I expect to be going to China soon to pursue 
discussions on that subject.
    Before concluding, let me just summarize the principles 
that guide our thinking. First, the United States must lead 
with a strong commitment to reduce our own emissions, in a 
nationwide program. Second, we will need to ensure that the 
agreement is truly global, as I just indicated. Third, we must 
work to promote research, development, and the wide-scale 
deployment of clean energy technologies. Fourth, we cannot meet 
ambitious reduction goals without concerted efforts to conserve 
the world's tropical forests. Fifth, Americans must understand 
that, as difficult and challenging as this may be for us, it 
will be still a greater challenge for countries that are still 
developing, particularly the poorer ones. Developed countries 
will have to work together to provide financial assistance and 
technology assistance to developing countries as part of our 
international agreement, and we will need to do work on the 
issue of adaptation as well.
    I believe these general principles can guide us toward a 
pragmatic international agreement. It will be difficult, but I 
think, with the administration, Congress, and the American 
public committed to doing this, we can succeed.
    Thank you, Mr. Chairman, members of the committee, and I 
look forward to answering your questions.
    [The prepared statement of Mr. Stern follows:]

  Prepared Statement of Todd Stern, Special Envoy For Climate Change, 
                  Department of State, Washington, DC

    Mr. Chairman, thank you very much for inviting me to testify today. 
I want to commend you and Senator Lugar for the outstanding leadership 
you have shown on the issues of climate change and clean energy, and I 
look forward to working closely with you and the other members of this 
committee in the days and months to come.
    That we must meet this challenge is clear. The basic science of 
climate change is no longer in doubt. Greenhouse gas concentrations in 
the atmosphere now stand at approximately 387 parts per million of CO2 
as compared to about 280 ppm in preindustrial times. The global average 
temperature has increased by 1.4 F above preindustrial levels.
    This amount of warming has already been associated with significant 
global impacts, including: The acceleration of glacier melt, putting 
the water security of hundreds of millions of people at risk; the rapid 
death of coral reefs due to heat and acidity; an increase in the 
frequency of forest fires; and the dramatic reduction--some 39 
percent--in Arctic Sea ice levels from just a decade or two ago.
    What is perhaps most disturbing is that the more that we learn, the 
more urgent the situation becomes. Emissions are rising far more 
quickly than expected, sea level projections are being revised upward, 
and predictions of the disappearance of summer ice cover in the Arctic 
have been moved forward by many decades.
    As a result, the effects that climate change will have on our 
economy, our security, and our environment will become increasingly 
severe. We are at risk of creating a world where climate change related 
disasters will drive millions of people across borders, deadly droughts 
and wildfire will threaten our homes as well as local ecosystems, 
increasingly frequent extreme weather events will wreak havoc on 
communities, and more frequent conflicts over scarce natural resources 
will have major geopolitical ramifications.
    In addition, the diplomatic costs of inaction are increasingly 
severe. When President Obama and Secretary Clinton travel abroad, they 
are invariably asked whether America will be part of the solution after 
8 years of inaction. It is no exaggeration to say that America has paid 
dearly in the diplomatic arena for our approach, and that our ability 
to pursue a range of foreign policy and national security objectives 
has been fundamentally compromised by our refusal to meet the energy 
and climate change crisis head on.
    The United States thus has an interest as well as a responsibility 
in leading on this issue. We are the world's largest historic carbon 
polluter and our current emissions on a per capita basis are very high, 
four times that of China, nearly 14 times that of India, and more than 
double both the EU and Japan. But, just as importantly, we are unique 
in our capacity to meet this challenge. Our scientists, our engineers, 
and our entrepreneurs can and must develop the innovative solutions and 
technologies that will lead America and the world toward a clean energy 
path.
    It is a path that will generate millions of clean energy jobs for 
Americans, break our dependence on foreign oil, and enable us to meet 
the challenge of climate change.
    The Obama administration and Congress have already taken a number 
of critical steps in this direction. Most notably, the American 
Recovery and Reinvestment Act provided many billions of dollars of 
clean energy investment. With targeted investments in key areas ranging 
from our transmission capacity to our transportation sector, from 
weatherization to research, this truly was a historic downpayment on 
our clean energy transformation.
    However, this is not enough. We must also pass legislation that 
caps carbon pollution and allows market forces to drive innovation and 
entrepreneurship in the clean energy sector.
    Let me be clear about this: Unless we all stand and deliver by 
enacting a strong, mandatory, nationwide climate and energy plan, the 
effort to negotiate a new international agreement will come up short. 
There will be no new global deal if the United States is not part of 
it, and we won't be part of it unless we are at least on track to enact 
our own robust domestic plan.
    Of course, it is also essential that others do their part as well. 
Eighty percent of greenhouse gas emissions are produced outside of the 
United States, and a rapidly growing percentage is produced in emerging 
market countries. According to the International Energy Agency, 97 
percent of the projected increase in emissions between now and 2030 
will come from developing countries--with three quarters of those from 
the emerging economies of Asia and the Middle East.
    This is why it is imperative to negotiate a strong new 
international agreement that will include significant commitments from 
all countries. I am heartened by the fact that the thinking of our 
country and the world has evolved since the time of the Kyoto 
negotiations. Today, many more countries recognize that the path to 
long-term, sustainable economic growth and prosperity is a low-carbon 
one. Developing countries such as Mexico and South Africa have charted 
low-carbon development pathways for themselves, and it is now much more 
widely understood that clean energy can be an economic catalyst rather 
than an economic burden.
    And yet there is no question that the challenges we confront in 
seeking to negotiate a viable new international accord are very real. 
If you spent much time in Bonn at the recent negotiating session--and I 
know the chairman and ranking member both had staff there for the 
meeting--you would have been treated to a lot of old style, north-south 
rhetoric of the kind that isn't much designed to find common ground. 
And the differences on issues are often large. The toughest issues 
involve what reductions the major developing countries will commit to, 
as well as the closely related questions of the financial and 
technology support they are seeking. We must also focus on the 
important issue of adaptation, which requires providing support to the 
most vulnerable and often poorest countries to help them cope with the 
impacts of climate change that they will face even if we all do 
everything right from here on out.
    Broadly speaking, we are pursuing our strategy on three related 
fronts. First, we are fully engaged now in the Framework Convention 
negotiating process itself. I traveled to Bonn last month to make the 
initial statement on behalf of the United States at the opening plenary 
session, and the reception was warm and enthusiastic. Countries are 
genuinely pleased--indeed relieved--that the United States is back in 
the game, committed to making rapid progress, and, as I said in Bonn, 
seized by the urgency of the task at hand. Our reengagement and the 
President's clear commitment cannot conjure away substantive 
differences, but they do dramatically change the negotiating 
environment.
    Second, we are intensifying the dialogue among 17 of the largest 
economies--including China, India, Brazil, Mexico, South Africa, and 
Indonesia--through our Major Economies Forum on Energy and Climate, 
which will meet in July in Italy immediately after the G8 meeting 
there. In fact, I called for the creation of such a forum in an article 
in the American Interest in early 2007. I thought it essential then, as 
I do now, that the core countries have an opportunity to get together 
at the leader level once a year--outside of the very large, noisy 
environs of the Framework Convention process--both to build the 
political consensus among key developed and developing countries that 
will be necessary to a successful outcome in Copenhagen and to build a 
strong commitment among these countries for concrete cooperation on 
technologies and policies that will allow us to move collectively onto 
a low-carbon path.
    So I was delighted when the Bush administration launched this 
process a couple of years ago and we are keen to invigorate the process 
and infuse it with real content and a real mission. The forum is not a 
substitute for the Framework Convention process; it is--in part--a 
means to facilitate success in that process.
    We plan to convene three preparatory sessions during the next 3 
months, the first to be held at the State Department next week, to be 
followed by a leaders meeting in Italy shortly after the G8.
    Third, we are focusing on key bilateral relationships. In the past 
2 months, I have personally had discussions with representatives from 
more than 30 countries, and members of my team have consulted many 
more. Relationships with major developing countries are going to be 
crucial for us, and, of course, none is more important than China, now 
the largest emitter of CO2 in the world and on track to increase that 
lead significantly in the years to come.
    As you may know, I accompanied Secretary Clinton on her inaugural 
trip to Asia, and I can assure you that energy and climate issues were 
discussed at every stop. She has elevated energy and climate to a top-
tier issue in our overall bilateral relations with China, and we are 
working vigorously to make it a strong and stable pillar of our 
relationship.
     Notably, China has demonstrated a growing commitment to clean 
energy in the past several years. China's current 5-year plan includes 
the goal of reducing the energy intensity of the economy by 20 perecent 
by 2010, and the aim of increasing the share of renewable energy in the 
primary energy supply to 15 percent by 2020.
    China has implemented increasingly stringent auto emissions 
standards, stronger than our own, and its domestic stimulus package 
contained substantial clean energy investments. And there are many 
other initiatives underway.
    However, China must do significantly more if we are to have a 
chance to solve the problem and to arrive at an international agreement 
that achieves what science tells us we must. We will be engaged in very 
active discussions with the Chinese on the related issues of climate 
change and clean energy in order to make that happen. I expect to be 
going to China to pursue these discussions quite soon--I hope next 
month.
    Before concluding, let me say a few words about some of the 
principles that guide our thinking and will inform our further 
refinement of policy positions.
    First, as noted, the United States must lead with a strong 
commitment to reduce our own emissions, as embodied in a nationwide 
program to cap greenhouse gas pollution. EPA has taken a bold first 
step by proposing that carbon pollution is a danger to our health and 
welfare. It is time to face facts squarely and take action.
    Second, we will need to ensure that the agreement is truly global 
and includes significant actions by all major economies. The simple 
math of accumulating emissions shows that there is no other way to make 
the kinds of reductions that science indicates are necessary. We will 
need to ensure that these actions are robust, quantifiable, and 
verifiable, and that they are measured against a broad scientific 
understanding of what needs to be done to stabilize greenhouse gas 
concentrations.
    Third, we must work to promote research, development, and wide-
scale deployment of clean energy technologies. We will need to ensure 
that we are leveraging the capacities of the international community in 
this process, and that intellectual property rights are respected.
    Fourth, the science dictates that we cannot meet ambitious 
reduction goals without efforts to conserve the world's tropical 
forests. Deforestation currently accounts for approximately 20 percent 
of emissions. Therefore, a viable international agreement must include 
incentives to promote more climate-friendly land-use practices and 
reduce deforestation in a manner that protect the interests of local 
communities.
    Fifth, Americans must understand that, as challenging as addressing 
climate change will be for us, it will be a greater challenge for 
countries that are still developing. Let me give you one illustrative 
number: More than 100 million Bangladeshis, approximately two-thirds of 
the country's population, livewithout access to the electrical grid. 
This is the scope of the challenge. Developed countries will have to 
work together to provide financial assistance and technology to 
developing countries as part of our ultimate international agreement. 
To that end, we are working on how to establish a financing structure 
that is well balanced and guarantees the necessary resources, 
transparency, sound governance, and incentives to establish enabling 
environments that can promote private investment and unleash innovation 
both in developing countries and around the world. Related work will 
need to be done on technology and adaptation as well.
    It is our moral responsibility to help the most vulnerable people 
to adapt to the effects of climate change and it is necessary from a 
global emissions standpoint that these developing countries have the 
capacity to leap over the fossil fuel stage of development straight to 
the clean energy stage. Such jumps are not unprecedented. As recently 
as 2002, India, with a billion people, had only 55 million telephones. 
But rather than insisting on getting the same kind of wired service 
that developed countries had, they simply leapfrogged straight to cell 
phones. Now, 350 million Indians have phones, and universal wired 
service is unnecessary. This is the same kind of dynamic approach that 
needs to be brought to the world of energy.
    I believe these principles can guide us toward a pragmatic 
international climate agreement that will put the world on the path 
that the science tells us we must be on. It will not be easy, but if 
the administration, Congress, and the American people are committed to 
this, we can generate millions of clean energy jobs, break our 
dependence on foreign oil, and meet the climate change crisis.
    Thank you, Mr. Chairman. I look forward to answering any questions 
that you and the members of the committee might have.

    The Chairman. Thank you very much, Mr. Stern. I appreciate 
it very much.
    Let me pick up, really, off of Senator Lugar's question, or 
even--statement, essentially, about the global participation 
and the concern that he expressed a moment ago about China 
having said they're not going to accept a ``mandatory,'' 
reduction target. I think it's important that we all begin from 
a point where we understand, sort of, why we're where we are in 
that state of play, but, more importantly, would you talk a 
little bit about the accountability that will exist. Let me be 
very specific, Senator Lugar.
    At Bali, and in Poznan, further, the countries accepted a 
concept called MRV--measurable, reportable, and verifiable. So, 
while they may not sign up, as was agreed in Berlin, in one of 
the COPs before they even went to Kyoto and because of their 
less-developed status and because of that original agreement, 
they are agreeing to accept differentiated responsibilities 
that are measurable, verifiable, and reportable. So, it is 
possible to proceed forward, for a few years, whatever number, 
while we synchronize where the lines come together and allow 
the space for the melding of activity under a joint-developed/
less-developed agreement that is mandatory. Ultimately, it has 
to be.
    So, maybe, Mr. Stern, you could share some thoughts about 
that because, in my judgment, if we were to get an agreement in 
Copenhagen, where you have the developed world agreeing to 
certain levels of reductions, as we agreed to, may I say, in 
1991 and ratified by the Senate under George Herbert Walker 
Bush--if you get that, and you get the less-developed countries 
joining together in major reductions that are reportable, 
measurable, and verifiable--if those levels that we're trying 
to get meet an acceptable standard, we can actually all get 
moving in the same direction and wind up in the same place at 
an appropriate moment. Is that a fair statement of what the 
expectations are from the developing countries?
    Mr. Stern. Well, I entirely agree with the way you just 
framed that, Senator. I think that there are different 
expectations from different developing countries. Let me just 
explain the way I kind of look at this, at the moment.
    I think that there's no question that developed countries, 
including the United States, are going to have to make major, 
significant commitments, which I think are, for us, with 
respect to the issue of mitigation of how much we're going to 
reduce emissions, will be very significantly framed by what is 
done in our domestic legislative debate.
    I think, at the same time, there's the broad range of 
developing countries, but there are obviously significant 
differences within the group of developing countries. I think, 
among the major developing countries, the kind of countries 
that are coming to our Major Economies Forum, for example, and 
some others, it's going to be very important that they make 
significant commitments to reducing their emissions.
    You cited the kind of foundation principle that is often 
relied upon by developing countries, ``common but 
differentiated responsibilities.'' We think that's a perfectly 
appropriate phrase. The responsibilities are differentiated, 
but they're common. It does not mean that the developing 
countries can have a free pass--the more developed ones among 
them can have a free pass, going forward. We will never solve 
the problem that way.
    I mean, in a speech I gave a while ago, I said, ``Do the 
math. Add it up. Add up the emissions.'' As you said, 75 
percent of the growth is going to come from developing 
countries, going forward. We cannot get anywhere near where the 
science tells us we have to get without significant commitments 
from developing countries. At the same time, differentiated. 
Both halves of that phrase are important, and we can expect the 
major developing countries to do a lot. We should not hang up 
the whole--shouldn't stop the show on the basis that they don't 
do exactly the same thing that we're doing now. But the 
important thing is that they take real commitments, that they 
are consistent with where the science tells us we need to go, 
and that we get started. We have been on the sidelines; we have 
been debating this thing for too long now. We have got to get 
going. Five more years of talking about it, rather than doing 
it, is just going to set us back.
    The Chairman. So, the bottom line is that the developed 
countries will, in fact, not be outside of the treaty or 
outside of an agreement, but there will be differentiated 
expectations, with an ultimate melding of everybody in a 
sufficient level to meet the task.
    Mr. Stern. That is the way we see it. Now, I also don't 
want to mislead anybody. This is a difficult negotiation, and 
we have to see whether the developing countries will come along 
on that basis. But they need to and we need to work with them 
to make that happen.
    The Chairman. But, is there any question in your mind--
there certainly isn't in mine, from the meetings that I've had 
with everybody--that if the United States doesn't take a lead 
and do something, having done nothing and actually stiff-armed 
the entire process for the last 10 years, it's a nonstarter?
    Mr. Stern. There is absolutely no question in my mind that 
that's true. The core--the foundation stone of our strategy has 
to be domestic action. I mean, there is a lot more that we have 
to do. That's not the endpoint of our strategy.
    The Chairman. Right.
    Mr. Stern. But, that is absolutely the core piece of it. 
And, as I said in my testimony, we have to be absolutely clear 
about this--if the United States is not on a real, evident 
track to enact its own domestic plan, you know, the cards drop 
out of our hand. We will not get anywhere without them.
    The Chairman. Senator Lugar.
    Senator Lugar. Thank you, Mr. Chairman.
    Mr. Stern, in my opening comments, I asked that the 
administration explain what it's attempting to accomplish and 
how this will affect Americans. And I don't mean that in a 
broad-scale way. I'm really thinking specifically--and some 
legislation now points in this direction--that there be, 
literally, diagrams, maps, text in which, first of all, Members 
of Congress could understand what, usually the first two 
sentences of testimony namely, is incontrovertible, and science 
knows, and so forth. Now, many scientists may know--and you may 
know, and our negotiators may know--but, I can testify my 
constituents claim they don't know, and they would like for me 
to explain what this is all about.
    This is so fundamental that I hate to be a skeptic at the 
party, but I would just say that we're coming down to a point 
where the administration, at least in 2 days or in a few days, 
is going to have to put on paper at least some thoughts with 
regard to Copenhagen. This may be delayed, for a variety of 
reasons, and it may be fairly general, and it may, as the 
chairman says, be sort of in the right direction. We all are 
sort of headed down the trail.
    But, I would just say, specifically, it's important, first 
of all, for the administration--and this ought not to be 
entirely your burden; ought to be our burden, in the Congress, 
other people who are taking leadership as Governors--to explain 
specifically what is the science, what are these measurements, 
why are we so certain that, by 2020, 2050, whatever the target 
is, that something beyond remedy might occur, or percentages of 
that something of that sort occurring? Because, fundamentally, 
whatever happens at Copenhagen or other locations will require 
ratification by the United States Senate in the form of 
treaties, two-thirds of the Senate, Republicans and Democrats, 
two-thirds of the States, in essence. And we're not close to 
that. We're really in the opening stages of our debate in 
Congress.
    Now, this is a problem for you, as our negotiator. And the 
President has made this point. Going to Copenhagen without 
congressional action or without at least some sentiment 
expressed is going to be very debilitating to your efforts, or 
at least be very hazardous. This is why this has got to be a 
pretty concentrated effort, not only for the preparation for 
Copenhagen, but the preparation of the Congress and the public 
in this particular period.
    Now, let me just make an example of--yesterday, outside 
this building, we had a car that was created by a company 
called BrightCar Company. I was there, and other Senators were 
there, because the car was produced in Indiana and research was 
done at the Anderson Discovery Park on hybrid engines. It was 
not really a car, it was a van. It was something that could be 
used commercially. It's claimed to get 100 miles per gallon. 
But, furthermore, someone else that produced a solar tower out 
here, just outside the building, pointing out that, given the 
hours that are involved, you can produce all of the energy for 
those vans with solar energy, so you don't even get into the 
CO2 problem that sometimes you get into even with 100 miles per 
gallon deal.
    The dilemma here is that, although the Congress has 
appropriated money for projects like this, the money has not 
been forthcoming. Now, I hope it will be, because I would say, 
once again, trying to help solve the problem--if I could make 
the case, as I tried to, to the television stations, going back 
to Anderson, IN, yesterday, that this is a new automobile 
company, these are jobs, these are vans that could be used 
commercially throughout the United States. More particularly, 
they're vans that could be used by the U.S. Government. And 
while we're busy in the climate change business, if we're 
serious about the transportation side of it, which we all claim 
is 40 percent of the problem of CO2, we have a lot of 
possibilities in purchase in the U.S. Government, or in 
suggestions to the State governments.
    Now, I go through all of this, because it seems to me that 
the credibility of whatever you're doing with Copenhagen, or at 
least our situation, has to run right along with credibility 
with the American people, with Members of Congress, with the 
support that you will need.
    Now, I remembered, in a different venue, President Reagan 
appointed an arms control observer group in 1986, and it was 
for the purpose of having the leadership of the Senate, 
Republican and Democrat, go to Geneva, look over the shoulder 
of the negotiators. Nothing happened for 3 years, but we did 
finally have a treaty, and it passed, and it had no chance of 
passing, vis-a-vis the Soviet Union, at that point, without 
there being people like ourselves who were meddlesome, who were 
always hovering over the shoulder, who were trying to make a 
case to the American people of why this was important, why we 
were not giving away the store, why nuclear weapons were not 
going to rain down on the United States.
    So, this is sort of a heavy message, but give me at least 
some thoughts as to, What are you preparing, actually, in the 
next 2 days or the next weeks or so, in recognition of the 
April 24 deadline?
    Mr. Stern. Senator, a number of points in response to what 
you've just said, I'll take the last one first.
    With respect to submissions, there are submissions on a 
number of subjects that we are preparing now, and that we'll be 
getting--that we'll be sending forth in the course of the next 
several days. I might say that you are right that the deadline 
can extend by a little bit--not by much, but by a little bit. I 
think it is also true that people, including the people in the 
international negotiating bureaucracy, if you will, the 
leaders, do recognize that the world gave itself 2 years, and 
the United States 9 months, for this process, in effect, in 
Bali. The agreement was made in Bali in December 2007, but, for 
a new administration coming in--by the way, this would have 
been true whether it was a Democratic or a Republican 
administration--you basically have about 9 months by the time 
people get in. And many of the people who will be involved in 
this issue, by the way, in the administration, aren't even 
there yet. So, I think there is some understanding of a little 
bit of flexibility in the deadlines, but not a great amount. 
So, we will be making submissions on a number of subjects in a 
few days.
    Let me talk to your broader point, though. I couldn't agree 
more with your underlying comment about the American people. I 
used to say, back when I was doing this in the White House in 
the late 1990s, when people would ask, ``What's the most 
important thing we can do in our international negotiations?'' 
I would say, ``Educate the American public,'' because if the 
American public feels this issue the way they started to worry 
about skin cancer coming from the ozone hole in the early 
1990s--that's what got the Montreal Protocol done, and so, the 
appreciation and concern about this issue among the public in a 
way that would radiate out to their representatives is 
enormously important.
    And I think it's a two-part message, fundamentally. It's a 
message of both danger and opportunity. I think that the danger 
is very, very real. Senator Kerry talked about it quite 
eloquently in his testimony--in his opening statement, rather. 
And the opportunity is enormous. I mean, the Green Revolution 
really is going to lead the economic development of the 21st 
century, and we need to be leaders.
    I mean, I have said to people, in recent days, we're going 
to spend the next few years probably trying to push China, and 
5 years from now we're going to be chasing them, because the 
Chinese are moving, and they are going to move rapidly, and 
they are going to conclude, they are concluding, that this is 
going to be a critical economic driver going forward. I was in 
Germany, in Berlin before I went to Bonn, meeting with the 
various leaders in the German Government. They told me, by 
2020, green technology will be the No. 1 source of employment--
the No. 1 sector in the German economy. So, I think it's both 
messages. And I could not agree more that we need to drive that 
message forward.
    I also would welcome participation, and we will work with 
Senator Kerry and you and others, in terms of having Senate 
participation at the member level, the staff level, and 
whatever makes sense in your minds to have participation in 
what we do going forward, because I completely agree with you, 
I think that's quite important.
    Senator Lugar. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Lugar.
    If I could just ask that we--I will put into the record the 
New York Times of April 2, 2009. It was a right-hand front-page 
column article, ``Chinese leaders have adopted a plan aimed at 
turning the country into one of the leading producers of hybrid 
and all-electric vehicles within 3 years, and making it the 
world's leader in electric cars and buses after that. The goal, 
which radiates from the very top of the Chinese government, 
suggests that Detroit's Big Three, already struggling to stay 
alive, will face even stiffer foreign competition,'' and so on 
it goes.
    So, I'd put this in the record, and I think it underscores 
what Todd just said about the economic opportunity.
    [The New York Times article previously referred to 
follows:]

                [From the New York Times, Apr. 2, 2009]

            China Vies To Be World's Leader in Electric Cars

                          (By Keith Bradsher)

    TIANJIN, CHINA.--Chinese leaders have adopted a plan aimed at 
turning the country into one of the leading producers of hybrid and 
all-electric vehicles within three years, and making it the world 
leader in electric cars and buses after that.
    The goal, which radiates from the very top of the Chinese 
government, suggests that Detroit's Big Three, already struggling to 
stay alive, will face even stiffer foreign competition on the next 
field of automotive technology than they do today.
    ``China is well positioned to lead in this,'' said David Tulauskas, 
director of China government policy at General Motors.
    To some extent, China is making a virtue of a liability. It is 
behind the United States, Japan and other countries when it comes to 
making gas-powered vehicles, but by skipping the current technology, 
China hopes to get a jump on the next.
    Japan is the market leader in hybrids today, which run on both 
electricity and gasoline, with cars like the Toyota Prius and Honda 
Insight. The United States has been a laggard in alternative vehicles. 
G.M.'s plug-in hybrid Chevrolet Volt is scheduled to go on sale next 
year, and will be assembled in Michigan using rechargeable batteries 
imported from LG in South Korea.
    China's intention, in addition to creating a world-leading industry 
that will produce jobs and exports, is to reduce urban pollution and 
decrease its dependence on oil, which comes from the Mideast and 
travels over sea routes controlled by the United States Navy.
    But electric vehicles may do little to clear the country's smog-
darkened sky or curb its rapidly rising emissions of global warming 
gases China gets three-fourths of its electricity from coal, which 
produces more soot and more greenhouse gases than other fuels.
    A report by McKinsey & Company last autumn estimated that replacing 
a gasoline-powered car with a similar-size electric car in China would 
reduce greenhouse emissions by only 19 percent. It would reduce urban 
pollution, however, by shifting the source of smog from car exhaust 
pipes to power plants, which are often located outside cities.
    Beyond manufacturing, subsidies of up to $8,800 are being offered 
to taxi fleets and local government agencies in 13 Chinese cities for 
each hybrid or all-electric vehicle they purchase. The state 
electricity grid has been ordered to set up electric car charging 
stations in Beijing, Shanghai and Tianjin.
    Government research subsidies for electric car designs are 
increasing rapidly. And an interagency panel is planning tax credits 
for consumers who buy alternative energy vehicles.
    China wants to raise its annual production capacity to 500,000 
hybrid or all-electric cars and buses by the end of 2011, from 2,100 
last year, government officials and Chinese auto executives said. By 
comparison, CSM Worldwide, a consulting firm that does forecasts for 
automakers, predicts that Japan and South Korea together will be 
producing 1.1 million hybrid or all-electric light vehicles by then and 
North America will be making 267,000.
    The United States Department of Energy has its own $25 billion 
program to develop electric-powered cars and improve battery 
technology, and will receive another $2 billion for battery development 
as part of the economic stimulus program enacted by Congress.
    Premier Wen Jiabao highlighted the importance of electric cars two 
years ago with his unlikely choice to become minister of science and 
technology: Wan Gang, a Shanghai-born former Audi auto engineer in 
Germany who later became the chief scientist for the Chinese 
government's research panel on electric vehicles.
    Mr. Wan is the first minister in at least three decades who is not 
a member of the Communist Party.
    And Premier Wen has his own connection to the electric car 
industry. He was born and grew up here in Tianjin, the longtime capital 
of China's battery industry, 70 miles southeast of Beijing.
    Tianjin has thrived in the six years since Mr. Wen became premier. 
It now has China's first bullet train service (to Beijing), a new 
Airbus factory and an immaculate new airport. Tianjin has also received 
a surge of research subsidies for enterprise's like the Tianjin-
Qingyuan Electric Vehicle Company.
    Electric cars have several practical advantages in China. Intercity 
driving is rare. Commutes are fairly short and frequently at low speeds 
because of traffic jams. So the limitations of all-electric cars--the 
latest models in China have a top speed of 60 miles an hour and a range 
of 120 miles between charges--are less of a problem.
    First-time car buyers also make up four-fifths of the Chinese 
market, and these buyers have not yet grown accustomed to the greater 
power and range of gasoline-powered cars.
    But the electric car industry faces several obstacles here too. 
Most urban Chinese live in apartments, and cannot install recharging 
devices in driveways, so more public charging centers need to be set 
up.
    Rechargeable lithium-ion batteries also have a poor reputation in 
China. Counterfeit lithium-ion batteries in cellphones occasionally 
explode, causing injuries. And Sony had to recall genuine lithium-ion 
batteries in laptops in 2006 and 2008 after some overheated and caught 
fire or exploded.
    These safety problems have been associated with lithium-ion cobalt 
batteries, however, not the more chemically stable lithium-ion 
phosphate batteries now being adapted to automotive use.
    The tougher challenge is that all lithium-ion batteries are 
expensive, whether made with cobalt or phosphate. That will be a hurdle 
for thrifty Chinese consumers, especially if gas prices stay relatively 
low compared to their highs last summer
    China is tackling the challenges with the same tools that helped it 
speed industrialization and put on the Olympics: Immense amounts of 
energy, money and people.
    BYD has 5,000 auto engineers and an equal number of battery 
engineers, most of them living at its headquarters in Shenzhen in a 
cluster of 15 yellow apartment buildings, each 18 stories high. Young 
engineers earn less than $600 a month, including benefits.
    When Tianjin-Qingyuan puts its entirely battery-powered Saibao 
midsize sedan on sale this autumn, the body will come from a sedan that 
normally sells for $14,600 when equipped with a gasoline engine. But 
the engine and gas tank will be replaced with a $14,000 battery pack 
and electric motor, said Wu Zhixin, the company's general manager.
    That means the retail price will nearly double, to almost $30,000. 
Even if the government awards the maximum subsidy of $8,800 to buyers, 
that is a hefty premium.
    Large-scale production could drive down the cost of the battery 
pack and electric motor by 30 or 40 percent, still leaving electric 
cars more expensive than gasoline-powered ones, Mr. Wu said.
    But Mr. Wu has plenty of money to pursue improvements. He 
interrupted an interview at his company's headquarters on Thursday to 
take a call on his cellphone, politely declined an offer from the 
caller, and hung up.
    The general manager of a state-controlled bank had called to ask if 
he needed a loan, he explained.

    The Chairman. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Mr. Stern, you've been quoted as saying that our 
international negotiation strategy will largely be set by 
domestic legislation that the Congress and the President are 
able to enact. So, if that is the case, what role does that 
leave for you in international negotiations before we enact 
such legislation? And what do you see, in terms of the 
administration pushing forward on a domestic cap-and-trade bill 
as the foundation for your negotiating position abroad?
    Mr. Stern. Thank you, Senator.
    As I have said this morning, I think that getting domestic 
legislation is a cornerstone for our strategy. I think it's 
enormously important. It's going to establish U.S. credibility, 
and I think we have made effectively, the point, and I think 
the point's been taken on board internationally, that the 
United States is back in the game and engaging. But, the world 
also wants to see what the United States actually does, not 
just what the United States says.
    I do not mean to say that our overall strategy is set by 
what's passed in Congress. That's an important piece of it. 
But, we already know, in broad strokes, what kind of reductions 
we're talking about. I mean, the President has announced--now, 
this goes back to his campaign, the kind of numbers that he's 
talking about, which is about a 15-percent cut from where we 
are now by 2020, and an 80-plus-percent cut by 2050. 
Congressman Waxman has put in a bill, on the House side, which 
is a little bit more than that, but kind of in the same general 
range.
    Plus or minus, that's the range of what we're talking 
about, so I don't think that that needs to be in great 
suspense. So, there's that piece.
    There's a piece that involves what we expect from 
developing countries, and in what form we think they need to 
take their action, to make their commitments.
    There are important issues that have to do with financing. 
Developing countries are looking for financial support for the 
mitigation efforts, as well as for adaptation. Frankly, they 
are talking about numbers that are often not fully tethered to 
reality, but nevertheless there is a very real need to put 
together funding packages, and there are important questions 
about how to structure that----
    Senator Menendez. Yes. Well, let me----
    Mr. Stern. [continuing]. Et cetera.
    Senator Menendez. I've let you go on 3 minutes.
    Mr. Stern. OK.
    Senator Menendez. I want to figure out, though, the 
answer----
    Mr. Stern. OK.
    Senator Menendez. [continuing]. To my question.
    Mr. Stern. OK.
    Senator Menendez. And that is, If you--your previous 
comments have been focused on, ``Our ability to negotiate 
successfully abroad is more than what we say, but what we do.'' 
And, while those are parameters of goals to be achieved, they 
have to have actual legislation in order to achieve them. Is 
that a fair statement?
    Mr. Stern. I think that we have to have actual legislation 
as soon as possible. I would absolutely agree with that.
    Senator Menendez. And so, to some extent, your ability to 
succeed in promoting U.S. interests abroad, as it relates to 
global warming, is going to be dictated by what the Congress 
does or doesn't do with the President.
    Mr. Stern. I think our capacity to get legislation is going 
to be a core part--yes. I mean, I think that's largely right. I 
think that there is a timing question which is related to that, 
but if you said to me, ``We're not going to get any legislation 
done, we're not going to be able to enact a plan,'' is that 
going to be devastating to our capacity to negotiate an 
international treaty? I would say yes.
    Senator Menendez. OK. Let me ask you one other line of 
questioning that I have a great interest in, and that's 
deforestation, as part of our broader issues.
    Today is Earth Day. You know, literally so many people are 
marking the occasion by going ahead and planting a tree, which 
is not an insignificant long-term, profound consequence. The 
question is--tropical deforestation, stopping it is essential 
if we're going to stabilize our climate. I am pleased to hear 
you acknowledged the problem in your testimony, given, as you 
said, that deforestation accounts for approximately 20 percent 
of the worldwide greenhouse gas emissions.
    The question is, How do we successfully pursue working with 
countries to stop that deforestation? If you look at the Union 
of Concerned Scientists, they have estimates that are pretty 
significant, in dollars. They talk about raising $50 billion 
annually to reduce tropical deforestation by 66 percent in 
2020. If those were the numbers, and then you look at what U.S. 
contributions have been to those types of initiatives in a 
similar set, that's a very significant number.
    The question is, Do you think we can marry our need to 
reduce compliant costs at home with the need for resources 
abroad, and address international deforestation and degradation 
by creating a system of international offsets?
    Mr. Stern. The short answer is ``Yes.'' I think there are 
different proposals that people are talking about and that 
countries prefer. There's the carbon-markets approach, which is 
what you just asked me about. And there are some that--some who 
prefer the creation of a fund. I think--for reasons that are 
implicit in your question, I think that there is a lot to 
recommend the notion of using the carbon markets. And I think 
that it will be important. It is a challenge, but, I think, a 
challenge that can be met, to do that in a way that has 
environmental integrity, where you're measuring and monitoring 
and all of that.
    Senator Menendez. And that's my next question. Do you think 
that the international community can create the regulatory and 
enforcement capacity possible to make such a market work?
    Mr. Stern. I think that the answer to that is ``Yes,'' but 
it's also going to depend country by country. In other words, 
the capacity is going to have to be built up in Indonesia, in 
Brazil, in other countries that are the core countries for 
tropical forests. So, they've got to be able to measure and 
monitor. You've got to deal with the problem of what's called 
``permanence,'' whether you get the credits and then next year 
you cut the forest down, and the problem of leakage, which is, 
you preserve the forest here and then cut them down someplace 
else. I think there are ideas for managing those things. There 
are discussions that are going on actively. We are intensely 
engaged in those discussions, and we are committed to the 
notion that forests have to be part of this. And I think, 
fundamentally, again, for just the raw financial reasons that 
you were suggesting in your question, that, in my mind, the 
carbon markets almost certainly will have to be the way to go.
    Senator Menendez. Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Menendez.
    Senator Corker.
    Senator Corker. Mr. Stern, appreciate you coming today. And 
this is an issue that I've tried to make myself informed of, 
because I think it's important, it's going to be a big part of 
our debate in--spent a week or so in Europe, meeting with 
carbon traders and European Commission members and cement 
manufacturers and steel manufacturers and utilities. I've been 
to Greenland, and, just a few weeks ago, was in the Amazon, in 
Brazil, looking at deforestation issues and the U.N. RED 
program and other things. And I look forward to working with 
you.
    I have to tell you that, other than this hearing happening 
to time with Earth Day, this is sort of a nothing-burger 
presentation today. I have no idea, no earthly idea, what 
you're planning to submit. And I was hoping that today we'd get 
some details, because I think, as has been mentioned by others, 
understanding where the administration is going very much 
relates to domestic policies that we might put in place here. 
And I have absolutely no idea. And yet, the submission is due 
in 48 years as to what the administration plans to do. And 
without going into that, I guess I'd like to understand, Is 
that because you don't know or the administration is not 
willing to share that yet?
    Mr. Stern. No, Senator, we will certainly be working very 
closely with you and others in this committee, among others in 
Congress. We are working----
    Senator Corker. The submissions are due--you know, OK. So, 
I know you're going to be working with it----
    Mr. Stern. No, no, I understand. But, we will be----
    Senator Corker. OK.
    Mr. Stern. [continuing]. Making submissions on certain 
issues. We will be continuing to work on other issues. Look, 
the reality is that, as I said, I think it's something that is, 
you know, important to bear in mind, that we came in, about 2 
months ago, and the world had 2 years, and we have a lot 
shorter time than that. We are very much on the schedule that I 
would have anticipated.
    Senator Corker. OK. So, let just ask you this. When you 
submit--I've only got limited time, here.
    Mr. Stern. Yes.
    Senator Corker. Apparently, the answer is, you don't know, 
because you've only been in office for 2 months. So, I'm just--
let me just--if you'd just give me a specific answer--and I 
want to ask you some more things--When is it that the 
administration will have a firm policy in--or a firm guideline, 
as to what they hope to accomplish in Copenhagen, that they can 
submit to us to look at? Because----
    Mr. Stern. Well----
    Senator Corker. [continuing]. I think that very much needs 
to be understood as we look at some of these other policies.
    Mr. Stern. Well, I--Senator, as I said, I don't think that 
there's a lot of suspense with respect to the main outlines of 
what we're talking about.
    Senator Corker. No, but let me say--let me--OK. I think 
we're getting, probably, nowhere. Let me just--you made a 
comment that somewhat I've found prevalent in the climate 
debate, and that is ``just doing it.'' OK? Earlier, talking 
about, ``We just need to do it.'' What I have--and talked with 
other members of the committee about--the details of how we do 
it are pretty important. OK? And so, I'd like to have an 
understanding of a lot of things, like international offsets. 
There's been all kinds of, you know--and your sense about 
international offsets and their role, because it will affect us 
as it relates to the domestic things that we do here. 
Personally, I've been very concerned about clean development 
mechanisms. International Rivers----
    Mr. Stern. Right.
    Senator Corker. [continuing]. Has said that 70-76 percent 
of them actually had no effect whatsoever.
    Mr. Stern. Right.
    Senator Corker. The bill--you know, Stanford has written 
papers about it--the bill--the Waxman-Markey bill that just 
came out said that, without international offsets in their 
bill, carbon prices in America would actually be 96 percent 
higher.
    Mr. Stern. Right.
    Senator Corker. Well, that's something that we all need to 
understand. Candidly--Senator Menendez and I seem to always be 
back to back, whether it's here or in other committees. I 
appreciate his focus on deforestation. Personally, if we're 
going to look at international offsets, deforestation, to me, 
is a much more prudent way of looking at it and verifying it, 
and actually making multiple good things happen at one time, 
versus dealing with the fraud, the huge amount of fraud, that 
has allowed people to make hundreds of millions of dollars off 
fraudulent CDMs.
    So, I'd like to just get a sense of international--well, 
let's just focus on that one issue and how you plan to approach 
that as you go ahead, because it'll affect us greatly in this 
country.
    Mr. Stern. Two issues, Senator. First of all, I would say, 
within the space of the next week to 2 weeks, we can come up 
and talk with you, if you'd like--or with your staff--on 
details of a number of these issues. We'd be happy to do that--
--
    Senator Corker. We will book that.
    Mr. Stern. [continuing]. In more specifics. On the specific 
issue of offsets and CDM, I kind of look at it two ways. I 
think that--first of all, as I said to Senator Menendez, I 
think the forest piece is a very important part of it. I think, 
with CDM, the clean development mechanism, more broadly, I 
think that there is a need probably both to narrow and broaden. 
Narrow, in the sense that there has been a lot of--there have 
been a lot of CDM credits that don't have environmental 
integrity, that are, as you have----
    Senator Corkecr. The vast majority of them.
    Mr. Stern. Well, I don't know what the exact----
    Senator Corker. Yes, OK.
    Mr. Stern. [continuing]. Numbers are, but I'm not disputing 
that issue at all. I think there's a lot that are not good 
enough. By the same token, it may well make sense to have an 
offset mechanism that can work in connection with actions that 
are taken at a broader-than-project level, at a sectoral-type 
level, if they're the right kinds of policies to move whole 
sectors to a low-carbon path. So, I think both a narrowing and 
potentially a broadening are what we're thinking about right 
now.
    Again, we are not trying to hide any ball. Believe me. We 
will be very happy to come, talk with you, talk with your 
staff, and, on a number of these issues, quite, quite soon.
    Senator Corker. Well, Mr. Stern, I very much appreciate, 
first of all, the importance of the role that you're going to 
play. And I hope that we will be in constant contact. We also 
plan to play a major role in the domestic debate here as it 
relates to climate change. And I do think that one of the 
things we can all do is to be more honest about the issue.
    I think the comment that Senator Lugar made regarding 
informing the public, I--in the budget amendment discussion, 
which I realize is mostly silly and mostly demeaning for most 
of us to participate in; it's mostly messaging votes--but, only 
two Senators--I was one of those--was willing to acknowledge 
that, if we deal with cap and trade, we're going to be talking 
about increased prices on all energy that's generated from 
fossil fuel here.
    So, I find it amazing that we're in the year 2009 and 
people are still trying to move around that topic. I mean, the 
purpose of cap and trade is to drive up energy prices from 
things--from energy that's generated from fossil fuels. That's 
the purpose of it.
    And so, I do hope that we'll have an open and honest 
dialogue. I want to be constructive in this. And I look 
forward, also, to talking to you, when you come to our office, 
about the deforestation issue. I think it's one that is 
important.
    And, candidly, I think many citizens in this country, even 
if they don't care about the issue of climate change, could 
find themselves toward caring greatly about the Amazon and 
other places being desecrated the way they are.
    Thank you very much, and I look forward to talking----
    Mr. Stern. I agree with you completely, and I look forward 
to working with you, Senator.
    The Chairman. Senator Corker, thank you for the line of 
questioning. Thanks for the work you're doing. Can I just 
comment on two things, quickly?
    The purpose of cap and trade is not specifically to put an 
increase on it; it's to put a price on it. The price could be 
lower, or the price could be higher. Now, it will be higher, to 
begin with. Absolutely acknowledged.
    Senator Corker. Which will increase prices, initially.
    The Chairman. But, you'll have a marketplace with vast 
revenues coming in to some entity; we had this discussion at 
the Aspen Institute. There is a formula by which you can 
redistribute that to citizens, and reduce the impact, so that 
you have a mitigation----
    Senator Corker. And I'm very supportive of that, and 
offered that amendment last summer. So----
    The Chairman. So, I think, you know, it's important to put 
it in its perspective.
    Also, the EPA just did a preliminary analysis of the Waxman 
bill--yesterday it came out--and it said, to a lot of people's 
surprise, that it would only have a 0.1 to 0.2 impact on 
economic growth.
    Senator Corker. One of the reasons is, it had clean 
development mechanisms in it that lowered--that didn't affect 
carbon prices by--if it didn't have the mechanisms in place, 
carbon prices would be 96 percent higher. Again, that's the 
reason, Senator----
    The Chairman. Well, that's----
    Senator Corker. [continuing]. Chairman, that this is such 
an important part of our discussion.
    The Chairman. That's an important part of the discussion.
    And the final comment I'll make is, Europe realizes that, 
first of all, when I was in Kyoto--and Todd Stern will remember 
this--the Europeans were dead-set against cap and trade in a 
marketplace. They didn't believe in it. They accepted it. But, 
they implemented it with that mindset of really not liking it, 
understanding it, et cetera. So, there were games played in the 
beginning. We all understand that. Now they like it, and now 
it's working, and now the price is stabilized, and they've 
reformed the CDMs, and they're moving on that. Every discussion 
we've had with them, they have acknowledged, ``You've got to 
have CDM reform.'' So, we're learning from their lesson, and I 
think that's one way we could approach it.
    Senator Webb.
    Senator Webb. Thank you, Mr. Chairman.
    Mr. Stern, actually I would like to begin by following on a 
little bit about what Senator Corker said. And I'd like to 
associate myself with a great deal of the remarks that Senator 
Lugar also put before us. You are aware of the votes that took 
place during the budget process, are you not?
    Mr. Stern. Yes, sure.
    Senator Webb. That was a pretty clear indicator, I think, 
from the perspective at least of the Senate, that there are a 
great number of concerns about whether this issue has become 
clearly defined as it relates to specific legislation that 
might be proposed. There are a lot of unanswered questions as 
they relate to technology--something that Senator Corker and I 
have discussed many times--the business model, the bureaucratic 
implications of legislation, perhaps unintended consequences, 
and also the international competitiveness of the United 
States. Many of us feel a strong commitment to improving 
environmental conditions, but that doesn't mean that the mail 
has been answered on a lot of these other questions. And I, 
like Senator Corker, have been spending a great deal of time 
over the last 2 years trying to sort out the technological 
capabilities with respect to carbon dioxide emissions and 
trying to examine the business model. Actually, the more I read 
about cap and trade, the less comfortable I am with it. I think 
that there are a lot of people who made a lot of money in the 
middle. I think we just went through that sort of an experience 
with our economy. So, there are going to be a lot of questions 
that are going to be coming out of both sides of the aisle here 
as this issue moves forward.
    I would like to ask you to, in--we don't have much time, 
but in precise terms, if you would, to explain the different 
categories, the annexes on the UNFCCC.
    Mr. Stern. Sure. The traditional breakdown is between 
developed countries, and there's a list of--essentially, the 
OECD. And that's Annex 1--and then, non-Annex 1 are countries 
that, at the time, were not OECD. There are two countries that 
weren't, and now are--Mexico and South Korea--and they're sort 
of in a nether zone between developed and developing in the 
world of the Framework Convention. But----
    Senator Webb. And the developed countries in Annex 1 have 
specific obligations.
    Mr. Stern. The developed countries under the Kyoto Protocol 
have specific obligations. There are obviously some countries, 
including the United States, that did not end up----
    Senator Webb. Right.
    Mr. Stern. [continuing]. Joining Kyoto.
    Senator Webb. But are assumed to have specific 
obligations----
    Mr. Stern. Exactly.
    Senator Webb. [continuing]. If we were to----
    Mr. Stern. That's right.
    Senator Webb. [continuing]. Join in this. And then there is 
an Annex 2, which is a subset of Annex 1?
    Mr. Stern. Yes, there are countries from the former--
essentially, the former Soviet group of countries. But, the 
fundamental--the fundamental division is between Annex--the 
Annex 1 and the non-Annex 1----
    Senator Webb. Right. And so, the major polluters in the 
world today--China and India--are not Annex 1.
    Mr. Stern. Correct.
    Senator Webb. So, they have----
    Mr. Stern. Well, they're--they----
    Senator Webb. They do not have----
    Mr. Stern. [continuing]. They are major----
    Senator Webb. [continuing]. Specific obligations.
    Mr. Stern. Absolutely right.
    Senator Webb. Right. And one of the justifications in this 
exclusion for them was that the developed nations have greater 
financial resources in order to deal with specific obligations, 
according to what I'm reading here.
    Mr. Stern. Well, that's partly right. I mean, let me just 
make one slight exception to what you said. They are major 
polluters. I would not describe them as ``the'' major 
polluters.
    Senator Webb. Well, in terms of carbon dioxide emissions, 
are they not now the highest----
    Mr. Stern. No.
    Senator Webb. [continuing]. Emitters?
    Mr. Stern. No. No, no. The United States is around 20 
percent. China is slightly more. India is around 4 percent of 
the world total. So, India is important----
    Senator Webb. Well--OK, so----
    Mr. Stern. I'm not----
    Senator Webb. [continuing]. China is----
    Mr. Stern. China's No. 1.
    Senator Webb. [continuing]. A greater polluter than we are.
    Mr. Stern. China's No. 1 right now. We're No. 2. The EU, 
broadly, is--I don't remember the exact percentage, but 
probably 14, or something like that. But----
    Senator Webb. So, here's the----
    Mr. Stern. [continuing]. It is about----
    Senator Webb. [continuing]. Here's the dilemma for a 
legislator who is attempting to be fair to the situation, but 
also to America's place in the world economy. We have a 
situation where it is assumed that we have greater financial 
resources to deal with this problem, when China is a greater 
emitter and they're sitting on a $2 trillion surplus----
    Mr. Stern. Right.
    Senator Webb. [continuing]. While our economy has gone down 
the tubes in the last 8 or 9 months. Would you comment on that?
    Mr. Stern. Sure. Look, I am absolutely not taking the 
position that I think that China or other major developing 
countries should stay on the sidelines and not have 
obligations. I understand that that's what the original 
division set up, and I understand that's the way Kyoto was. 
That's not what our position is. So, I hear you. That's----
    Senator Webb. Your position would be that China would also 
have to have a specific obligation?
    Mr. Stern. Yes.
    Senator Webb. OK.
    Mr. Stern. Yes. Now, that doesn't mean the same obligation. 
That's what I was saying earlier, in response to something that 
Senator Kerry said. But, the----
    Senator Webb. Why wouldn't they have the same obligation?
    Mr. Stern. There has been a historical division which is 
kind of represented in the phrase ``common but differentiated 
responsibilities.'' And developing countries, based on their 
level of development, based on their per capita income and so 
forth, have had different expectations. That's narrowing for a 
country like China. It's narrowing quite considerably. China, 
right now, is a developed country and a developing country. 
There's probably 300 or 400 million people who still live in 
poverty in the countryside. It's basically a developed country 
in the cities and a developing country in the countryside. 
Right?
    Senator Webb. [continuing]. Would agree with you on that.
    Mr. Stern. Right. And so----
    Senator Webb. But, at the same time, they're sitting on $2 
trillion----
    Mr. Stern. There's no question about that.
    Senator Webb. [continuing]. Which is going to affect what's 
going on in their country----
    Mr. Stern. There's no question about that. And I think that 
our policy is that the Chinese and other major developing 
countries are going to have to take on real obligations, but 
that does not necessarily mean, to me, that that needs to be, 
at this point, an economy-wide target, the way the United 
States might take on. I think it has to be robust action. We 
think it needs to be quantified, that they need to commit to 
it, and that the commitment needs to be transparent. We need to 
be able to see what it is and make a determination about 
whether it's enough----
    Senator Webb. Right, I understand.
    Mr. Stern. [continuing]. To start.
    Senator Webb. I'm over my time, but I do want to reinforce 
that there are a lot of questions on this side with respect to 
the capability of technology to protect our energy production 
in all sectors. The business models that are being used, 
there's going to be a lot of questions about cap and trade. The 
bureaucracy that would come out of this--the bureaucracy that 
was going to come out of last year's bill was--it looked like 
something you would get out of the old Soviet Union. It would 
have bogged down our governmental system and also our ability 
to compete internationally. So, those are the questions.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Webb. Let me just assure 
you that we are prepared, those of us who have been advocating 
to move forward on this, to sit down with you at any time, work 
through each and every one of these issues. There are answers. 
A lot was learned through last year's effort. There is a very 
different approach being taken this year to try to deal with 
those things up front and inclusively. And we look forward to 
working with you.
    Senator Webb. Well, thank you, Mr. Chairman. We're trying 
to talk to as many different people as we can.
    The Chairman. Good. Thank you.
    Senator Shaheen--Senator Casey.
    Senator Casey. Mr. Chairman, thank you very much for 
calling the hearing. I think it's further evidence of the 
chairman's commitment to these issues for so many decades.
    And I do want to commend our witness, Mr. Stern, for being 
here not just to testify and respond to questions, but speaking 
with a sense of urgency on this issue that's critically 
important.
    I believe this issue is as important as any we'll face in 
this Congress. It's not just an esoteric issue that's far into 
the future. I really believe it involves, not just the kind of 
world we're going to have, but--in essence--human life and the 
protection of human life.
    I wanted to try to focus on two areas, one from the 
perspective of Pennsylvania. I live in and represent a State 
that's No. 3 in terms of carbon emissions. And I guess that 
adds up to about 1 percent of the world's carbon. So, we have a 
significant challenge ahead of us.
    There are particular industries where there's a real 
concern about so-called ``carbon leakage,'' meaning high-
paying, high-skilled jobs going to countries that haven't set 
forth or put in place restrictions on carbon.
    I wanted to ask you--for example, in the steel industry in 
Pennsylvania, a real concern is that jobs will be going to 
another country that isn't doing their part, so to speak. 
What's your feeling about this challenge, and has the 
administration arrived at a conclusion about, so-called 
``sectoral agreements,'' meaning economic sectors that would 
take into account that concern about what's known, in common 
parlance, ``carbon leakage,'' as it relates to jobs?
    Mr. Stern. Thanks, Senator. Two comments.
    First of all, I think that, both in terms of the 
legislation that's been introduced in the House and in terms of 
discussions that are going on inside the administration, I 
think there is a lot of focus on what to do and how to respond 
to the concerns of energy-intensive industries like steel. The 
Waxman legislation includes two different ways to deal with 
that. One would, in effect, provide a certain amount of 
resources from the sale of allowances to energy-intensive 
industries, and tie that to their production so that the more 
you produce, the more you get in order to offset the higher 
energy costs that might ensue. That's one idea.
    The other idea, which has also appeared in legislation in 
previous years, has to do with, in effect, a border tax 
adjustment. We don't have a position on that, at this point, 
and, any way that would be done would have to be done with some 
sensitivity to WTO concerns. But, that is another idea that's 
embedded in that bill.
    Sectoral agreements, I think that there is potential for 
those. I'm not sure that those--it's conceivable that those 
could be part of the Copenhagen agreement, or there is also the 
potential that they could happen independent of Copenhagen.
    I think it's important to say, in this context, Copenhagen 
is not the whole show. It is very important, and it, at this 
point, has a great deal of our focus, but it will be vitally 
important to have major technology agreements among the key 
countries around the world. It could be very important to have 
agreements on standards, and that could include things like 
steel or other kinds of products or appliances that could be 
global. So, Copenhagen is an enormously important framework, 
but if we get a Copenhagen deal done, in my mind that's the 
start, that's not the finish. I mean, that would set the broad 
framework within which we would operate and would set targets 
for where people need to go. But then you've actually got to 
take the action that could make the reductions. And sectoral 
agreements could be part of that.
    Senator Casey. Thank you.
    I want to ask you about financing and the U.S. role in 
financing any kind of adaptation or climate initiatives in 
developing countries. How do you see that working? And has the 
administration arrived at a position on what our role would be 
in financing those adaptations or new initiatives?
    Mr. Stern. Yes. We're in the middle of a lot of work on 
that subject right now, both internal to the administration and 
in consultations with our colleagues in other donor countries. 
I think that financing, whether it applies to adaptation or to 
mitigation, is something that needs to be looked at, in 
essence, in terms of different potential sources of funding. 
Carbon markets themselves can provide a lot of funding. Some 
funding probably--this is probably more true in the context of 
adaptation, even--is going to need to come from public sources, 
public government sources. And so, there's--what the total 
amount of potential funding can--what amount can be put 
together among the donor countries. There are also very 
important related questions that have to do with what sort of 
institutional arrangements would be set up, what the governance 
structure would be as between developed and developing--
probably a blended structure--not exactly what the developing 
countries are going to want, and not exactly what the developed 
countries are going to want, but a blend--so that we can have 
both a flow of funds, but accountability over the funds. The 
last thing we want is for money to go, and not get used well.
    So, I think that we are right in the middle of working on 
that. We have been meeting with our friends from the U.K. and 
Germany and many other countries to work on both the amounts 
that could be provided and the structure.
    Senator Casey. Thank you very much.
    The Chairman. Thank you, Senator.
    Senator Shaheen. I'm sorry. I didn't have the mike on.
    Senator Shaheen. Good, thank you.
    I would like to just go back to the comments of Senator 
Corker and Kerry relative to the purpose of cap and trade, to 
begin. And I would take it one step further even than Senator 
Kerry did in talking about the purpose. It's not just to put a 
price on fossil fuels, but it's really to try and put a price 
on carbon. And I appreciate, Senator Corker, you think that can 
be done more efficiently with a tax, but--I think the--neither 
of those are really the purpose of what we're talking about. 
It's really how we deal with the greenhouse gases that cause 
global warming. And I think sometimes we all understand that, 
but we get so into the weeds of what's involved here that we've 
got to stay focused on the point you made, Mr. Stern--and thank 
you for being here--and the point that a number of people here 
have so eloquently made, and that is that we have to deal with 
climate change, that we are experiencing now in New Hampshire. 
And the farther north we go, the more we can see the impacts of 
that. And we--there are a number of ways for us to deal with 
this issue, but the important thing is for us to get a 
commitment to deal with this issue, and to do it expeditiously.
    And I would point out that we have a number of States in 
the United States that already have cap-and-trade programs 
underway. New Hampshire is one of those, with the Regional 
Greenhouse Gas Initiatives. And so far it's working well, and 
it hasn't--we haven't seen a negative impact on our industry, 
beyond the impacts that we're all feeling with the economic 
downturn.
    So, I just think it's important for all of us to stay 
focused on the need to get something done, because of the 
challenge that's facing us, and, with that said, to recognize 
that there are significant areas of disagreement among us about 
how to get that done.
    And one of the things you pointed out was that it's going 
to be very important to have a position that Congress and the 
United States have taken to go to Copenhagen, that we will be 
in a much better negotiating position.
    So, I guess what I would say to you is, recognizing the 
challenges that we're facing to do that, what do we need to 
take to Copenhagen, short of legislation, that will demonstrate 
our commitment to addressing this issue?
    Mr. Stern. Thank you very much, Senator.
    I think that there are--first of all, there are a number of 
things that have happened already which are certainly very 
helpful. As I noted in my testimony, the stimulus package 
included a very large amount--it gets described in different 
precise numbers, but--whether it's $80 billion or $70 or $90, 
it's a large number and, really, a historic downpayment.
    I think that, though--on the issue of the major cap-and-
trade and energy legislation, for purposes of Copenhagen, real 
serious progress has to be made on that. I would love to see 
the bill done. I think that would be--that would be----
    Senator Shaheen. Wouldn't we all?
    Mr. Stern. Yes, that would be in everybody's interest. But, 
short of that, I think demonstrable progress that--a sense that 
it is rolling--with determination and decisiveness, down a 
track, is at least what we're going to need. If, by contrast, 
the sense is, as I said earlier, that the bill is dead and it 
didn't go anywhere, and we've got nothing going on, it's going 
to be very, very difficult. I mean, it's going to be more than 
difficult. So, I think that we need to be making demonstrable 
progress, at the very least.
    Senator Shaheen. Thank you. And, as I'm sure you are aware, 
one of the debates that's going on as we think about our 
internal legislation is how we--revenue recycling and what 
happens----
    Mr. Stern. Yes.
    Senator Shaheen. [continuing]. To dollars. Do they get sent 
back to consumers? How do those get used? Does that debate here 
have implications, as you're thinking about dealing with 
developing countries? And----
    Mr. Stern. I guess my answer to that would be--I'm not sure 
that it has direct implications with respect to developing 
countries. One thing that would have some implications with 
respect to developing countries is whether there's any capacity 
within the bill to have some very small part of the proceeds 
available for adaptation uses for the poorest countries, for 
example. And I think that actually would be important. Probably 
a contentious debate, but I think it would be very useful, in 
the international context, if that were true.
    Beyond that, I think the precise debate--and it is a very 
active debate, I think, on the Hill and even, obviously, a 
subject of a lot of discussion and consideration within the 
administration--on whether the funds get sliced up exactly this 
way or that way, in general, matters less on the international 
side than that the choice gets made that is most productive to 
getting the legislation completed, and the legislation stays 
strong. I mean, you don't want it to be sliced up in a way that 
guts----
    Senator Shaheen. Right.
    Mr. Stern. [continuing]. The legislation. Let's just say 
it's got to be real and strong. But, getting it done, I think, 
is the fundamental, internationally.
    Senator Shaheen. Thank you.
    The Chairman. Mr. Stern, thank you.
    Are there any further--Senator Corker?
    Senator Corker. Again, I look forward to seeing you in a 
week or so and talking through some of these things.
    I guess I'd just close--and I won't take, certainly, 7 
minutes to do this, but--the reason that I think this is such 
an important issue is the relationship between addressing 
climate and energy security, in general, and our economic 
security. OK? And I see some of the upsides that people talk 
about on the economic side. I also see some of the downsides. 
And thus, the amendment last year to make sure all the proceeds 
come back to people, which I know is--that was the great line 
of questioning, I thought--which does put in place the rub 
between us and the developing countries if we don't want our 
citizens transferring wealth. Right? Pretty important issue.
    But, I guess I would just ask how much time you're spending 
on the energy side, in that climate change legislation or 
treaties done in a vacuum can leave us in a very bad place as 
it relates to our own energy security, and it doesn't take but 
just one trip to Ukraine or Russia and the tendency of Russia 
to turn the valve off when, sometime, things aren't going 
exactly the way they wish, and to see the huge amount of fuel 
switching that took place in Europe after cap-and-trade 
legislation was put in place in the European Union.
    So, I hope that this is not being done in a vacuum. And I 
know Jeanne and I serve together on the Energy Committee, and 
this is all very related, and I would just say, Mr. Chairman, I 
actually think it would be helpful--I know you talked to 
Senator Webb about sitting down, but this and energy really tie 
together in a very, very important way, and I hope that, as 
we're moving through this, we will make sure that we address 
the complexities that are so important to our country as it 
relates to energy security, which is very relevant to our 
national security and our economic security, when we're talking 
about climate.
    So, I look forward to those meetings, and certainly, Mr. 
Chairman, I appreciate you having the hearing today.
    The Chairman. Well, thank you, Senator Corker.
    Let me just say we're going to have a lot of meetings. 
We're ready to work to move this forward. In fact, one of the 
reasons Leader Harry Reid has decided to keep the energy bill 
and the cap-and-trade bill linked in the Senate, as they are in 
the House, is because of the interconnectedness. We understand 
that. We have a huge investment that is taking place through 
the stimulus package, some $80 billion going into alternative 
energy, renewable energy, so forth. Senator Lugar raised a 
question with me and--publicly--about why some of this money 
isn't getting out there into these companies, in terms of 
technology. And, indeed, there was about $40 billion just 
bottled up at the Energy Department in the last administration. 
No grants were being made. Secretary Chu is committed now to 
moving that money out into our private sector, and that's going 
to make an enormous difference for colleges and universities 
and technology advances as we go forward.
    But, one thing that a lot of the opponents and/or 
questioners--I don't want to say ``opponents''--people who are 
sort of still sitting on, or have serious reservations, I 
think, aren't focused on the fact that cap and trade, as it is 
currently defined in the Waxman bill and in our current 
conceptualization here, is not economy-wide. The transportation 
sector is not in it. The agriculture sector is not in it. The 
small-business community is not in it. It applies to utilities, 
power generation, and it applies to heavy industry.
    Effectively, you're talking about a universe of about 2,000 
entities in the United States. That's it. That's what you're 
talking about. And our economy, you know, is big enough, No. 1, 
to consume that.
    Second, the McKinsey Company, which is one of the most 
reputable, well-thought-of consulting companies, business 
consulting, in--advising companies--in the country, spent a 
number of millions of dollars doing an analysis and putting 
together a carbon-cost abatement curve. And they have a chart--
and I'm going to get it for you; you should read the study--
that shows that the first 30, 35, whatever--I forget the exact 
percentage--it's about 30, 35 percent of this reduction--is 
completely paid for by your doing it. The companies that do it 
actually get money back. They wind up net-positive in doing it. 
And then you have a midsection cost that's very minimal, and 
it's at the far outside end of it, where you're grabbing a much 
greater amount, that you actually went into the higher cost.
    So, for the first few years, this is going to be money back 
to companies. This is the most energy-inefficient nation in the 
planet, folks. I'm sure our next panel will probably address 
some of this. Energy efficiency, according to the McKinsey 
study, can grab anywhere from 40 to 75 percent; 70 percent of 
the total grab we need to get out of greenhouse gas emissions. 
So, we become more competitive because we are, in effect, 
becoming more efficient.
    So, these are all the things that we need to get at as we 
go at this over these next months. And I look forward to 
sitting down.
    Now, Mr. Stern, as we terminate your part of this panel, 
let me just say to you, what has leapt out from this--and 
Senator Lugar mentioned the Arms Control Observer Group--we've 
been planning. Two years ago, I ran that by then-Chairman 
Biden, and we decided, sort of, to do that within the framework 
of this committee, which has jurisdiction over the treaty. And 
the Senate is going to have to, hopefully, be able to pass 
whatever it is that we work. So, my commendation to you here is 
that we've got to be talking more. And I think you've got to 
sort of be up here dealing with both sides of the aisle. And 
we'll convene that, Senator Lugar and I, so we have an ongoing 
effort to be working at these issues. I think it will help you, 
it'll help us, and, in the end, hopefully helps the final 
product significantly.
    Now, in fairness--I said this to Senator Corker--Todd Stern 
made it clear to me, prior to coming up here, that not all of 
the t's were crossed and i's dotted with respect to where 
they're going in the next few days. And I----
    Senator Corker. I would add ``paragraphs written,'' but----
    The Chairman. Well, no, I think that's unfair. But, I think 
that, for a lot of reasons, they're trying to get all of that--
and they've got the major emitters meeting next week. I think 
we've got to allow them that leeway to be able to complete that 
task. This is a major effort. And, as he said, not all those 
folks are even on board yet.
    So, I knew he was coming here today without the ability to 
fully flesh out every single component of it. I still think it 
was important, and I think it's contributed significantly to 
people's understanding of the process and of where we're 
heading and of how we're going to get from here to there.
    So, I thank you for taking the time to be up here today. We 
look forward to continuing this work with you in the next 
weeks. And you wanted to make one comment, I think.
    Mr. Stern. Well, thank you very much, Senator Kerry. I 
welcome the very full engagement with this committee. I can 
talk to Senator Corker separately, but I do want to say that we 
are in anything but a vacuum, in terms of the energy issue. We 
have worked closely with the White House and the Department of 
Energy on energy partnerships with Canada, with Mexico, an 
initiative in the Summit of the Americas. And when I went with 
Mrs. Clinton to China, back in February, the leading thing that 
we focused on was establishing an energy partnership with the 
Chinese. They agreed on that, in principle, and we are working 
very hard right now. I hope to go, later in the month of May, 
to China, as soon as I possibly can, with people from DOE and 
probably the Office of Science and Technology Policy, 
specifically to work on energy issues and climate change 
issues.
    I think that these things are absolutely, completely, 
intimately linked, and that the energy security issue is 
fundamentally linked, as well. So, we're not approaching it in 
a vacuum at all. Just the opposite.
    The Chairman. Thank you very much, Mr. Stern. We appreciate 
it.
    Mr. Stern. Thank you so much.
    The Chairman. Could we invite the second panel to move 
right in and have a seamless transition here, hopefully?
    Thank you.
    [Pause.]
    The Chairman. I'm delighted again to welcome Ned Helme, 
president of the Center for Clean Air Policy; Paul Camuti, 
president and chief executive officer of Siemens Global 
Research; and Helene Gayle.
    And, Helene--do you want to lead off, Helene?

   STATEMENT OF HELENE GAYLE, PRESIDENT AND CHIEF EXECUTIVE 
                   OFFICER, CARE, ATLANTA, GA

    Ms. Gayle. Yes, thank you.
    The Chairman. And I'd ask that you each summarize, if you 
would, please. Your full testimony will be placed in the 
record, and we'd really enjoy the chance to explore questions 
with you.
    Ms. Gayle. Great. And thank you very much, to you, Chairman 
Kerry, to Senator Lugar, for this session and also for your 
longstanding commitment on this issue. We also would like to 
acknowledge the administration's pledge to prioritize climate 
change and to really reengage in the global negotiations, as 
was mentioned in the first panel.
    My goal today is to provide input on this important 
discussion, from the perspective of CARE, an international 
development and relief organization that's been working in 
partnership with the poorest communities around the world for 
60 years, fighting poverty, and to try to represent the 
interests of poor communities on two aspects of the Bali Action 
Plan, forestry and the issue of deforestation that's already 
been raised, and adaptation.
    And I would just say that my overall message is that, 
beyond our part to preserve the planet which has been talked 
about already, in our U.S. climate policy and legislation, we 
must also respond to the impact that climate change will have 
on people in the world's poorest communities. And so, in that 
context, I will make my remarks.
    This obviously growing body of evidence shows that the cost 
of doing business as usual with energy and the environment is 
going to pull the rug out from underneath the progress that the 
world is making on important Millennium Development Goals. As 
has already been mentioned, people in extreme poverty, who are 
already living on the edge of crisis, are going to have climate 
change push them over that edge, whether it's from reduced 
agricultural productivity, increased water stress, health 
risks, or the increasing frequency, severity, and intensity of 
weather-related hazards. And as has already been mentioned, in 
addition, unmitigated climate change is likely to have an 
impact on global security and global instability, contributing 
to mass migration, refugee crises, increased scarcity of 
natural resources.
    And I would just take a moment to thank the Chair for the 
work on Sudan. And, I think, as you mentioned, if you go to 
Darfur, if you go to Sudan, you see what that impact is 
already, in some places.
    Ultimately, climate change is going to have its greatest 
impact on the poorest communities and most marginalized groups, 
including women and girls, which is a major focus of our 
organization.
    Now, to avoid this scenario, I want to just touch briefly 
on three recommendations related to deforestation and 
adaptation that we believe can make an impact, understanding 
that the United States has to act aggressively to put in place 
policies to effect deep and immediate reductions in domestic 
greenhouse gas emissions, that people have already touched on.
    So, my three recommendations relate to protecting rights 
within the context of the reduction of emissions from 
deforestation and forest degradation in developing countries, 
or so-called REDD; funding adaptation, making sure that there 
are set-asides of substantial revenues, new and additional to 
our official development assistance, to support adaptation in 
developing countries that are vulnerable to climate change; 
and, three, to reach the poorest and the most vulnerable with 
these funds to ensure that adaptation funding actually reaches 
and responds to the priorities of the poorest populations, who 
are most vulnerable.
    Let me just give a bit of detail about each of those, very 
quickly.
    First of all, the issue of protecting rights under REDD. 
Clearly, to reach mitigation goals, we need to make sure that 
we reduce emissions from deforestation and degradation in U.S. 
climate change legislation, because it does account for about 
20 percent of human-induced greenhouse gas emissions. But, REDD 
activities must include pro-poor social standards and 
safeguards. We know, from our experience, that conservation 
efforts are going to be much more effective if they also 
recognize communities' central role in forest conservation, and 
protect their rights, and ensure that they have a livelihood in 
the context of reducing degradation and deforestation.
    So, an example--and we cite several examples in our written 
testimony--CARE worked in Nepal with Weyerhaeuser Company, 
USAID, and World Wildlife Fund to have a three-pronged approach 
that promoted conservation and biodiversity, strengthened 
economic development, and also worked on changing government 
policies, forest policies in Nepal, to make sure that they were 
responsive to the needs of the poor. We're going to continue to 
do projects like this, working in partnership with 
environmental groups, to use these models to demonstrate the 
ability to conserve natural resources, but also to make sure 
that livelihoods are maintained and that policies are changed, 
in the meantime, to meet the needs of the poor.
    Second recommendation, new funds for adaptation in 
developing countries. And people have mentioned this and 
touched on this, but I think it's important to recognize that 
this is going to be key. Past emissions have already set in 
motion the changes that we've talked about, and it's important 
that we recognize the need for adaptation on the ground.
    The estimates are large for this, so this is not something 
that can be done on the cheap. The estimates of international 
adaptation needs are as high as $86 billion a year by the year 
2015. Now, there's a range of estimates here, but it's clear 
that we're talking about tens of billions of dollars if we want 
to meet adaptation needs. But, we also know that investing in 
adaptation today is going to save dollars tomorrow, perhaps in 
the range of $1.00 of prevention today for the $7.00 that it 
would cost us in the future. It's going to save lives, and it 
also is going to build resiliency in communities to be able to 
withstand ongoing climate changes that have already occurred.
    Funding international adaptation is also the right thing to 
do. The world's poor are the least responsible for climate 
change and are the most severely impacted. So, understanding 
all the issues about our own domestic concerns, clearly it's 
the right thing to do. We have been most responsible for the 
climate change that others are suffering from.
    And finally, No. 3 point, assuring that adaptation funds 
reach those with the greatest needs. And, as I've mentioned 
before, the best way to do that is to make sure that local 
communities are empowered to facilitate ownership of adaptation 
strategies. And I would just again point out--we've included 
several examples in our written testimony--but, the good news 
is that we already know how to do that.
    In Tajikistan, for instance, we're working with women to 
develop greenhouses to be able to grow more food, because the 
winter season has already lengthened and decreased agricultural 
productivity.
    In Kenya, communities are building sand dams in freshwater 
rivers to capture and store water for use during longer dry 
seasons.
    In Bangladesh, women have identified duck rearing as an 
adaptation option, as opposed to chickens, which is oftentimes 
their livelihood, because ducks float during these more 
frequently occurring floods.
    So, there are simple ways which communities have already 
found to adapt to climate change, and we want to be able to 
help support them in their ability to do some of the very 
simple things that can make a difference in saving lives and 
providing livelihoods.
    Finally, in conclusion, I would just say, as everyone has 
said before, the opportunity to make a difference is 
extraordinary. Clearly, it is vital that the United States pass 
domestic legislation that does reduce U.S. greenhouse gas 
emissions, but also that protects the rights and interests of 
forest-dependent communities around the world, funds 
international adaptation, and guides those funds so that they 
reach the people in poor countries most vulnerable to climate 
change. This is the time to act. As everybody says, this is 
urgent, not only for us, but for others around the world.
    So, again, I thank you, and we have full written testimony 
that's already been submitted.
    [The prepared statement of Ms. Gayle follows:]

  Prepared Statement of Helene D. Gayle, MD, MPH, President and Chief 
                Executive Officer, Care USA, Atlanta, GA

    Mr. Chairman, Senator Lugar, members of the committee, thank you 
for the opportunity to join this important discussion about climate 
change, especially as the Senate considers U.S. climate change 
legislation and a post-2012 global climate agreement.
    I congratulate the new administration and Congress for your renewed 
engagement in the U.N. Framework Convention on Climate Change and 
welcome the positive tone that the U.S. delegation brought to the 
recent meeting in Bonn. I also applaud President Obama's pledge to 
prioritize climate change, even as the country and the world face other 
major challenges, and the strong start on U.S. climate policy in the 
U.S. Congress made by House Energy and Commerce Committee Chairman 
Henry Waxman and Congressman Edward Markey. Finally, I want to 
acknowledge the importance of the work of Senator Barbara Boxer and the 
Subcommittee on International Operations and Organizations, Human 
Rights, Democracy, and Global Women's Issues.
    I speak today on behalf of CARE, an international development and 
relief organization that has worked for more than 60 years in some of 
the poorest communities in the world. In addressing two elements of the 
Bali Action Plan--forestry and adaptation--my goal this morning is to 
represent the interests of poor, marginalized people in the developing 
world and to shine a light on how they are likely to be affected by 
climate change--a phenomenon they bear little responsibility for, yet 
are forced to confront--and by its global response.
    My overall message is that, above and beyond doing our part to 
preserve the planet, U.S. climate policy and legislation must respond 
to the impact that climate change will have on people in some of the 
world's poorest communities.
                          the human imperative
    The exponential increase in climate change research in the past 
decade demonstrates overwhelming scientific agreement that climate 
change is already happening and has been triggered by human activities. 
In fact, according to the U.N., climate change is happening with 
greater speed and intensity than initially predicted, and we may be 
closer to an irreversible tipping point than first thought.
    In the United States, economic arguments for addressing climate 
change have gained some traction among businesses and policymakers. 
Business coalitions, such as Business for Innovative Climate and Energy 
Policy and the U.S. Climate Action Partnership, have called for U.S. 
legislation to help stimulate the development of a low-carbon economy. 
Last fall, during the Presidential elections, both John McCain and 
Barack Obama argued that U.S. climate policy would be more of an 
opportunity for, rather than a hindrance to, the U.S economy.
    National energy security arguments have also gained traction. Last 
year, the U.S. Center for Naval Analysis released a report stating that 
climate change poses a serious threat for U.S. national security; the 
report argued that climate change will threaten some of the most 
volatile regions of the world and add tensions even in stable regions. 
In addition, when oil prices skyrocketed last summer, there was a push 
from policymakers and the American public for reduced U.S. reliance on 
foreign oil in the interest of national energy security.
    While we at CARE would not argue against these economic and 
national energy security rationales, we support strong action on 
climate policy for another reason. That reason is based on our mission 
and more than 60 years of experience working alongside poor, 
marginalized communities, where people already struggle to live with 
dignity even without climate change. Our policy position is firmly and 
explicitly underpinned by our commitment to reducing poverty.
    The projections are stark. Economist Sir Nicholas Stern estimates 
that, if economic models took into account three crucial factors--the 
direct nonmarket impacts on the environment and human health, the risk 
of catastrophic weather events, and the disproportionate burden of 
climate change impacts on poor regions of the world--the total cost of 
business as usual emissions would be equal to an average reduction in 
global per capita GDP of 20 percent.\1\
---------------------------------------------------------------------------
    \1\ Stern, N. 2007. ``The Economics of Climate Change: The Stern 
Review.'' Cambridge University Press, U.K.
---------------------------------------------------------------------------
    In other words, unmitigated climate change will pull the rug out 
from under progress the world is making on the Millennium Development 
Goals (to which the G20 in its most recent meeting reaffirmed its 
historic commitment). In fact, it threatens to wipe out decades of 
development gains, and it is likely to contribute to mass migration, 
refugee crises, and increased conflict over scarce natural resources, 
undermining global stability and security.
    There is no doubt that everyone will be affected by the 
consequences of climate change; in the U.S., for example, storms will 
likely become more severe and coastal communities along the gulf and 
Atlantic coasts will be especially stressed.\2\
---------------------------------------------------------------------------
    \2\ Field, C.B., L.D. Mortsch, M. Brklacich, D.L. Forbes, P. 
Kovacs, J.A. Patz, S.W. Running and M.J. Scott, 2007: North America. 
``Climate Change 2007: Impacts, Adaptation and Vulnerability. 
Contribution of Working Group II to the Fourth Assessment Report of the 
Intergovernmental Panel on Climate Change,'' M.L. Parry, O.F. Canziani, 
J.P. Palutikof, P.J. van der Linden and C.E. Hanson, Eds., Cambridge 
University Press, Cambridge, U.K., 617-652.
---------------------------------------------------------------------------
    However, while climate change will affect us all, the world's 
poorest people will be hardest hit. Today, more than 1 billion people 
survive on less than $1.25 a day and already live on the edge of 
crisis.\3\ If left unchecked, climate change may push them off that 
edge. Major projected impacts include:
---------------------------------------------------------------------------
    \3\ Chen, S. and Ravallion, M. 2008. ``The Developing World Is 
Poorer Than We Thought, But No Less Successful in the Fight against 
Poverty.'' World Bank Policy Research Working Paper 4703.

   Agriculture. The negative impact of unmitigated climate 
        change on agricultural production will likely be more adverse 
        in tropical areas and the poorest developing countries, 
        particularly in sub-Saharan Africa.\4\ Agricultural production 
        in many African countries is likely to be severely compromised 
        by climate change and climate variability, with yields 
        declining by as much as 50 percent by 2020.\5\
---------------------------------------------------------------------------
    \4\ FAO, 2003. ``World Agriculture: Towards 2015/2030. An FAO 
Perspective.'' Available online at: http://www.fao.org/docrep/005/
y4252e/y4252e00.htm.
    \5\ Boko, M., I. Niang, A. Nyong, C. Vogel, A. Githeko, M. Medany, 
B. Osman-Elasha, R. Tabo and P. Yanda, 2007: Africa. ``Climate Change 
2007: Impacts, Adaptation and Vulnerability. Contribution of Working 
Group II to the Fourth Assessment Report of the Intergovernmental Panel 
on Climate Change,'' M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. 
van der Linden and C.E. Hanson, Eds., Cambridge University Press, 
Cambridge U.K., 433-467.
---------------------------------------------------------------------------
   Freshwater resources. Climate change will intensify the 
        water cycle, resulting in billions of people gaining or losing 
        water. Areas likely to gain water, like South and East Asia, 
        will face more flood disasters. Arid and semiarid regions, like 
        southern Africa, will become even drier and be at dire risk of 
        increased water stress, while current water management 
        practices will likely be inadequate. In addition, as 
        temperatures increase and glaciers retreat, river flows, 
        particularly in the Hindu Kush-Himalaya and the South American 
        Andes, will increase in the short term; but as glaciers melt, 
        river flows will gradually decrease over the next few 
        decades.\6\
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    \6\ Kundzewicz, Z.W., L.J. Mata, N.W. Arnell, P. Doll, P. Kabat, B. 
Jimenez, K.A. Miller, T. Oki, Z. Sen and I.A. Shiklomanov, 2007: 
Freshwater resources and their management. ``Climate Change 2007: 
Impacts, Adaptation and Vulnerability. Contribution of Working Group II 
to the Fourth Assessment Report of the Intergovernmental Panel on 
Climate Change,'' M.L. Parry, O.F. Canziani, J.P. Palutikof, P.J. van 
der Linden and C.E. Hanson, Eds., Cambridge University Press, 
Cambridge, U.K., 173-210.
---------------------------------------------------------------------------
   Human health. Climate change will likely increase health 
        risks. Projected trends include increased malnutrition, 
        increased morbidity and mortality in heat waves and weather-
        related disasters, and changes in the geographic range of some 
        infectious disease vectors, such as malaria. These health risks 
        will be heavily concentrated in poorer populations at low 
        latitudes, particularly in sub-Saharan Africa.\7\
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    \7\ Confalonieri, U., B. Menne, R. Akhtar, K.L. Ebi, M. Hauengue, 
R.S. Kovats, B. Revich and A. Woodward, 2007: Human health. ``Climate 
Change 2007: Impacts, Adaptation and Vulnerability. Contribution of 
Working Group II to the Fourth Assessment Report of the 
Intergovernmental Panel on Climate Change,'' M.L. Parry, O.F. Canziani, 
J.P. Palutikof, P.J. van der Linden and C.E. Hanson, Eds., Cambridge 
University Press, Cambridge, U.K., 391-431.
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   Disasters. According to a CARE/UNOCHA report, people in 
        extreme poverty, especially in Africa, Central and South Asia, 
        and Southeast Asia, will face even greater risk of disaster as 
        the frequency, intensity and duration of weather-related 
        hazards, such as floods, cyclones and droughts, increases as a 
        result of climate change.\8\ By late century, millions more 
        people than today, particularly in low-lying coastal regions, 
        such as the mega-deltas of Asia and Africa and small islands, 
        will likely experience floods every year due to sea-level 
        rise.\9\
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    \8\ CARE and UNOCHA, 2008. ``Humanitarian Implications of Climate 
Change: Mapping Emerging Trends and Risk Hotspots.'' Available online 
at: www.careclimatechange.org.
    \9\ IPCC, 2007: Synthesis Report. ``Contribution of Working Groups 
I, II and III to the Fourth Assessment Report of the Intergovernmental 
Panel on Climate Change'' [Core Writing Team, Pachauri, R.K and 
Reisinger, A. (eds.)]. IPCC, Geneva, Switzerland, 104 pp.

    The severity of the consequences of climate change described above 
and the effort required to adapt to the consequences depend on what we 
do now. The IPCC recommends that global greenhouse gas emissions be 
reduced 25-40 percent from 1990 levels by 2020 in order to improve the 
odds of avoiding dangerous warming of more than 2 C in average global 
temperatures.\10\ The longer we wait to stabilize the atmosphere, the 
greater the probability that the world will exceed the 2 C threshold. 
Adverse impacts on ecosystems, agricultural production, freshwater 
resources, human health, and the risks from extreme climate events are 
projected to increase significantly when the increase in average global 
temperature from preindustrial levels exceeds 2 C.
---------------------------------------------------------------------------
    \10\ IPCC, 2001. ``Climate Change: Impacts, Adaptation and 
Vulnerability. Contribution of Working Group II to the Third Assessment 
Report of the Intergovernmental Panel on Climate Change.'' Cambridge 
University Press, Cambridge, U.K.
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    The UNFCCC is grounded in the principles of equity and ``common but 
differentiated responsibilities'' (Article 3.1)--principles which were 
reaffirmed by the G20 in its most recent meeting. Developed countries, 
including the U.S., have the largest historical responsibility for 
climate change, as well as the most resources to address the problem. 
Developed countries must, therefore, lead efforts to combat climate 
change and its impacts.
    At the same time, it will be impossible to keep the global 
temperature rise as far below 2 C as possible unless the largest 
emitters among the developing countries do their part. Many have 
already expressed willingness to do so. At the 14th Conference of 
Parties (COP) of the UNFCCC in December 2008, key developing countries, 
such as Brazil, China, Mexico and South Africa, came forward with plans 
to reduce their own greenhouse gas emissions, demonstrating their 
willingness to engage at the global level.
    Successful global climate negotiations, culminating this December 
in Copenhagen, may well hang on concrete U.S. action and the impact it 
will have in bringing all countries together around shared goals and 
responsibilities.
       recommendations for international adaptation and forestry
    A global solution to climate change begins but does not end with 
deep and immediate reductions in domestic greenhouse gas emissions. 
Based on our extensive field experience, CARE believes that it is also 
vital for the U.S. administration and Congress to commit to passage of 
domestic legislation that:

          1. Protects rights. Supports the reduction of emissions from 
        deforestation and forest degradation in developing countries 
        (REDD) in a manner that protects the rights and interests of 
        indigenous peoples and other forest-dependent communities;
          2. Funds adaptation. Sets aside substantial revenues--new and 
        additional to official development assistance and reflecting 
        U.S. commitment to funding its fair share--to support 
        adaptation in developing countries vulnerable to climate 
        change; and
          3. Reaches the poorest and most vulnerable. Ensures that 
        adaptation funding reaches and responds to the priorities of 
        the poorest populations most vulnerable to climate change.

    I will address each of these three recommendations in further 
detail, grounding my observations in CARE's field experiences.
1. Social Standards and Safeguards Essential for Successful REDD
    The inclusion of Reduced Emissions from Deforestation and 
Degradation (REDD) in U.S. climate legislation is crucial if we are to 
avoid dangerous global warming. Deforestation accounts for some 20 
percent of human-induced greenhouse gas emissions.
    However, CARE believes that REDD must be accompanied by adequate 
social standards and safeguards from the outset. While investments in 
REDD have the potential to offer significant benefits for indigenous 
peoples and other forest-dependent communities in developing countries, 
they can also do substantial harm. Past experience with forest 
conservation worldwide tells us that, without appropriate standards and 
safeguards, forest-dependent communities face numerous social and 
economic risks to their livelihoods, their access to resources and 
land, and their ability to share in the benefits of REDD activities.
    Take the case of Uganda, a country with one of the highest 
deforestation rates in the world. In 2002, the Ugandan Government took 
forested land away from local populations in the Butamira Forest 
Reserve and gave it to large commercial sugar companies. Forests were 
mowed down and cleared for profit. Natural resources from the forest 
were no longer available to forest-dependent communities. Pig, cattle, 
and goat rearing projects were forced to close due to lack of access to 
water and grazing land. Crafts and household goods, which women used to 
sell at local markets, ceased to be produced because women no longer 
had access to raw materials. As a result of the loss of income, parents 
had to pull their children out of school. Women were forced to use 
leftover sugarcane waste, instead of fuelwood, for cooking, which meant 
that they could only make food that could be cooked quickly. Sugarcane 
leftovers burn fast, making preparation of nutritious beans impossible.
    In 2006, CARE worked with women from the former Butamira Forest 
Reserve to stop rampant deforestation and change national policies. 
Their protest led to a reversal in government attitude in February 
2007. Unfortunately, within a month of winning that policy change, 
there was another reversal and the Cabinet re-endorsed the 
giveaway.\11\
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    \11\ CARE, 2004. ``Reclaiming Rights and Resources: Women, Poverty 
and Environment.''
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    What is happening in the Butamira Forest Reserve underscores the 
kinds of risks that forest-dependent communities face without proper 
safeguards in place. What is happening in the Butamira Forest Reserve 
also underscores the importance of standards to ensure that such 
communities can exercise their rights and participate in the management 
of forests that directly affect their well-being.
    Forests provide a range of environmental services and livelihood 
opportunities, serving as a safety net for poor, forest-dependent 
communities. This becomes particularly important in light of 
projections that climate change will reduce agricultural yields in 
certain parts of the world. We need to help developing nations find 
alternatives to cutting away that safety net. We also need to find 
alternatives that respect affected communities' rights and strengthen 
their stake in, and rewards from, conservation efforts.
    We know this is possible because for years, CARE has been working 
with poor, forest-dependent communities to conserve forests and forest 
ecosystems as part of a strategy to promote sustainable development. 
From 2002-2009, for example, in collaboration with the Weyerhaeuser 
Company Foundation, USAID, World Wildlife Fund (WWF), and local 
partners, CARE worked with poor, forest dependent communities 
throughout Nepal to promote biodiversity and forest conversation as 
well as the democratic management of forests, the equitable 
distribution of benefits derived from forest management, and livelihood 
security for the poorest and most marginalized, including women and 
dalits (the so-called ``untouchable caste'').
    Today, poor and marginalized groups are no longer excluded from 
community forests, as they once were. There are now more women and 
dalits on the executive committees of forest user groups. Forest user 
groups are holding public hearings and public audits on a regular basis 
to promote transparency and accountability in financial and management 
decisions. Moreover, the poorest and most marginalized have improved 
their incomes, and therefore their livelihood security, by rearing 
pigs, keeping honey bees, cultivating high market value medicinal herbs 
and high market value vegetables and fruits for sale in local and 
regional markets.
    CARE's program was also the first of its kind in Nepal to ensure 
access to and control over natural resources exclusively by landless 
and marginalized households. This practice has gradually spread 
throughout Nepal. Furthermore, because of the program, CARE succeeded 
in influencing the formulation of the government of Nepal's Three Year 
Interim Plan (2008-2010), particularly the chapter on pro-poor forestry 
policy, as well as the government's 2008 Community Forestry Operational 
Guidelines. These policy changes have benefited more than 14,500 
community forest user groups, which account for about one-third of the 
total population of Nepal.
    From our field experience, we know that social standards and 
safeguards for REDD must include measures to ensure participation by 
indigenous peoples and other forest-dependent communities in forestry 
management; prevent human rights violations; and guarantee free, prior 
and informed consent, equitable benefit sharing, the right to access 
and use resources, and access to legal recourse and fair compensation 
for damages. These standards are essential not only to guard against 
risks but also to ensure environmental success, i.e., the 
sustainability and permanence of emission reductions.
    CARE is now working with partners, such as FIELD and the Climate, 
Community and Biodiversity Alliance, to map out, in concrete terms, 
what social standards and safeguards for REDD would look like within 
the UNFCCC framework as well as under voluntary carbon markets. We are 
also looking, specifically, at the potential opportunities and threats 
that REDD poses for poor and marginalized women within forest-dependent 
communities in developing countries. This is new and cutting edge 
policy research. It will help identify the kinds of social standards 
and safeguards that need to be in place to ensure that REDD contributes 
to climate change mitigation in a way that protects the rights and 
interests of indigenous peoples and other forest-dependent communities.
    CARE has also joined strategic forces with WWF to improve the 
livelihoods of the world's most vulnerable people, to transform their 
abilities to control their own destinies and natural resources, and to 
establish sustainable patterns of resource use. Through the alliance, 
CARE and WWF will create pro-poor, sustainable development models on 
the ground that can reach significant scale and to drive policy change 
both in the countries where we work and in the United States.
2. New, Additional Funding for Adaptation in Developing Countries 
        Necessary for Long-Term Success
    We need to reduce domestic greenhouse gas emissions as well as 
emissions from deforestation and degradation in developing countries. 
We need to do this because if we don't, it will erode decades of 
development gains and make the struggle to survive even harder for the 
world's poorest people.
    At the same time, we must also help developing countries--and the 
communities and groups most vulnerable within them--adapt to new 
conditions. Even if we stopped all greenhouse gas emissions today, a 
certain degree of climate change is inevitable. Past emissions have set 
in motion longer term changes to which people in extreme poverty will 
need to adapt.
    While no single weather event can be directly attributed to climate 
change, numerous examples from all over the world testify to a pattern 
of new climate conditions much different from what we have seen or 
experienced before. In Tajikistan, for example, CARE conducted climate 
vulnerability and capacity assessments to determine how climate-related 
risks were affecting the lives of people in three villages at different 
altitudes within the same watershed. What we heard is that the snow 
pack is increasing, winter is shifting and getting longer, and rainfall 
is becoming increasingly erratic. All of these local observations are 
consistent with the meteorological data for the region. In assessing 
the consequences of these changes for local livelihoods, communities 
focused on the sensitivity of livestock, gardens and orchards to 
climate risks.
    The communities CARE supports are doing the best they can to adapt 
to new conditions with limited resources. The amount of funding 
available to help communities in developing countries adapt is, 
however, severely insufficient. A number of analyses have been 
conducted on how much money is needed for adaptation in developing 
countries. The World Bank suggests that costs will run between $9-$41 
billion per year (the low figure assumes no investment in community-
based adaptation) \12\ while Oxfam puts the price tag at more than $50 
billion per year by 2015 \13\, the UNFCCC estimates that costs will 
range between $28 billion and $67 billion per year by 2030 \14\, and 
the UNDP projects annual costs of $86 billion per year by 2015 \15\. 
While the range varies, consensus is growing that the need, annually, 
is on the order of tens of billions of dollars and will be 
significantly higher if greenhouse gas emissions are not reduced 
substantially in the near term.
---------------------------------------------------------------------------
    \12\ World Bank, 2006. ``Clean Energy and Development: Towards an 
Investment Framework.'' DC2006-0002. Available online at: http://
siteresources.worldbank.org/DEVCOMMINT/Documentation/20890696/DC2006-
0002(E)-CleanEnergy.pdf.
    \13\ Oxfam, 2007. Financing adaptation: Why the UN's Bali Climate 
Conference must mandate the search for new funds. Available online at: 
http://www.oxfamamerica.org/newsandpublica-
tions/publications/briefing_papers/financing-adaptation/Financing-
Adaptation-120407.pdf.
    \14\ UNFCCC, 2007. ``Climate Change: Impacts, Vulnerabilities and 
Adaptation in Developing Countries.'' Available online at: http://
unfccc.int/files/essential_background/background_
publications_htmlpdf/application/txt/pub_07_impacts.pdf.
    \15\ U.N. Human Development Report 2007/2008. ``Fighting Climate 
Change: Human Solidarity in a Divided World.''
---------------------------------------------------------------------------
    Unfortunately, few public financing options exist to help 
developing countries reduce their vulnerability and adapt to climate 
variability and change. There are three adaptation funding mechanisms 
under the UNFCCC. However, as of December 2008, pledged commitments to 
the Least Developed Countries Fund (LDCF) and the Special Climate 
Change Fund (SCCF) total only $262.3 million. The UNFCCC estimates that 
the third fund, the Adaptation Fund, has the potential to raise between 
$25 to $130 million through 2012 and between $30 million to $2.25 
billion by 2030.\16\ There is a huge gap between what is needed and 
what has been pledged or can be raised through the UNFCCC mechanisms.
---------------------------------------------------------------------------
    \16\ ``Developed Country Climate Financing Initiatives Weaken the 
UNFCCC.'' South Center. Analytical Note SC/GGDP/AN/ENV/7 January 2009. 
Available online at: http://www.south
centre.org/index.php?option=com_content&task=view&id=909&Itemid=1.
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    Poor countries bear the least responsibility, are the most severely 
impacted, and have the least capacity to cope with climatic changes. If 
international adaptation continues to be inadequately resourced, 
climate change is projected to contribute to increased conflict over 
scarce natural resources, mass migration, and refugee crises.
    The good news is that we know that investments in prevention and 
preparedness work. We can draw this lesson from our experience with 
natural disasters. The number of disaster-affected people grew from 1.6 
billion in 1984-1993 to 2.6 billion in 1994-2003. Material losses also 
grew from $38 billion in the 1950s to $652 billion in the 1990s.\17\ 
These rising numbers are due to several factors, including population 
growth and changing habitation patterns. One number, however, has gone 
down. Fewer people are dying as a result of natural disasters as a 
result of investments in disaster risk reduction. We can apply this 
lesson to climate change. Investing now in adaptation will help save 
money down the road. More importantly, it will help save lives and 
build people's resilience.
---------------------------------------------------------------------------
    \17\ World Bank. 2006. ``Hazards of Nature, Risks to Development: 
An IEG Evaluation of World Bank Assistance for Natural Disasters.'' 
Available online at: http://www.worldbank.org.
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    The United States must do its fair share and provide substantial 
new and additional funding, above and beyond official development 
assistance, to support adaptation in developing countries vulnerable to 
climate change. New and innovative mechanisms that can raise 
significant funds for adaptation and create incentives for mitigation 
should be pursued, such as the auctioning of emission allowances and 
levying the use of international maritime and aviation transport (so 
called ``bunker'') fuels.
    Some policymakers may argue that this will be a tough sell. But I 
disagree. Deputy Special Envoy for Climate Change Jonathan Pershing 
made a statement in Bonn earlier this month about the American people. 
He said that the United States has a tradition of supporting people, 
not ``buying'' people. I believe he is referring to the American 
sentiment that, with a little help and the right enabling environment, 
people can lift themselves up from hardship. I agree with Deputy 
Special Envoy Pershing. I, too, believe that most Americans understand 
and support the U.S. doing its fair share to help people in developing 
countries adapt to new conditions. People in poor communities 
vulnerable to climate change are doing the best they can. With some 
external assistance, they can contribute their fullest potential to 
social and economic development.
3. Pro-Poor Adaptation Funding to Safeguard Development Progress and 
        Global Stability
    Robust funding for international adaptation is crucial. So, too, is 
guiding those funds so that they reach the people who need them most. 
Vulnerability is more than exposure to climate shocks and other 
stresses. CARE's experience has shown that vulnerability varies within 
countries, within communities, and even within households. It is, in 
large part, determined by the economic, social, and political systems 
and structures that govern people's lives.
    Climate change will have the greatest impact on the poorest 
communities and most marginalized groups. Women and other marginalized 
groups are particularly at risk. Women tend to rely more than men on 
natural resources. They are the primary food and health care providers 
in their families and are responsible for tasks that will likely be 
made more difficult by climate change. They are less mobile then men, 
confined to their homes save for trips to gather water, fodder, and 
fuel. They have more limited access than men to vital information about 
climate change mitigation or adaptation strategies. And they are less 
likely to be reached by government extension agents.
    Women and girls tend to lack access to information and opportunity 
to feed their own knowledge into community or national-level adaptation 
and mitigation strategies. This jeopardizes larger processes of 
reducing climate change and its impacts. It also means that women are 
more likely than men to be injured or killed during hurricanes, floods, 
and cyclones. They are less likely to hear official warnings and to be 
able to swim or to escape quickly, especially if carrying young 
children.
    Well designed, top-down, scenario-driven approaches to adaptation 
can play a role in reducing vulnerability to climate change; yet they 
may fail to address the particular needs and concerns of the most 
vulnerable communities. CARE believes that the most effective approach 
is to empower local communities and facilitate their ownership of 
adaptation strategies. Through community-based adaption, we can foster 
more resilient livelihoods, link people to basic services, strengthen 
local capacity, and support social and policy change to address 
underlying causes of poverty and vulnerability.
    Again, the good news is that we know how to do this. I want to 
share with you an example from Bangladesh, a country that will likely 
face more frequent and severe floods as well as sea-level rise as a 
result of climate change. In southwest Bangladesh, CARE worked closely 
with local organizations to help communities, especially the women 
within them, decide how best to adapt to more frequent and severe 
floods. We recruited female staff, gave gender training to all staff, 
and prioritized female-headed households in the project. We also 
organized community meetings at times that fit women's daily work 
schedules. We engaged women in all steps--from conducting climate-
related vulnerability and capacity assessments to the design, 
implementation and evaluation of adaptation strategies.
    By doing so, I believe that we got better and more effective 
results. We discovered that men and women come to different conclusions 
about what aspects of their lives are most vulnerable to climate 
variability and change and how to build their resilience. Women 
prioritized health, housing, and water (citing increasing salinity), 
while men focused on income and food security. Women also prioritized 
adaptation strategies that they could implement close to home. When 
given a choice of options to diversify their incomes, for example, many 
women chose to rear ducks. They can do so right near their homes. The 
start-up costs are low, and therefore the risks in investing in duck 
rearing are also low. The activity does not create a heavy workload in 
terms of time or labor. Ducks produce eggs and meat for food or cash. 
And unlike chickens, they can swim, so they can survive floods.
    Women also participated in the evaluation of the project. They told 
us that before the project, they coped during the lean season by 
skipping meals or eating nontraditional foods, like water hyacinth, in 
order to ensure that the rest of the family had enough food. After the 
project, they reported that they no longer skipped meals during lean 
seasons, and that, by bringing cash into the home, they had more say in 
household decisions. In the end, the project helped tackle gender 
inequities as well as build community resilience to more frequent and 
severe floods. The next step is to scale up our local experiences and 
incorporate women's interests and knowledge into national-level 
adaptation strategies and plans.
    The United States can provide leadership in ensuring that 
adaptation funds reach the people who need them most by ensuring 
systematic identification of the most vulnerable groups; inclusive, 
transparent, and participatory decisionmaking on the design and in the 
monitoring and evaluation of adaptation activities; and mechanisms to 
support community-based adaptation.
    Mr. Chairman, members of the committee, you have an opportunity to 
make an extraordinary difference throughout the world by reducing U.S. 
greenhouse gas emissions, protecting the rights and interests of forest 
dependent communities, funding international adaptation and guiding 
those funds so that they reach people in poor countries most vulnerable 
to climate change.
    As Special Envoy Todd Stern put it in Bonn, we cannot have a global 
solution to climate change with U.S. action alone; nor can we have a 
global solution without the United States.
    The time to act is now. The world is waiting for the United States 
to show leadership by setting the example of what must be done and why 
it must be done now. The cost of further delay or an inadequate 
response will be too high--in dollar and human terms.
    I would be pleased to answer any questions.

    The Chairman. Thank you very much.
    Mr. Camuti.

    STATEMENT OF PAUL CAMUTI, PRESIDENT AND CHIEF EXECUTIVE 
       OFFICER, SIEMENS CORPORATE RESEARCH, PRINCETON, NJ

    Mr. Camuti. Mr. Chairman, Senator Lugar, and members of the 
committee, thank you for the opportunity to share Siemens' 
perspective on technology development, transfer, and 
deployment. We, at Siemens, believe this is a critical part of 
the conversation with regard to climate change.
    Again, I'm Paul Camuti. I'm the chief executive officer of 
Siemens Corporate Research. This is our central technology 
development organization, based in Princeton, NJ. We have a 
team of over 350 scientists and engineers working on cutting-
edge technologies for energy, health care, and for industrial 
competitiveness.
    One of the most valuable contributions that we're making in 
our business is what you had already mentioned, which is 
energy-saving technologies. Of particular interest is also the 
area of energy solutions. And Siemens, in a number of our lines 
of businesses, is involved every day in transferring and 
developing technology on a global basis.
    One quick example is, we've invested in our wind turbine 
business. We've built a wind turbine blade manufacturing 
factory in Iowa, a gearing factory in Illinois. We've 
established an R&D center in Colorado. And we have a large and 
growing services team for our wind business headquartered in 
Texas.
    Our business, not only works through public/private 
partnerships, but we enable technology transfer through trade 
and direct investment.
    I wanted to just briefly hit on the technologies that we're 
talking about. I think, when we're talking about technology 
transfer, it's somewhat important to get our arms around the 
scope of the technology, because there's literally thousands 
and thousands of technologies that apply and can help to 
mitigate climate change.
    We group these into four basic areas. One is in the area of 
power generation. This is the one that gets the most focus. 
These are renewable sources, like wind, solar, hydro, wave 
power. Important in the equation is high-efficiency gas and 
steam turbines, increasingly running plants fueled by a diverse 
set of fuels, like coal, oil, gas, and nuclear. There's also a 
set of technologies in the power generation area for carbon 
capture, both pre- and post-combustion. These are all areas 
that we're currently working on.
    The second grouping of technologies that we look into are 
the electrical transmission systems. This has been much talked 
about in the area of Smart Grid, but also important for us is 
high-voltage D.C. transmission. And this is a set of technology 
that flexibly links power from distant areas, where renewable 
energy is generated, to the points of use in cities. And we 
have a really good example, actually, of linking large hydro 
sources in China to the main cities. There's also an aspect of 
energy storage and a whole range of technologies around energy 
storage.
    We're also involved heavily in technologies for 
transportation. These are light-rail vehicles, electrification, 
automation, hybrid electric vehicles, all-electric vehicles, 
and intelligent transportation systems. And also, and very 
important, because they're probably the set of technologies 
that are the most readily deployed, are a set of technologies 
around the demand side of the energy efficiency. And this is 
technology like new lighting technologies or high-efficiency 
motors and drives for industrial processes, industrial 
automation, energy-efficient computing, and another area that 
we're very focused on--advanced building controls.
    I'd like to just make a couple of comments on the state of 
technology around the globe, from our opinion. A lot of the 
industrialized countries, like the United States, Europe, 
Japan, have traditionally led in the development of these 
technologies. Increasingly, China, India, Brazil, and other 
emerging economies are also investing heavily in R&D as a 
source of their nations' competitiveness. And a lot of the 
investments are dedicated today to clean technology.
    There are significant variances to the state of the 
readiness and availability of the technology on a global basis, 
and critical to the conversation on climate change is how we 
move the technology around the globe.
    And so there are differences in how the technologies will 
be moved, so the commercially available off-the-shelf 
technologies often--that we take for granted, actually, here in 
the United States--might not be sufficient where basic 
infrastructure, skilled labor, and on-the-ground operational 
knowhow is lacking in the least-developed countries. So, there 
is a need for adaptation of the technology. And this becomes 
even more problematic the higher the level of technology, so 
some of the most advanced technologies create some significant 
barriers to deployment in emerging countries.
    We have some experience with the CDM--Clean Development 
Mechanism. Our lighting business has done a project in India 
that I'd like to just share a few of the details with you on. 
This was a project which we did in conjunction with a German 
utility, RWE. And the idea here was that, in rural parts of 
India, the access to compact fluorescent lighting CFLs, which 
are about 80 percent more efficient way of lighting than a 
standard incandescent bulb, is greatly restricted. There's 
unique requirements, in terms of the technology and the 
robustness of the technology, but also the affordability of the 
technology. So, we conceived this project to actually give 
away, or at a very low cost, equivalent to incandescent bulb, 
supply light bulbs in rural India. With the corresponding 
carbon offsets being valued under an agreement with RWE, the 
utility would take over these offsets at a stipulated price.
    So, we're not talking about the value of the mechanisms, 
but we're focusing on the process. This process took us over 5 
years to get through an approval process, with the verification 
being the critical thing. We went through two iterations of a 
methodology in order to get the project off the ground.
    Now that the methodology exists, it's reusable for other 
projects of this nature, and we believe that through the 
verification methodology that's in here, that it's actually 
replicable and could be used as a model for how to set up 
processes like this for future agreements.
    But, the point would be that the significant amount of 
administrative time and initial investment on our part in order 
to be able to pull this project together, and it would be 
helpful to take the lessons that have been learned around CDM 
projects to dramatically improve the way that we're doing those 
types of projects.
    Private capital also is very critical. I think, Senator 
Kerry, you had stated earlier, ``How do we find the next 
Google?'' The level of investment that happens in clean-tech 
technologies is, far and away, dominated by the private 
players. And so, we believe strongly that we need to facilitate 
the market in a way that actually attracts increasing amount of 
private investment. Much of this private investment actually is 
done on a global basis, in conjunction with local partners. So, 
when we work in a local market, it usually is in an ecosystem 
of other stakeholders and local workers. And so, this private 
investment actually results in quite a bit larger investment.
    By way of example, we're spending about $6 billion annually 
just on R&D. We're teaming with universities, with government 
labs, with suppliers. And the projects that we're implementing 
are actually quite a bit larger than our own investment.
    I'd like to point out just one project in this area, again, 
to hit the high-performance building topic. It's already been 
stated. I think you're all aware. The building infrastructure 
in the world is responsible for about 38 percent of the 
greenhouse gas emissions. The Intergovernmental Panel on 
Climate Change estimated that 30 percent of the baseline carbon 
dioxide emissions from buildings can be mitigated with today's 
technology. And my team has had an ongoing project, partnered 
with partners in Switzerland, the University of California at 
Berkeley, Tshingua University, and several labs, in order to be 
able to develop a concept to dramatically increase the energy 
efficiency of buildings. The stages that we go through have us, 
right now, at a point of commercial proof of principle. And 
here, multinational public funding for demonstration projects 
in different parts of the world would really help to move this 
ball along.
    And so, part of the technology transfer and the work that 
we're doing in climate change will require substantial 
government and multilateral funding in order to be able to have 
an impact.
    Last, I wanted to just mention the processes by which this 
technology transfer happens. So, we work, at the earliest 
stages, with research institutions, like universities. We build 
those into pilots. It's deployed and transferred through, 
usually, pilot, and then large-scale deployments.
    The idea of having a price signal for carbon in the market 
is actually important for us in order to be able to justify the 
deployment parts of these projects. That happens through IP 
protection and the investments that we make. We would like to 
have a robust environment of IP law, on a global basis, in 
order to protect and expand on this investment.
    So, the conclusion that I'd like to make is that technology 
transfer related to climate change is a critical aspect. 
There's a lot of technologies involved. The environmental focus 
on products, services, and technology, in our experience in the 
United States and with the academic community here, we fully 
believe that America can and does have a technology leadership 
position, but we're in global competition. There are emerging 
high-growth economies. They're also focused on the same 
technology. And spurring this investment in technology 
deployment and development is what's going to help to grow new 
businesses here in the United States.
    So, again, thank you for the opportunity to share my views. 
I'd be interested in addressing any of the questions.
    [The prepared statement of Mr. Camuti follows:]

   Prepared Statement of Paul Camuti, President and Chief Executive 
           Officer, Siemens Corporate Research, Princeton, NJ

    Good morning, Mr. Chairman and members of the commmittee, thank you 
for the opportunity to share Siemens' perspective. On technology 
transfer and deployment as it relates to the challenges of climate 
change.
    I am Paul Camuti, president and chief executive officer of Siemens 
Corporate Research. I am based at our principal U.S. R&D facility in 
Princeton, NJ, where more than 350 employees work on leading edge 
technologies for the energy, health care and industrial sectors. 
Siemens' U.S. revenues exceeded $22 billion in FY 2008. We employ 
approximately 68,000 people across all 50 States, boosting America's 
economy with over $5 billion in payroll to our United States employees, 
and over $6.5 billion in exports last year. We hold almost 12,000 
patents in the United States, and our U.S. R&D spend is $1.6 billion 
annually.
    One of the most valuable contributions we can make in the fight 
against global warming is providing innovative, energy-saving 
solutions. Of particular interest to the hearing today, Siemens' energy 
solutions help to meet one-third of America's total electric power 
generation needs every day. This includes power from renewable wind 
technologies, where Siemens has invested in blade manufacturing in 
Iowa, gear manufacturing in Illinois, an R&D Center in Colorado, and a 
service team headquartered in Texas. We are also the No. 1 provider of 
light rail vehicles in North America, we are an industry leader in 
Smart Grid technology, and we are an innovator of emerging clean coal 
technologies, including carbon capture and sequestration. We have 
applied strict criteria to our worldwide product offerings to identify 
a $25 billion environmental portfolio that will help our customers 
reduce their impacts on the environment. Audited, independently 
certified results show that Siemens' environmental portfolio helped our 
customers save approximately 148 million tons of carbon dioxide 
emissions in 2008 alone.
    My testimony will focus primarily on two areas I believe are of 
critical importance to America's position in the upcoming global 
climate negotiations. These include some of the impediments to the 
diffusion and deployment of existing climate change technologies as 
well as mechanisms needed to foster future innovation and its 
diffusion. I will emphasize the importance of ensuring intellectual 
property protection, and establishing clear pricing signals via a 
carbon market--elements that are key to both innovation and diffusion.
    As is evident from my opening comments, there are many technologies 
available around the world today at various stages of commercialization 
which can be deployed to reduce the emissions of greenhouse gases. 
Industrialized countries and increasingly high-growth emerging 
economies have invested heavily in clean technologies. The United 
States, Europe, Japan, and other industrialized countries have led the 
field in investing in climate change technologies. But, China, India, 
Brazil, and other emerging economies also invest heavily in R&D, much 
of which is dedicated to clean technology. Yet there is a significant 
variance around the globe in the commercial availability of 
technologies across sectors such as power generation, building 
technologies and transportation. To succeed, technology transfer policy 
must actively facilitate the diffusion of technologies across 
geographies and economies with widely varying needs and absorptive 
capabilities, a particular challenge in the least developed countries. 
The success of any innovation and deployment strategy depends on how 
well it responds to the needs of the target market or locale. Transfer 
of existing, commercially available off-the-shelf technologies may be 
insufficient where basic infrastructure, skilled labor and on-the-
ground operational know-how is lacking. Transfer of more advanced 
technologies will be even more problematic for the same reasons. In 
order to match a variety of available technologies to local conditions, 
detailed needs assessments can be valuable tools for identifying 
targeted, case-by-case solutions to unique or unanticipated problems in 
technology dissemination.
    Mechanisms to stimulate market-based climate change projects and 
technology deployment and dissemination must be improved and expanded. 
For example, the Clean Development Mechanism (CDM), under the aegis of 
the United Nations Framework Convention on Climate Change (UNFCCC), 
offers promise as a conduit of finance and technology. The experience 
of the Siemens lighting company OSRAM with the CDM highlights its 
potential and challenges. OSRAM is currently implementing three CDM 
projects in India together with the German utility company RWE aimed at 
supplying high-quality, energy-efficient lighting that responds to low-
market penetration of energy-saving compact fluorescent lamps (CFLs) in 
the region. In this 10-year project, RWE and OSRAM share upfront costs 
and RWE is contractually bound to purchase the credits eventually 
earned through the project at a stipulated price. Conceived in 2004, 
the first 2\1/2\ years of the project were devoted to establishing a 
(large-scale) methodology that proved impractical due to amendments 
requested by the UNFCCC and a further 1\1/2\ years on a small-scale 
methodology required by the UNFCCC. At the end of 2008, OSRAM began 
distributing CFLs to householders in exchange for their inefficient 
incandescent bulbs. The project participants, Indian citizens mainly in 
rural areas, pay only a small fee comparable to the price of a 
conventional incandescent lamp. A sample population will have meters 
installed in their homes so that the energy savings can be measured, 
verified by an independent auditor, and reported to the UNFCCC. Credits 
will be calculated using this data. CDM credits can be earned once the 
lamps and meters are installed and the project is officially registered 
with the UNFCCC. In the first three projects, up to 2 million lamps 
will be distributed in India.
    Significant administrative time and initial financial investment 
were required for this CDM project. One of the most time-intensive 
aspects of the project was development and approval of the methodology, 
the cost of which was borne by SRAM and RWE. Now, any subsequent 
projects may use this approved methodology. To avoid delay and reduce 
initial investment, others may choose to deploy technology for which 
there is an approved CDM methodology rather than navigating the time-
consuming process of creating a new methodology for new innovation. Our 
experience shows that a more streamlined administrative process and a 
full-time CDM staff will be critical to the success of the CDM process.
    Private capital plays a critical role. It is crucial to put into 
place a framework that will stimulate the private investment required 
to continue to pioneer new technologies. The private sector accounts 
for the majority of green research and development expenditures today 
and remains the most cost-effective source of new technology 
development. Private trade and investment, typically involves local 
partners, local stakeholders and local workers. Private investment can 
help to train local workers and facilitate development of local supply 
chains.
    Siemens, for example, makes this investment on a global scale, 
investing some $6 billion annually on new technology R&D as well as 
some $900 million in venture investments. Our corporate technology 
teams operate in open innovation networks with universities, government 
labs and supplier resources in diverse, collaborative teams that are 
located in technology hotspots around the world including Germany, 
Austria, Russia, India, China, Japan, and multiple locations here in 
the United States. This global approach gives us access to world class 
talent and, additionally, a firsthand look into the regional needs of 
our customers. We identify promising new technologies through a 
technology road-mapping process. We then incubate these technologies 
and develop proof of principles, prototypes, followed by scale-up and 
deployment strategies which are essential to moving innovation from the 
lab to the commercial market.
    A good example of the process in action is our Technology To 
Business (TTB) center in Berkeley, CA. Since TTB's founding in 1999, we 
have worked with many new technologies, hired innovators and 
transferred new ideas to our businesses. The work of TTB has led to the 
founding of 12 new companies in which Siemens maintains a minority 
investment. As an example, Sensys Networks, Inc., is a leader in 
wireless vehicle detection technology. Working closely with innovators 
at the University of California at Berkeley, our team developed 
wireless sensor technology to simplify the detection of vehicles. These 
sensors, now deployed in 30 States and 20 countries, are a key element 
in intelligent transportation systems, resulting in reduced congestion, 
travel times and greenhouse gas emissions.
    The deployment and lifecycle of many of these technologies is often 
20 to 30 years or more. Policy measures that create clear, predictable, 
long-term economic incentives are critical to stimulating private 
investment and to enabling the provision of capital and technology in 
both the developed and developing world. Public policy can help manage 
the technical risks through large-scale demonstration projects and loan 
guarantees.
    An example of Siemens' cross-border R&D collaboration is in the 
area of high performance, low-energy buildings. It is estimated that 
buildings account for some 38 percent of greenhouse gas emissions. 
Research conducted by the Intergovernmental Panel on Climate Change 
(IPCC) estimated that approximately 30 percent of the baseline of 
carbon dioxide emissions in buildings could be mitigated in a cost 
effective way. (See ``Sectoral Trends in Global Energy Use and 
Greenhouse Gas Emissions,'' Price, L., et al, Lawrence Berkeley 
National Lab 2006, and IPCC 2007 Assessment Report, Working Group 3, 
Mitigation.) Building performance currently varies by more than 50 
percent from best in class to average. At Siemens, we have been 
involved in a substantial research project with partners in 
Switzerland, the University of California, at Berkeley, Tshingua 
University (China) and our own labs on several continents. This global 
project team has developed a high performance building concept. The 
challenge now is to prove the concept and make it commercially viable. 
Here, multinational public funding could provide the necessary 
resources for a demonstration project and ultimately widespread 
implementation.
    While we strongly believe in the role of the private sector in the 
development and deployment of technologies related to climate change, 
it is clear that the role of the public sector is also extremely 
important, particularly in providing substantial government and 
multilateral funding. The transfer, development and deployment of 
technology is not painless, automatic, nor without cost. From Siemens' 
perspective, technology deployment is based on the cost attractiveness 
of the technology in relation to the alternatives as well as mitigating 
the risks. The Stern Review has concluded that funding toward 
deployment alone should increase two to five times globally from 
current levels of around $33 billion per year. (``The Economics of 
Climate Change: The Stern Review,'' Nicholas Herbert Stern, 2007).
    To this must be added substantial funding increases necessary to 
support basic research and innovation at the speed required to meet 
goals for reduction in greenhouse gas emissions and to make sure that 
research takes place even in those situations where a particular 
technology may not be commercially viable. Public-private partnerships, 
technology cooperation, and funding for joint research institutes can 
all contribute to meeting the demand for technology innovation, 
deployment and transfer. Major infrastructure investments must be made, 
for instance, to facilitate the deployment of renewable electricity and 
Smart Grid technology. Price signals in the market need to be stable 
and predictable over the long term in order to spur investment in these 
and other clean technologies. Fiscal incentives also play an important 
role, but need the same long-term focus to enable transfer of 
technologies with 20- to 30-year lifecycles to the developed and 
developing world.
    I would also like to direct the committee's attention to the 
fundamental role of intellectual property (IP) rights as they relate to 
technology transfer and deployment as this has become an area of 
increasing discussion lately. IP is a proven means of incentivizing the 
R&D needed to generate not only technological breakthroughs but also 
the continuous stream of innovation that builds upon and improves 
existing ideas. By allowing innovators to realize the value of their 
R&D investments, IP stimulates investment in innovation that otherwise 
might not occur. Importantly, IP provides a legal framework coupled 
with economic incentives that encourages companies and individual 
innovators to share and exchange their technology and know-how, rather 
than guarding their inventions and innovations closely as trade secrets 
for fear of the risk of misappropriation via compulsory licensing or 
unauthorized use. Intellectual property protection has helped foster 
not only technology development, but robust competition, in deploying 
climate change solutions in developed and developing countries. There 
is no better system to incentivize innovation globally than the 
guarantee provided by robust IP protection.
    Finally, I would like to emphasize the role of a well-designed 
carbon market. Such a market will play a crucial role in providing 
incentives for all businesses and households to become energy 
efficient. The United States, and in fact the world, needs a framework 
that includes a mix of short-term goals and incentives for immediate 
action, as well as mid and long-term goals and incentives to provide 
certainty for investment. Innovation is driven not only by smart ideas 
but also by a market hungry for technology.
    Siemens joined the United States Climate Action Partnership 
(USCAP), a coalition comprised of our business competitors, customers 
in various sectors and friends in the environmental community to 
develop recommendations for a carbon market framework. Within the 
recommendations contained in USCAP's ``Blueprint for Legislative 
Action'' released in January of this year is a set of International 
Principles relevant to the hearing today.
    First, USCAP believes that the United States demonstrating its 
leadership by adopting mandatory U.S. climate policy is essential for 
establishing an equitable and effective international policy framework 
for action by all emitting countries. In addition, the mechanisms that 
Congress establishes as part of domestic legislation can play a crucial 
role in encouraging broad international action, and thus, creating 
markets for technology. For instance, provisions and criteria for 
linkage of U.S. systems to other cap-and-trade systems can facilitate a 
strong incentive for emerging economies to adopt measurable and 
verifiable commitments to cap and reduce their emissions in order to 
gain access to the U.S. greenhouse gas market.
    In conclusion, I would like to underscore that the establishment of 
technology transfer provisions related to climate change are critical 
to addressing these challenges. Siemens' focus on our environmental 
portfolio of products, services and technologies and our experience as 
part of the U.S. scientific and engineering community also makes us 
believe strongly that America can enhance its technology leadership by 
supporting the innovation engine here at home. We are in a global 
competition; the emerging, high-growth economies have been and are 
continuing to invest aggressively in their technological 
infrastructure. In addition to a global agreement on climate change, 
spurring investment in--and reducing the risk of--technology 
development, as well as the deployment of existing environmentally 
friendly technologies, will help new businesses to grow and thrive here 
in the United States.

    The Chairman. Thank you, Mr. Camuti.
    Mr. Helme.

STATEMENT OF NED HELME, PRESIDENT, CENTER FOR CLEAN AIR POLICY, 
                         WASHINGTON, DC

    Mr. Helme. Thank you, Mr. Chairman. It's a pleasure to have 
a chance to testify before you this morning.
    I'm Ned Helme. I'm the president of the Center for Clean 
Air Policy, and we're an environmental think tank based here in 
Washington and in Brussels, and we work extensively in China, 
Brazil, Mexico, India, and California, working with governments 
to design carbon programs, climate programs. In addition, we 
bring together, several times a year, 30 heads of delegation to 
the UNFCC negotiations for off-the-record discussions about the 
key issues that are pending in the negotiations. So, we have a 
good sense of the pulse of where things are.
    I want to make four points today. First, I want to talk 
about the Bali Action Plan and distinguish that from Kyoto, to 
make clear to you that this is a major departure. We're talking 
about an opportunity now where developing countries are going 
to take significant action, which, of course, wasn't part of 
Kyoto.
    Second, I want to build on your point earlier, Mr. 
Chairman, that developing countries are, indeed, taking a lot 
of action already, and it's not just action that is being 
generated to sell credits in a CDM market. They are taking 
action on their own as a contribution to the protection of the 
atmosphere--a very important point.
    Third, I want to talk a little bit about the Copenhagen 
agreement. I think it'll have two key parts. One will be 
targets for the Annex 1 countries, a next set of goals; and the 
other will be an architecture for these developing countries to 
deal with the ``common, but differentiated'' responsibilities 
we talked about earlier in this first panel, that sets a 
process for developing countries to set these mitigation 
actions and to receive the financing to make them go.
    Finally, I want to talk about the role for the United 
States and Annex 1 developed countries. Two key questions: What 
target do we take? How do we handle the finance?--as Senator 
Lugar was talking about earlier.
    OK, let me go right to the point about Bali. This package 
in Bali has two tracks. It basically says developing countries 
will take nationally appropriate mitigation actions that'll be 
verifiable and contingent on receiving financial support for 
technology and for capacity-building. That's the quid pro quo. 
And that financial support is also verifiable. That's the heart 
of the deal.
    In terms of the story on emissions, as you pointed out, Mr. 
Chairman, China is already very active. The program that you 
talked about, the 20-percent energy-intensity program that they 
have underway, that they'll reach in 2010, would produce 1\1/2\ 
billion tons of reductions. To give you some context, that's 20 
percent of our national emissions, so it's a very significant 
reduction.
    Couple that with what Mexico and what Brazil are doing. If 
you look on page six of my testimony, you can see that those 
three developing countries are doing as much in reductions by 
2010 as the EU would do with its new target for 2020 and as we 
would do under the Lieberman-Warner bill, and probably under 
the Waxman-Markey--though we haven't seen the final numbers on 
Waxman-Markey. But, the bottom line here is that these 
reductions are unilateral reductions by these countries, not 
reductions they're being paid for by the CDM, and they're also 
of a size comparable to what we're talking about from Europe 
and from the United States. So, it's a very significant 
program.
    And to build on what you all were saying earlier. China, 
the
No. 1 investor in renewable energy last year. They will 
displace Germany as the highest spender, in terms of percentage 
GDP, on renewables of any country in the world next year. So, 
very significant. On cars, they are 10 years ahead of us. Our 
new CAFE standards are 35 miles to the gallon; they're doing 
that now. And they, last year, put in an $8,000 vehicle tax on 
SUVs. Obviously, there's some advantage to the command-and-
control system; you can move tax a lot faster than we can. But, 
it sends you--it tells you how significant this effort is.
    Brazil, similarly, reduced several hundred million tons of 
emissions in the reduced deforestation in the last 2 years. 
They have the best program in the world today, with a satellite 
monitoring of the entire forest area of Brazil. They have a 
national number, which we don't have in the United States, for 
how much is happening, in terms of net flows from the carbon 
and the other agricultural activities in Brazil. And they 
follow it up. Every 2 weeks, they get a satellite survey. The 
police are out there arresting people when there's big 
deforestation. Very effective program. So, there's some real 
stuff on the ground that often goes missed here in this country 
when we talk about these issues.
    So, building on that, this Bali plan is basically saying, 
``We're going to create nationally appropriate mitigation 
actions,'' NAMAs, that's the new rhetoric. When you hear people 
say ``NAMAs,'' that's the new acronym, a new lingo of the 
international negotiations. NAMAs probably take three forms. 
One is the unilateral actions I was just talking about. The 
second is conditional actions, where I say--I'm a developing 
country, I'll go further if I see the financing. And that's the 
heart of this Bali negotiation, this Copenhagen negotiation. 
And then, the type is for crediting? Can I set a target, above 
a baseline that, if I exceed--by doing a program that's strong 
enough, I then can generate carbon credits.
    So, no more CDM in the future for a lot of these big 
countries; it's now more about ``let's get the whole sector 
in.'' Today, if a developing country has a good plant and it 
does good deeds, they get some credits, even if you've got 
three plants over here, polluting out the wazoo.
    In this new world of sectoral agreements, that Mr. Casey 
was talking about, you will be required to look at what happens 
in the entire sector, all the plants, just like we do in the 
United States. So, very promising, in terms of the potential 
direction.
    Let me give you one more example. Mexico, in Poznan in 
December, announced what this means in real terms. And we need 
some delegates talking about these concepts--NAMAs and so on. 
What does it mean on the ground? Mexico said, ``All right, 
we'll make it clear. Four sectors: cement, steel, oil refining, 
electricity. We will set intensity targets in every one of 
those sectors. We will make them more stringent if you send us 
some money in the form of loans to help us. And we exceed that 
level, we'll generate credits, and we'll do it through cap and 
trade.'' So, a very strong program in Mexico, and it gives you 
a concrete example of what's possible in this negotiation.
    Let me pivot to the second half of this issue, which is, 
What about the Annex 1 countries? What about the developed 
nations and the targets? I was encouraged by Todd Stern's 
comments about the U.S. target, because, frankly, the U.S. 
target in 1990 levels is not going to cut it. If we look at the 
numbers we need, in terms of reductions, to get to stay on 
track for 2 degrees Centigrade by 2050, we've got to do better 
than that, because everybody else is watching. As you said, Mr. 
Chairman, all eyes are on the United States. We had a great 
honeymoon 2 weeks ago in Bonn. Everybody was really happy. The 
President was making speeches, a number of countries. Great 
stuff. I mean, everybody was very excited about it. Now we get 
to the real game. What is our target? Mr. Corker's questions.
    And I think--I was also encouraged by Todd Stern's comments 
that he sees the Waxman target as in the same ballpark as what 
the administration has been talking about. I see it as very 
significantly stronger and a much better card to play in the 
international negotiations, because they're talking about a 
deeper target for the United States and, in addition, a 
significant supplemental reduction by investing in 
deforestation programs in places like Brazil and Bolivia and 
Indonesia.
    And this is new ground. This is an innovative idea that I 
think really is deserving of a lot of attention. What they're 
basically saying is, ``We'll do our target in the United 
States. We'll get our reduction. We'll have some offsets. But, 
we'll also take a chunk of allowances, 5 percent of the 
allowances, we'll turn that into cash, and we'll invest that in 
Brazil, in these countries, in programs to reduce 
deforestation. And now we'll produce additional reductions that 
are not offsets.'' This is not about what Mr. Menendez was 
talking about, ``I need more offsets.'' This is about net 
reductions to protect the atmosphere, in addition to the U.S. 
target. And I think that's the right way to go with forestry.
    I mean, I heard Mr. Menendez and Mr. Corker saying they 
felt offsets were a better way to go. Our personal view is, 
this program is not the same thing as putting scrubbers on 
powerplants. This is a social program. This is about convincing 
little landowners in the Amazon to not chop down the trees to 
raise three or four cattle--three or four cows. Basically, 
we're talking about a social program, where we're investing in 
paying them for environmental services so they stop cutting 
down the forest. And that's not the same thing as putting 
widgets on smokestacks, so that's not something I want in the 
carbon market at the start. I want to be sure that this thing 
works, that the numbers add up, and so on, before I put this in 
the carbon market. And the Waxman-Markey bill puts that out 
there; it says we're going to have this separate goal, we're 
going to put some investment directly in deforestation that's 
not about offsets, that gets us more toward the environmental 
goal we need.
    And it helps us in terms of cost. Because you can say, 
well--take Mr. Menendez's point, let's make this a tougher U.S. 
target, take the U.S. target down another 10 percent, and say 
that much more of this forestry can be scored in the U.S. game. 
Sounds good at first glance, but remember, if that program 
doesn't materialize in Brazil, I've got a 10-percent tougher 
target on all those United States companies, and I've got no 
place to go to get those reductions. So, I don't want to bet 
the store on setting that tougher target and coming up with 
those reductions. I'd much rather put the money in Brazil, in 
the countries that know what they're doing, develop a program, 
prove it works, then we can come back and look at the carbon 
market in 2020 and say, ``All right, at this point we'll bring 
it in.''
    But, I think there's a really important piece here of 
taking some allowances, putting that revenue on the table, 
spending it on deforestation programs in these countries, and 
making something happen.
    That takes me to the last point, which is the finance 
question. And Mr. Lugar said, you know, the key is, How do we 
incentivize low-carbon strategies? He's right on the money. 
That's our No. 1 issue here. And, I think, again, there's a 
real opportunity here to do it with technology. We can, again, 
take a chunk of the allowances, use that revenue to invest in 
advanced technologies. When Mr. Xia was here--I think he met 
with you, Chairman--a few weeks ago from China. He was very 
clear. He said, ``Look, we're ready to go further. We've done a 
billion and a half tons in energy efficiency. We'll do more in 
the next round. We'll do more on renewables. We're committed to 
renewables. And we don't need your money for that. What we want 
your money for is, those very expensive technologies we can't 
do today, those advanced wind technologies, carbon capture and 
storage. That's what we want the money for. We want help to 
write down the cost--we don't want free technology, we want 
affordable technology, and we want to see it developed.''
    In the past, we would have said, ``We'll build that in the 
United States. Twenty-five years later, we'll build it in China 
and India. We can't afford that. We're building a coal plant a 
week in China. If we're going to turn this around, we've got to 
build that technology, that CCS, here in Ohio, and all--and 
Indiana--and also in China, at the same time. We can't afford 
to wait 25 years to have this work.'' And I think that's the 
place to go.
    And I think, you know, when we talk about financing--Todd 
said, ``Well''--he said, ``You know, these developing countries 
are calling for huge amounts of--1 percent of GDP.'' I think 
that's ridiculous. When you get down to the bottom line, 
Minister Xia puts it on the table. He's saying, ``I don't need 
buckets of money. I need some help with really expensive 
technology that's very promising that I can't build 
commercially today in China.'' That's not big handouts.
    Mexico's program, they're asking for loans; they're not 
asking for any grants.
    So, I think we've got to be careful of the rhetoric of the 
UNFCC and the reality of what we really need, here. And I think 
it's very promising.
    So, I'm very encouraged. I think the administration's off 
to a great start, and I certainly commend the committee for 
your leadership in the past on this issue of finance. I mean, 
you guys are the ones who understand this international game 
the best, and you can really help, as you know, sell this idea. 
We're not talking about paying for technologies that improve 
our competitors' ability to beat us. We're not talking about 
that. We're talking about carbon capture and storage, which 
makes the plants less efficient, but helps us, from the carbon 
perspective. So, we're not talking about putting money in the 
hands of the steel industry to beat Mr. Casey's companies in 
Pennsylvania. We're talking about the advanced stuff.
    So, let me stop there. Thank you.
    The Chairman. Thank you very much.
    Mr. Helme. And I'd like to include, for the record a paper 
on financing, which I couldn't cover in my testimony, if I 
could.
    The Chairman. It will be included in the record, and we 
appreciate it very much.
    Mr. Helme. Thank you.
    The prepared statement of Mr. Helme follows:]

Prepared Statement of Ned Helme, President, Center for Clean Air Policy 
                         (CCAP), Washington, DC

    Mr. Chairman, Ranking Member Lugar, and members of the committee, I 
would like to thank you for the opportunity to testify before you 
today. My name is Ned Helme and I am the President of the Center for 
Clean Air Policy (CCAP), a Washington, DC, and Brussels-based 
environmental think tank with on-the-ground programs in New York, San 
Francisco, Mexico City, Beijing, Jakarta, and many other places.
    Since 1985, CCAP has been a recognized world leader in climate and 
air quality policy and is the only independent, nonprofit think tank 
working exclusively on those issues at the local, national, and 
international levels. We are committed to advancing pragmatic and 
market-based climate solutions that balance both environmental and 
economic interests.
    CCAP is actively working on national legislation in the United 
States (U.S.) and is advising European governments as well as 
developing countries such as China, Brazil, and Mexico on climate and 
energy policy. Our behind-the-scenes dialogues educate policymakers and 
help them find economically and politically workable solutions. Our 
Future Action Dialogue provides in-depth analyses and a ``shadow 
process'' for climate negotiators from 30 nations around the world to 
help them develop the post-2012 international response to climate 
change. It has produced important agreements among key nations on 
emissions trading, the design of the United Nations' Clean Development 
Mechanism, and key features of the Bali Action Plan.
    In our work with the developing countries, nationally appropriate 
mitigation actions in key sectors (focusing on major industrial sectors 
and forestry) have emerged as the most promising approach to the post-
2012 international climate change agreement because they both raise the 
bar on developing countries' performance and fit well with how 
developing countries view their role in an international agreement.
    In December of this year, all eyes will be on Copenhagen, Denmark, 
where we have the first opportunity to reach a truly global accord on 
climate change mitigation and adaptation.
    In my time today, I would like to emphasize a few key points:

   The Bali roadmap is the breakthrough developed countries 
        have been waiting for that makes the agreement in Copenhagen 
        most likely very different from the agreement in Kyoto in 1997 
        and will bring meaningful developing country actions into the 
        agreement.
   Developing countries are taking action already and are 
        prepared to take additional measurable, reportable and 
        verifiable actions contingent on receiving support from 
        developed nations for capacity-building, technology, and 
        finance.
   The objective in Copenhagen is to agree on new green house 
        gas (GHG) reduction goals along with a new architecture to 
        govern developing country action in the post-2012 framework, 
        and
   The willingness of the U.S. and other developed countries to 
        propose and enact meaningful domestic national emissions 
        reduction targets and provide financing to support additional 
        developing country action are the linchpins for a successful 
        outcome in Copenhagen.

  1. A HISTORIC OPPORTUNITY: THE BALI ACTION PLAN RAISES THE BAR FOR 
       DEVELOPING COUNTRY PARTICIPATION IN A GLOBAL CLIMATE PACT

    The U.S., as almost all other countries of the world, is a 
signatory to the 1992 United Nations Framework Convention on Climate 
Change (UNFCCC). The U.S. Senate ratified the treaty in 1994. The 
UNFCCC calls for international climate policy ``to prevent dangerous 
anthropogenic [human] interference with the climate system'' (UNFCCC, 
Art. 2). To prevent dangerous climate change, the Intergovernmental 
Panel on Climate Change calls for keeping worldwide temperature 
increase below 2 C (3.6 F) during the course of this century.
    The Bali Action Plan, which the U.S. and other developed and 
developing countries agreed upon in December 2007, makes the 
negotiations going into Copenhagen notably different than those in 1997 
in Kyoto. The Bali Action Plan builds on the key principle in Article 3 
of the United Nations Framework Convention on Climate Change (UNFCCC), 
``The Parties should protect the climate system . . . on the basis of 
equity and in accordance with their common but differentiated 
responsibilities and respective capabilities.''
    However, it goes much further and establishes for the first time 
that the negotiation process will cover both developed and developing 
country actions to mitigate climate change. It also importantly sets up 
much stronger accountability by calling for developing countries to 
consider: ``Nationally appropriate mitigation actions in the context of 
sustainable development, supported and enabled by technology, financing 
and capacity-building, in a measurable, reportable and verifiable 
manner.'' In effect, both the actions and the support are to be 
measured, reported, and verified. It is important that we understand 
this link as the basis of the Copenhagen deal.
    The U.N. talks earlier this month in Bonn, Germany, were the first 
in a series of meetings this year scheduled in the runup to Copenhagen. 
The next round of negotiations will be held in Bonn, Germany, on June 
1-12, followed by several other 85 meetings before December. In June, 
the first drafts of negotiating texts for the Copenhagen agreement will 
need to be on the table, as UNFCCC rules require.
    The accord in Copenhagen is likely to be an agreement on the basic 
policy architecture for both developed and developing countries for 
action beginning in 2013. Many of the details of the accord will be 
worked out during 2010 and 2011 (the same way the Marrakech Accords 
were for the Kyoto Protocol). The agreement can be expected to have 
three critical components:

   Developed country absolute emission reduction commitments 
        for 2020 and possibly 2030;
   A new architecture for developing country actions and their 
        finance and verification; and
   Developed country financing commitments for clean 
        technology, deforestation, and adaptation to help developing 
        countries go beyond their voluntary/unilateral reduction 
        commitments.

    The process will also need to have produced a strong sense of the 
overall scope of likely developing country actions and of the aggregate 
emissions reductions that can be expected from those actions.
    The Chinese Minister and Vice Chairman of the National Development 
and Reform Commission (the most powerful Chinese Agency), Mr. XIE 
Zhenhua, in his recent visit to Washington, DC, referred to this basic 
new agreement framework by describing that China would toughen and 
extend to 2020 their already bold goal of improving energy intensity by 
20 percent across the economy by 2010 and increase their 15-percent 
renewable energy 2020 target in return for financial assistance to 
develop advanced innovative technologies.

2. DEVELOPING COUNTRIES' ACTIONS AND ELEMENTS OF A GLOBALLY ACCEPTABLE 
                              CLIMATE DEAL
    CCAP's extensive policy work in key developing countries has shown 
that developing countries are doing more to reduce the growth in their 
emissions than conventional wisdom here in the United States would 
suggest. China, Brazil, and Mexico have already put in place national 
laws that collectively, if fully implemented, will reduce the projected 
growth in emissions by more aggregate tons in 2010 than the reductions 
the Lieberman-Warner bill (S. 2191 of the 110th Congress) was projected 
to achieve by 2015 and by almost as many tons as the European Union's 
30 percent reduction pledge for 2020 (Figure 1).



    Figure 1. Emissions reductions from BAU for full implementation of 
proposed measures (CCAP, 2009).

    Nevertheless, the outlook for developing country CO2 emissions 
growth remains substantial in the aggregate and as a percentage of 
global emissions (Figure 2). In 2000, developing country emissions from 
fossil fuels and industrial processes were roughly 40 percent of global 
emissions. By 2050, developing country emissions are expected to grow 
to 64 percent of global emissions. If we want to keep global warming 
below 2 C (3.6 F), we cannot allow this to happen but need 
substantial cuts in these parts of the world as well.



    Figure 2. Fossil Fuel and Industrial Process CO2 Emissions by 
Region in 2000 (solid bars) and 2050 (checkered bars). (U.S. Climate 
Change Science Program. 2007. ``Scenarios of Greenhouse Gas Emissions 
and Atmospheric Concentrations; MINICAM Results.'')

    The Bali Action Plan's concept of ``Nationally Appropriate 
Mitigation Actions'' (NAMAs) provides needed incentives to encourage 
developing countries to make those reductions. Discussions since Bali 
have begun to define a menu of options for what actions will constitute 
NAMAs. It is expected that each developing country will choose those 
actions that make the most sense for its own circumstances, just as we 
will do in the U.S.
    South Korea and South Africa have suggested there could be three 
types of NAMAs: Unilateral actions that developing countries will take 
on their own without any assistance; conditional actions they will take 
conditioned on receiving financial and technology assistance from 
developed countries; and emission credit generating policies--where 
credits may be earned and sold in the international market if the 
country exceeds the goal it has set.
    Although all developing countries will be encouraged to implement 
NAMAs, the main focus appropriately will be on the 6 to 10 largest 
emitting economies in the developing world which, when combined with 
developed nations, are responsible for 80-90 percent of the emissions 
in key industrial sectors. Reaching agreement on specific actions in 
these countries and on the support for those actions from developed 
nations will be the key to the Copenhagen agreement.
    The Kyoto Protocol has long been criticized in the U.S. and 
elsewhere because it does not require explicit emission reductions by 
developing countries. Instead, it rewards developing countries who 
implement specific emission-reducing projects with emission credits 
through the Clean Development Mechanism (CDM) that they may sell to 
developed countries or to companies and individuals within such 
countries. These credits in effect substitute for or ``offset'' 
required domestic carbon reductions in developed nations. By purchasing 
these credits, developed nations are paying the full market cost of 
these emission reductions. This reduces the cost of compliance with 
Kyoto targets, but it does not increase the net reduction in emissions 
beyond the level that would otherwise be achieved by compliance in 
developed nations.
    The Kyoto Protocol does not contain any explicit system for 
recognizing actions taken by developing countries to reduce GHG 
emissions outside the CDM. One of the tests of any agreement in 
Copenhagen will be whether it creates a system for recognizing 
unilateral actions by developing nations to reduce their emissions that 
constitute their contribution toward protecting the climate. A large 
portion of the nearly 2 billion tons of projected reductions in 
emissions growth by China, Brazil, and Mexico that I detailed for you 
earlier in Figure 1 of my testimony are unilateral reductions that 
contribute to protection of the climate, not reductions that generate 
credits for sale to developed nations under the CDM. These unilateral 
actions are one form of a NAMA. Negotiators have proposed creating a 
formal registry in the UNFCCC that will record these and other NAMAs 
proposed by developing nations.
    Recent actions by key developing countries give us a sense of what 
some of these actions or NAMAs might look like. For example, in Poznan, 
Poland, in December 2008, Mexico took a significant step, announcing 
its plans to set a national aspirational goal to reduce absolute 
emissions by 50 percent below 2000 levels by 2050. It also announced 
plans to set emission goals for four key industrial sectors--cement, 
steel, aluminum, and electricity--and to achieve these goals through a 
domestic cap and trade program. It suggested an initial reduction 
target that it would undertake unilaterally in each sector and 
suggested that each sectoral target could be made more stringent if 
developed nations provided focused loan support (to overcome domestic 
financing barriers) in the post-2012 agreement. Mexico has also created 
and financed its own Energy Transition Fund of three billion Mexican 
pesos a year for 3 years (about $210 million annually) to provide 
incentives for more aggressive emissions reduction activities.
    There are two key elements here that distinguish the Mexican 
proposal from today's CDM approach:

--First, the support for a more stringent sectorwide policy involves 
    loans, not full payment for the incremental emissions reductions, 
    and
--Second, it does not involve any generation of offset credits for 
    developed nations in meeting the new more stringent target. All of 
    these reductions will help reduce global aggregate emissions to 
    safe levels rather than replacing or offsetting required reductions 
    by developed nations. Offset credits would be generated only if the 
    sector (e.g. Mexican oil refining) reduces its emissions in 
    aggregate below the sectoral cap level. The heart of this program 
    is then to generate a Mexican net contribution to the protection of 
    the climate.

    China also has taken bold action to reduce emissions. The 
government released its climate plan in 2007 and has set an aggressive 
goal to reduce its energy use per unit of GDP by 20 percent between 
2006 and 2010. In the plan's first year in 2006, China fell short of 
its 4-percent per year goal, but in 2007 and 2008 it has reached the 
aggregate 8-percent reduction for those 2 years. If fully achieved, 
this goal alone would reduce GHG emissions by more than 1.5 billion 
metric tons of CO2 from business as usual annually by 2010. The plan 
also includes measures to: Increase the use of renewable and nuclear 
energy; recover and use methane from coal beds, coal mines and 
landfills; increase the development and use of bioenergy; utilize clean 
coal technologies; improve agricultural practices; and plant forests. 
China led the world in renewables investment in 2007 with over $10.8 
billion; it is projected to displace Germany as the world leader in 
investment in renewables as a percentage of GNP in 2010 and has already 
exceeded its 2010 goals for additions of wind generation capacity. Its 
vehicle efficiency standards are 10 years ahead of the new U.S. 
standard already and excise taxes on SUVs were recently doubled to more 
than $8,000 per vehicle. It has retired scores of inefficient coal 
powerplants, cement kilns, and steel mills in the last several years.
    South Africa has analyzed a number of long-term mitigation 
scenarios. It has announced its intent to peak its emissions no later 
than 2025 and expects to have a final domestic climate policy adopted 
by the end of 2010. South Africa also continues to implement 
sustainable development policies and measures that will reduce GHG 
emissions. These policies and measures include moving from traditional 
coal-fired electricity production to renewables, nuclear power and 
clean coal technologies, improving energy efficiency and improving the 
efficiency of the transportation system.
    Brazil has released a climate plan that emphasizes energy 
efficiency and reducing emissions from deforestation, including a goal 
to reduce the average deforestation rate by 70 percent over the period 
2006-2017. It would lower CO2 emissions by about 413 million metric 
tons CO2 in 2010 (roughly one quarter of the emissions reduction 
expected in the Lieberman-Warner bill by 2015) and by a total of 4.8 
billion metric tons CO2 over the 12-year life of the program. In the 
last 2 years, Brazil has reduced deforestation by more than 250 million 
tons of CO2 equivalent through incentives for landowners and aggressive 
enforcement against those who deforest illegally.
    South Korea intends to announce a long-term, economywide target for 
emissions reductions later this year. South Korea is already a global 
leader in the efficiency of its production in the major heavy 
industrial sectors, so its new effort will focus on domestic energy use 
and transportation-related emissions.
    Each of these efforts by key developing countries can fall into one 
of the three categories (unilateral, conditional, and credit-
generating) of nationally appropriate mitigation actions (NAMAs) which 
are now the central focus of the international climate negotiations. 
The new policy architecture will likely create a U.N. registry where 
these NAMAs will be recorded.
    The purposes of such a registry could include:

--Providing recognition of developing countries' unilateral actions--in 
    the current UNFCCC there is no such place;
--Listing developing countries proposals for more aggressive actions 
    along with requests for developed country assistance to incentivize 
    that action;
--Listing completed agreements on which NAMAs will be supported, by 
    whom, for what, and at what level; and
--Recording decisions for crediting baselines for NAMAs that are 
    authorized to generate carbon credits.

    The next critical steps in the negotiations will be to decide on 
the governance for the matching of developing countries NAMAS and 
developed countries assistance funds, and on the process for 
establishing NAMA crediting baselines.
    As widely agreed in the negotiations, the basic characteristics of 
the governance process should be:

--Effective, efficient, equitable, and transparent;
--Objective criteria for evaluation of conditional NAMAs (as opposed to 
    a project by project approval process); and
--Effective matching of conditional NAMAs financing needs and available 
    funds.

    The debate on these key issues is just beginning, and a variety of 
existing and new governance entities and processes are under 
consideration including the Global Environment Facility (GEF), the 
World Bank, the CDM Executive Board, the Montreal Protocol's 
Multilateral Fund, and the new UNFCCC Adaptation Fund.
    Some countries including developing nations prefer to decide 
separately (i.e., outside the NAMA-fund matching body) where to set a 
sectoral crediting baseline for a NAMA. They favor an approach of 
having one entity comprised of donors and developing countries to 
handle the matching and a separate ``Super CDM Executive Board'' to 
decide the sectoral crediting baselines. Developing countries through 
the G77 have proposed having separate entities to handle capacity-
building, technology, and mitigation respectively.
    In addition, the Bali Action Plan calls for monitoring, reporting, 
and verification of both the NAMAs and the provision of finance by 
developed nations. However, little detail is provided in the action 
plan regarding the forms that potential financial assistance could 
take, or on how private investment can be stimulated to assist in this 
effort.
    In short, many key issues remain to be settled between now and 
Copenhagen. An attractive idea proposed by CCAP is to give the process 
a ``fast start'' after Copenhagen (by getting agreements on key NAMAs 
and their finance) so that countries can have some sense by late 2010 
or early 2011 what the size of the major developing countries' actions 
are likely to be in aggregate. This will be a key to the success of the 
ratification process.

 3. U.S. AND DEVELOPED COUNTRIES' EMISSIONS AND FINANCING COMMITMENTS 
               ARE CRITICAL TO AN AGREEMENT IN COPENHAGEN
    Strong commitments and actions from developed countries on their 
emissions targets and on financing for developing countries are needed 
to reach an agreement in Copenhagen. Developed countries, including the 
U.S., are expected to agree to national, quantified GHG emission 
reduction targets in Copenhagen. The stronger the proposed U.S. target, 
the greater the likelihood of stronger developing country actions. 
Although it would be ideal if the U.S. could pass domestic legislation 
setting out its emissions reduction targets before Copenhagen, in my 
view that is not necessary to reach a deal in Copenhagen. What is 
needed is sufficient action in both the House and Senate to give our 
negotiators a good sense of where our national cap is likely to be set.
    One only needs to look at the impact of the United States recent 
decision to reverse its position and support the development of a new 
international agreement to reduce mercury emissions \1\ to understand 
the implications of U.S. engagement. Almost immediately after the U.S. 
decided to support the development of a new agreement, China and then 
India supported the process as well.
---------------------------------------------------------------------------
    \1\ ``Final Omnibus Decision on Chemicals Management'' (UNEP/GC/25/
CW/L.4) adopted by 25th session of the Governing Council/Global 
Ministerial Environment Forum.
---------------------------------------------------------------------------
    For developing nations, participation in a global accord is 
contingent on developed nations' providing meaningful financing 
assistance as was agreed to most recently in the Bali Action Plan. If 
done well, developed country financing will support the sectoral NAMAs 
discussed earlier and not only bring developing countries into a global 
accord for the first time, but do so in a way that raises the bar on 
their performance and accelerates the pace of deployment of advanced 
carbon reducing technologies.

What targets are other developed countries proposing?
    The European Union has already committed to reduce emissions 20 
percent below 1990 levels in 2020 on its own, and increase its target 
to 30 percent below 1990 levels if other countries join. Australia also 
announced a national target in its recent submission to the UNFCCC. The 
Australian Government committed to reduce Australia's emissions by 5 
percent below 2000 levels by 2020. Accordingly, emissions will peak in 
2010 and fall thereafter, with a long-term goal of national emissions 
reductions by 60 percent of 2000 levels by 2050. Like the EU, Australia 
is willing to commit to more stringent emission reductions (15 percent 
below 2000 levels by 2020) as part of an international agreement.
    Japan is expected to announce a 2020 target by June, but has 
committed to 80 percent reduction below 1990 levels by 2050. Canada has 
adopted a 20-percent reduction below 2006 levels by 2020 and a 60-70 
percent reduction below by 2050. The decisions of both these countries 
on their final target level could be strongly influenced by the U.S. 
choice of cap level, much as developing country action will be 
affected.
    Other industrialized countries have set more ambitious 
industrialized targets: Norway, for example, intends to cut its 
emissions 30 percent below 1990 levels by 2020 and to become a totally 
carbon-neutral nation by 2030. It currently has in place a substantial 
carbon tax as well as a cap-and-trade program for CO2, while 
maintaining its major role in international oil and gas production.

What target should the U.S. adopt?
    The Bali Action Plan calls for comparable actions across developed 
countries. Parties are still analyzing various indicators of 
comparability. Australia proposes the economic costs of mitigation as 
one of the relevant indicators for comparable effort. The EU is 
proposing a different system of comparability using four separate 
criteria, including: The capability to pay for domestic emission 
reductions and to purchase emission reduction credits from developing 
countries; the GHG emission reduction potential; domestic early action 
to reduce GHG emissions; and national circumstances such as population 
trends.
    Based on a modeling study by Michel den Elzen of the Netherlands 
Environmental Assessment Agency that compared developed countries on 
the basis of six different comparability metrics, if developed 
countries collectively agree to reduce emissions by 20 percent below 
1990 levels by 2020, based on the metrics evaluated, the U.S. share 
would come to roughly 1990 levels--as President Obama has suggested--
while an equivalent reduction for the EU, for example, would range from 
20 to 25 percent below 1990 levels.
    This, however, will not be enough to avoid the worst effects of 
climate change. Mainstream science suggests that global emissions would 
have to peak by 2020, and some scientists believe that this means that 
developed countries collectively would have to reduce their GHG 
emissions by 25-40 percent by 2020. According to the den Elzen 
analysis, if Annex I countries collectively agree to reduce emissions 
by 30 percent below 1990 levels by 2020, comparable effort across the 
range of metrics evaluated will require the U.S. to reduce to between 
10 and 20 percent below 1990 emission levels, and the EU to reduce by 
30 to more than 40 percent below 1990 levels.\2\
---------------------------------------------------------------------------
    \2\ Source: den Elzen, Michel, ``Exploring Comparable Post-2012 
Reduction Efforts for Annex I Countries,'' CCAP Future Action Dialogue, 
Wellington, New Zealand, 2-4 February 2009.
---------------------------------------------------------------------------
    In short, while the Obama administration deserves great credit for 
putting the U.S. back on the proverbial map with its proposal for 
reducing emissions to 1990 levels by 2020, we will need to do a bit 
more. As the den Elzen analysis suggests, the U.S. does not need to 
take the same percentage reduction target as Europe or Norway, but we 
do need to make a comparable effort in terms of the economic effort we 
put forward if we are to keep the globe on track to hold temperature 
increases in the 2 degrees Centigrade range most scientists recommend. 
That means reducing emissions below 1990 levels by 2020 in the U.S.
    Before Senators despair of the potential cost of going well below 
1990 levels, I want to call your attention to an innovative approach 
championed by Representatives Waxman (D-CA) and Markey (D-MA) in their 
recently introduced discussion draft. Simply put, the emission 
reduction target does not need to be confined solely to what a country 
proposes to achieve within its own borders. They suggest additional 
reductions should be achieved in developing countries by supporting 
efforts to reduce the rate of deforestation. These reductions would not 
be a substitute or offset for domestic emission reductions. Instead, 
these additional reductions would mean the U.S. would be making an 
additional contribution toward protecting the climate in collaboration 
with key developing countries.
    Their proposal sets a goal to reduce emissions the equivalent of an 
additional 10 percent below 2005 emission levels via investments in 
programs to reduce deforestation in developing countries. It allocates 
about 5 percent of emission allowances over a number of years to 
programs and efforts in developing countries. This approach has several 
advantages: It avoids potentially flooding the allowance market with 
new forestry-based credits; it allows this new program for reducing 
forestry emissions to develop in a stable and orderly fashion; and it 
also helps meet developed countries' commitments to helping developing 
country with financial assistance.
    Other countries, most notably Norway and Germany, have embarked on 
similar, more broad-based efforts using revenue from auctioning of 
emission allowances not only to reduce deforestation but also to 
finance technology development and climate adaptation efforts in 
developing countries.
    We believe funding deforestation through these approaches could be 
cheaper and less risky than simply tightening the U.S. domestic target 
to 30 percent below 2005 levels (16 percent below 1990 levels) and 
allowing more international offsets from reduced deforestation to meet 
the tighter cap. It would be cheaper because such a program may be able 
to purchase reductions for less than the full market price for carbon. 
It would be a less risky path for the U.S. because if developing 
country programs to reduce deforestation fail to materialize or are 
ineffective, U.S. companies would not be stuck with much more stringent 
targets and strict compliance penalties when there were no readily 
available alternative sources of required emission reductions.

Financing for developing countries
    As described earlier, the U.S. and developed countries will be 
judged in Copenhagen by whether they provide meaningful financing, 
technology, and capacity-building assistance to developing countries as 
they agreed to consider in the Bali Action Plan?
    The level of developed countries' financial and technological 
support has become one of the most critical issues in the negotiations. 
The concept of committing to financing supplemental reductions in 
deforestation in developing countries as part of the U.S. domestic 
climate legislation would certainly qualify as providing meaningful 
support per the Bali Action Plan.
    Whether financing is for deforestation or clean technology 
deployment, some observers incorrectly assume that any financing 
agreement in the Bali Action Plan must mean large unrestricted amounts 
of funding. However, the behind the scenes negotiations are more likely 
to focus on specific and tailored financial mechanisms like support to 
``write down'' the cost of advanced but not yet commercial technologies 
like carbon capture and storage, and financing for special purpose 
entities that can help overcome resistance from banks in developing 
countries to make financing available for energy efficiency. As we have 
seen with Mexico's recent proposals in Poznan for caps in key 
internationally competitive industrial sectors, the financing element 
comes down to targeted loans that help overcome domestic policy 
barriers. The European Commission has proposed the creation of a 
``facilitative mechanism'' by which developing country proposals for 
action and specific requests for assistance can be evaluated based on 
objective criteria. The idea of ``block grants'' and the like are not 
under serious consideration.
    One framework for providing financial incentives in the industrial 
arena that has been garnering support internationally would rely on 
establishing the NAMAs discussed earlier in my testimony in key 
internationally competitive industrial sectors. This concept is 
included in the Bali Action Plan as ``cooperative sectoral approaches 
and sector-specific actions'' which are part of the actions suggested 
for mitigation of climate change. Under such sectoral approaches, 
developing countries would be asked to take a new commitment to reduce 
GHG emissions in a given industry sector beyond any recent unilateral 
actions they may have already adopted. They could receive up-front 
financial and/or technology incentives from developed countries in 
return. Mexico's announcement in Poznan of sectoral targets for key 
industrial sectors coupled with a 4-sector cap-and-trade program is the 
first concrete example of how such an effort might proceed.
    Technology and finance assistance could be provided to developing 
countries by developed countries for a number of purposes. For example, 
assistance could be dedicated to build first-of-a-kind advanced 
technologies, such as carbon capture and storage, which are not yet 
cost effective, to accelerate technology deployment by bringing down 
the cost of advanced technologies, and as an incentive for 
participating developing countries to establish more aggressive 
``performance goals.'' This approach also creates opportunities for 
leading U.S. companies to gain access to growing new markets (creating 
jobs at home) and moves toward leveling the playing field for carbon in 
internationally competitive sectors.
    This committee in the past has been very effective in trying to 
develop a technology assistance fund that can provide incentives for 
more aggressive developing country action while not stirring fears of 
``subsidizing our competitors.'' Your thoughtful contribution to the 
coming U.S. discussion of financing international technology deployment 
and of the possibility of adding an international emission reduction 
target not based on generating domestic offsets will be a key element 
in making a historic global climate deal between the developing and 
developed world in Copenhagen possible.

    The Chairman. Let me just say that Senator Lugar had to go 
to a meeting with some of our friends from South Korea, and I 
have a 12 noon meeting I've got to leave for momentarily, so 
I'm going to leave the gavel in the able hands of Senator 
Shaheen. But, I do want to ask just a few things before we go, 
and then we'll submit some questions for the record, if we can, 
to answer a few more things.
    But, let me just go back quickly to what you just said, Mr. 
Helme. Senator Webb's concern. You know, China's sitting on $2 
trillion surplus, blah, blah, blah. We're borrowing--they're 
our banker. Why are we talking about any kind of money with 
respect to even the high-end technology? Why--I mean, a lot of 
people are going to have trouble understanding that.
    Mr. Helme. I think we're talking about technology that's 30 
percent more expensive, and it's----
    The Chairman. Well, no matter how----
    Mr. Helme. [continuing]. The kind of thing that we want to 
share----
    The Chairman. [continuing]. Much more expensive it is----
    Mr. Helme. [continuing]. We want to----
    The Chairman. No matter how much more expensive it is, I 
mean, there's a sense--I mean, I can understand joint 
venturing, and that's----
    Mr. Helme. That's where I was going.
    The Chairman. OK. Because that's--in my conversations with 
Xia, I think he's more sensitive to this notion--you know, 
we're not--this is not going to work, in terms of the balance 
of payments and other----
    Mr. Helme. Absolutely.
    The Chairman. [continuing]. Kinds of things.
    Mr. Helme. Absolutely.
    The Chairman. I would agree with you.
    Mr. Helme. I agree with you.
    The Chairman. So, we're talking straight-out----
    Mr. Helme. [continuing]. Joint ventures and----
    The Chairman. [continuing]. Lay out the----
    Mr. Helme. [continuing]. You know----
    The Chairman. [continuing]. Lay out the----
    Mr. Helme. Exactly.
    The Chairman. [continuing]. Lay out that----
    Mr. Helme. Exactly.
    The Chairman. [continuing]. Kind of----
    Mr. Helme. And that's what he's saying. He's saying, ``I'll 
pay my share. I'm not saying I won't pay.'' But, this is a 
tricky, uncertain technology, from his perspective. I don't----
    The Chairman. Right.
    Mr. Helme. [continuing]. Tend to share that view, but----
    The Chairman. And----
    Mr. Helme. [continuing]. I think it's doable.
    The Chairman. So, they're really looking at, where we are 
more advanced, we need to be able to be helpful----
    Mr. Helme. Yes.
    The Chairman. [continuing]. In order to help them do some 
of these things.
    Mr. Camuti, you talked about the reductions--about the 
incentive. And I just wanted to follow up on with you on that. 
What--in your judgment, what is the best incentive here for the 
private investment that you're talking about? I mean, you're 
doing $6 billion in R&D, you mentioned, and obviously a lot of 
companies are already engaged in that, but you say it's not 
enough. There's not a sufficient incentive at this point?
    Mr. Camuti. Yes, I think with regard to technologies that 
we're discussing there are two aspects. One is predictability 
of the return. So, the investments that we make in energy 
technologies are large investments, and we have to have 
certainty of a market, that extends beyond a year or two. And 
so, from--the level of investment that we make, and how we need 
to predict that, goes over 20- or 30-year of the plant, and you 
obviously have to build more than one or two of these types of 
plants in order to be recouping the R&D investment.
    So one of the main issues that we deal with is predicting 
which technologies to work on with which intensity, which is 
driven by our assessment of where the market is. And so, 
something as simple as that--and we design and develop at the 
highest level to what the requirements of the market are, if 
there's not a price on carbon, that's not put into the 
calculation; and if there is going to be a price signal on 
carbon, that needs to be predictable, stable, and available 
over a longer period of time in order for us to recoup the 
investment that we're making in technology.
    The Chairman. That certainly happens under a cap-and-
trade----
    Mr. Camuti. That's right.
    The Chairman. [continuing]. Regime. I know your chairman 
and chief executive officer has been very involved and engaged, 
and we're appreciative for his support and help in that 
endeavor. But, do you believe there are sufficient levels of 
private capital now moving into this sector?
    Mr. Camuti. There's a lot of early-stage capital, and 
there's been a boom prior to the current economic 
circumstances, in early-stage technology, under the hope, 
actually, that the market's going to develop for those. The big 
challenge that we have with energy-related technology--and I 
think it gets lost in some of the conversation, is the scale 
with which you have to do pilot plants. It's not like the 
Internet, where a couple of people and a computer can do the 
first proof of concept. To capture the amount of carbon that 
would come out of an average-size coal-fired powerplant is a 
very large investment to start. And so, the order of magnitudes 
that you have to have a market of that----
    The Chairman. I agree with that. Senator----
    Mr. Camuti. [continuing]. Is totally different. And so, 
there is private investment at the early stages of technology, 
but we still have a gap in how you're going to field the 
technologies and then improve the technologies over their 
lifetime.
    The Chairman. Former Senator Stevens and I actually, 
through the Commerce Committee, introduced legislation to 
create some immediate 10 demonstration projects, at commercial 
scale, in sequestration, and 10 in capture, so that we could 
allow the marketplace to go out and rapidly decide what's the 
best technology that works, and that doesn't work. And we 
should be doing it.
    I'm not sure--I think, under the stimulus package, we 
actually have some money, if I recall correctly.
    Mr. Helme. Like, $3 billion, I think.
    The Chairman. Right--that's directed toward that. So, the 
key is to get it out there as fast as we can, needless to say.
    Dr. Gayle, thank you for the extraordinary work that CARE 
does and for caring about these issues from the perspective 
that you do. A lot of the countries are supporting a 
centralized fund under the Framework Convention. Do you think 
that's the best, most effective mechanism for channeling these 
funds, or is there some other existing entity, or should it be 
divided--what's your approach to it?
    Ms. Gayle. Yes, thank you. And this is obviously a 
complicated and, in some ways, contentious issue: What's the 
best way to make sure that there are funds available for 
adaptation? We think that some sort of Adaptation Fund could be 
incredibly useful, and I think there are other mechanisms, 
other innovations, taxes that people have proposed, similar to 
the kind on air travel that is now raising resources to combat 
AIDS and other diseases. I think there are also taxes on use of 
maritime shipping, et cetera. So, I think there are a variety 
of different ways, and it really is going to most likely be 
some combination of that, but it is going to take the kinds of 
resources that are in the billions of dollars, probably tens of 
billions of dollars, if we want to make sure that we prevent, 
as opposed to having to clean up even more, later on. But, I 
think it--the Adaptation Fund--is a good central idea, along 
with some of the other innovations.
    Just one other comment I want to make, to make sure that 
this committee is not left with what could be interpreted from 
Mr. Helme's comments. And I'm sure it wasn't meant 
intentionally. But, it isn't because of poor people 
intentionally cutting down forests that a lot of deforestation 
is occurring. In fact, it's often large logging companies that 
come in, that use poor communities, who have no other 
livelihood, so, it's not the people in the communities 
themselves. But, I just want to make that point, that 
oftentimes it's large companies that come in that lead to that 
kind of impact. I'm sure that you weren't putting it on the 
backs of poor people, but I just wanted to make that----
    Mr. Helme. No, but I would--I would say that, in terms of 
deforestation in Brazil, the vast majority is for small-scale 
ranching and agriculture rather than big lumber companies. In 
Indonesia, you're absolutely right.
    Ms. Gayle. Yes.
    The Chairman. Well, thank you very much. I appreciate it. I 
regret that I'm not able to go into a little greater depth with 
you, but we're going to submit some questions.
    Senator Shaheen, if you could conclude this, I'd appreciate 
it very much.
    Thank you very much for being with us.
    Senator Shaheen [presiding]. Well, thank you, Mr. Chairman.
    I would now like to ask Ms. Gayle if she would be willing 
to go ahead and give her testimony.
    Ms. Gayle. Actually, sorry, in the brief moment that you 
were----
    Senator Shaheen. I missed it.
    Ms. Gayle. [continuing]. Away, I--yes, right. I'm happy to 
do it again, but----
    [Laughter.]
    Senator Shaheen. No, no. Well----
    Ms. Gayle. We have----
    Senator Shaheen. [continuing]. Thank you.
    Ms. Gayle. [continuing]. Submitted a written--a full 
written statement, and I just did a brief summary of that and 
stated our three primary recommendations. So, thank you.
    Senator Shaheen. Good. Well, I actually don't have any 
question, because I have another commitment, as well, but would 
just like to thank all of you for taking the time to be here. 
And appreciate that, as this debate continues toward 
legislation, that we will continue to call on you for your 
expertise.
    Thank you all very much. And thank you for being here, 
everyone.
    [Whereupon, at 11:57 a.m., the hearing was adjourned.]
                              ----------                              


 Additional Material and Questions and Answers 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 importance 
of U.S. leadership in the international effort to forge a new global 
climate change agreement.
    Global warming presents a grave threat to our planet. This is a 
problem that will affect not only us, but people all around the world 
now and for generations to come. It is imperative that we develop a new 
global agreement to address this serious issue.
    Fortunately, the days of U.S. inaction--and leadership failure--on 
climate change have ended. Our States and cities are forging ahead with 
their own climate change policies, and now the Obama administration has 
begun meaningful action on climate change at home.
    Just last week, the EPA issued a proposed finding under the Clean 
Air Act that global warming is a threat to public health and welfare. 
This is a step that is long overdue. The Clean Air Act provides EPA 
with an effective toolbox for cutting greenhouse gas emissions. 
However, the best and most flexible way to deal with this serious 
problem is to enact a market-based cap-and-trade system which will help 
us make the transition to a clean energy economy, while also bringing 
us innovation and strong economic growth.
    The Obama administration has also announced that the EPA will 
review the Bush administration's denial of California's waiver request 
to cut automobile greenhouse gas emissions. I am confident that the 
requirements of the law and the dictates of science will lead to strong 
greenhouse gas-cutting standards for tailpipe emissions.
    The economic stimulus bill included billions of dollars for 
renewable energy, smart grid technology, and energy efficiency programs 
along with tax incentives for manufacturers of renewable energy 
technologies.
    The President has made it clear that enacting a market-based cap on 
carbon pollution is one of his top priorities because it is the most 
effective way to address global warming pollution. Working with leaders 
like the chairman of this committee, I remain committed to ensuring 
that we enact effective climate change legislation--and lead the global 
effort to reach an international climate agreement. The United States 
must take action on global warming at home to be a leader in the world 
effort to combat global warming.
                                 ______
                                 

 Paper on Financing Submitted for the Record by Ned Helme, Center for 
                            Clean Air Policy

   a financing mechanism of a post-2012 agreement on climate change: 
                   governance and funds distribution
    The financial component of a post-2012 international climate change 
agreement is outlined in the Bali Action Plan, but it is not clearly 
defined there. The Bali Action Plan calls for enhanced nationally 
appropriate mitigation actions (NAMAs) by developing countries to be 
supported and enabled by technology, financing and capacity-building in 
a measurable, reportable, and verifiable manner. There is now a need to 
identify and describe the key features of a mechanism that would 
support mitigation actions in developing countries by channeling 
capacity-building, technology and financial assistance.
    There are several key questions that need to be answered that also 
define the four key components of a financing mechanism:

   What mechanism can be used to streamline requests for 
        assistance by developing countries for GHG mitigation actions?
   How will these requests for up-front financing be evaluated?
   Where will the money come from to finance selected requests?
   How will a monitoring, reporting and verification (MRV) 
        component of mitigation actions in developing countries and 
        delivered assistance for these actions be organized?

    The effectiveness of a financing mechanism will depend on the 
effectiveness of each of these components.
A Mechanism to Request Assistance for GHG Mitigation Actions in 
        Developing Countries
    National appropriate mitigation actions (NAMAs) established by the 
Bali Action Plan could be the basis for assistance requests. They 
should be formulated and submitted to the UNFCCC in a way to facilitate 
the process of assistance granting and delivery. There are still 
differences in views on what NAMAs mean, what they may include, and how 
they may be recognized in the international framework. In addition, it 
has been proposed by some parties that developing countries describe 
their GHG mitigation actions in national climate change action plans or 
low-carbon development strategies. In this case, there is a need to 
find a clear link between NAMAs (formally established by the Bali 
Action Plan) and national low-carbon development strategies.
    In the absence of agreement on what NAMAs are and what role they 
will play in a post-2012 financing mechanism, this briefing note 
follows the South Korean proposal of three types of NAMAs and assumes 
that a registry of NAMAs will be instrumental in recognizing developing 
countries actions and directing support to them for the implementation 
of NAMAs.
    For the NAMA component of a financing mechanism to be an effective 
and robust tool of requesting assistance, the following principles need 
to be applied:

   All identified NAMAs are tied together into a comprehensive 
        low-carbon development strategy or a climate mitigation plan to 
        demonstrate coherence;
   NAMAs and climate mitigation action plans or low-carbon 
        development strategies are nationally driven;
   The development of NAMAs and climate mitigation plans and/or 
        low-carbon development strategies is based on a multi-
        stakeholder national consultative process;
   These plans and/or strategies and specific NAMAs have proven 
        legitimacy at the national level (e.g., created under inter-
        ministerial guidance, approved by the president or incorporated 
        into national laws);
   Mitigation actions requiring assistance (programs, policies, 
        projects) are clearly defined and presented in the context of 
        current and future place of the sector(s) (where an action 
        takes place) in the national economy; GHG profile and expected 
        GHG emission reductions from BAU or net reductions; timeframe 
        of proposed actions; total estimated cost of proposed actions, 
        and cost per ton of CO2-eq. reduced; and MRV provisions;

    It would be important to build enough flexibility into the 
financing mechanism to allow developing countries to tailor requests 
for financing to their national sustainable development strategies. 
However, it does not mean that certain criteria cannot be agreed on to 
guide the selection and prioritization process.

Support for NAMAs: Financial Resources Made Available by Developed 
        Countries
    The financial side of the equation can also be designed in a way 
that maximizes its effectiveness. Here, several options/issues should 
be considered:

   A multichannel financing mechanism that includes both 
        existing funds and mechanisms directed at GHG mitigation and 
        new funds that would be committed by the Annex I parties 
        according to an agreement;
   An inclusive structure of financing tools (grants, loans, 
        international partnerships, creation of special purpose 
        financing entities);
   A virtual multilateral fund, in which the money is kept in 
        the country of origin, while the multilateral facilitative 
        financing mechanism keeps records of all available resources 
        (together with their location and eligibility criteria, if 
        applied) and directs resources to approved NAMAs; Some portions 
        of new funds could be pulled together into a multilateral fund 
        with specific objectives (e.g., for establishing MRV systems);
   Existing funds already have certain rules attached to them, 
        so a system/registry needs to be created that will track all 
        available funds and their priority areas; and
   New funds--contributions from Annex I parties should be 
        additional to already ongoing assistance programs, created 
        specifically in compliance with a post-2012 agreement, and 
        should have minimal eligibility requirements, but could still 
        identify preferred priority areas or countries;
   A registry of financial resources and their disbursement 
        will also be needed in addition to the registry of NAMAs.

    Below are several examples of existing funds and available 
resources for climate change mitigation to illustrate the importance of 
developing a new mechanism that is inclusive and incorporates existing 
as well as new funds and programs:

   The EGTT interim report estimates that about $140-$230 
        billion is available annually for the development of mitigation 
        technologies (90 percent of it is outside the Convention);
   Government funding provides about $10 billion for RD&D per 
        year;
   GEF funds (Trust Fund, Special Climate Change Fund and Least 
        Developed Countries Fund) contribute about $0.22-$0.32 billion 
        annually for the deployment and diffusion of low-carbon 
        technologies.
   About $1 billion of public finance (through various national 
        and multilateral vehicles) is available to address REDD.

Multilateral Facilitative Financing Mechanism as a Process to Match 
        NAMAs With Financing
    It is clear that there is a need for a mechanism that would match 
requests for financing from developing countries with available funding 
sources. A Multilateral Facilitative Financing Mechanism (operating 
under authority of Parties to the UNFCCC) could be charged with 
matching NAMAs with support. This Mechanism could carry out the 
following governance functions (which could likely be divided between 
different entities):

   Facilitate financial assistance to developing countries by 
        approving NAMAs for funding; identifying potential sources of 
        funding for particular NAMAs, and pairing NAMAs with funding 
        sources, stopping just short of negotiating specifics (this 
        would be done bilaterally between the developing country and 
        the funding sources);
   Facilitate technology cooperation, especially new technology 
        commercialization, by writing down (a portion of) incremental 
        cost;
   Facilitate R&D partnerships;
   Finance clearinghouse functions to help specific developing 
        countries identify needs for cooperation, etc.;
   Finance the Facilitative Financing Mechanism support costs; 
        and
   Possibly approve crediting baselines--the Multilateral 
        Facilitative Financing Mechanism could be charged with 
        approving crediting baselines, based upon agreed criteria, or 
        another structure could be created to deal with baselines and 
        determining their stringency.

Disbursement Criteria
    To guide the NAMA evaluation process, a set of criteria for 
national prioritization could be agreed on multilaterally. Possible 
criteria could include: Cost per ton of CO2; Mitigation potential (per 
year or aggregate)--total GHG emission reduction expected from proposed 
NAMA; Leveraged domestic resources; Role (current and expected in 2020) 
of this activity/NAMA in the overall economy of this country; 
Sustainable development benefit.
    Decisions need to be made whether all NAMAs will be evaluated by 
one system or separate pools/windows on NAMAs will be created 
separating for example, REDD NAMAs, capacity-building NAMAs, policy 
NAMAs, and technology NAMAs into distinct tracks. If latter option is 
chosen, another question is whether available funds will have to be 
divided and designated for NAMAs from specific tracks, (e.g., 30 
percent--for REDD NAMAs, 20 percent--policy NAMAs in other sectors, 10 
percent--capacity-building, 20 percent--technology deployment, 20 
percent--R&D). There are also some proposals for limiting the amount of 
funding that any single party could access (Mexico calls for setting an 
upper limit at 15 percent of the total amount in its proposed fund on 
withdrawals by any single developing country).

Governance and Institutional Structure
    Parties are looking for a mechanism with streamlined decisionmaking 
and limited bureaucracy. It is also clear that parties would like to 
move away from the traditional donor-recipient relationship that has 
prevailed in the past, thus calling for a multilateral governance of 
the financial mechanism that will be created for the post-2012 climate 
regime. While a new multilateral approach to governance has a risk of 
complicating the decisionmaking process and creating bureaucratic 
structures that would diminish efficiency, it also offers some clear 
advantages, such as mutual accountability, fairness, equity, and 
transparency.
    One of the governance challenges for a new NAMA/registry/finance 
structure is establishing the types and number of bodies needed to make 
the key decisions. The decisionmaking body could be separated from the 
technical/evaluating body. Two types of decisions will need to be made 
about NAMAs: (1) which conditional NAMAs receive support, how much and 
from whom?, and (2) where should a crediting baseline be set for a NAMA 
or group of NAMAs in a particular sector? Two decisionmaking bodies 
could be established to answer these two sets of questions. Each of 
them could be supported by a technical body. Existing institutions 
could be involved in technical evaluation processes through entering 
into special agreements with the Multilateral Facilitative Financing 
Mechanism.

Monitoring, Reporting and Verification (MRV)
    The Bali Action Plan puts a strong emphasis on monitoring, 
reporting and verification (MRV). MRV of NAMAs, MRV of support and 
annual national inventories of GHG emissions in developing countries 
will be critical for demonstrating compliance and building confidence 
in the financing mechanism. Decisions are yet to be made on these 
elements and their links with the financing mechanism.
    National GHG inventories would also play an important role in 
evaluating an overall national progress in addressing GHG mitigation in 
developing countries. A question could be asked whether national 
inventories could eventually replace an MRV system that focuses on 
specific actions. If developing countries establish strong national 
policies with GHG objectives and stringent enforcement provisions, 
their international accountability could be provided for by national 
inventories. In this case international financing could be delivered on 
the basis of national inventories that would demonstrate sectoral and/
or national performances and progress made from year to year.
                                 ______
                                 

    Responses of Special Envoy Todd Stern to Questions Submitted by
                        Senator Russell Feingold

    The adoption of a new energy strategy is critical in order to 
effectively address climate change domestically and internationally. We 
have seen, for example, calls to construct a large solar power 
installation in the Sahara Desert to power both North Africa and 
Europe--this solution would require a huge infrastructure investment 
reaching across many countries.

    Question A. Are there any incentives offered by the U.S. Government 
to encourage investment in renewable and clean energy in developing 
nations? Are there particular areas where demonstration projects have 
been attempted, unsuccessfully or successfully?

    Answer A. I wholeheartedly agree with the premise of your question. 
A new energy strategy is inextricably connected to, and in certain 
respects the antecedent condition, of a successful climate change 
strategy, both domestically and internationally. That is why the State 
Department is forging better linkages to and cooperation with Federal 
agencies such as the Departments of Energy, Commerce and Treasury, the 
Environmental Protection Agency and the U.S. Agency for International 
Development, as well as the trade and export promotion agencies such as 
the Trade and Development Agency, Export-Import Bank, and the Overseas 
Private Investment Corporation, that will play significant roles in the 
energy-climate nexus and the attendant development of a new energy 
strategy.
    The short answer to your question of the availability of incentives 
for overseas investment and successful and unsuccessful demonstration 
projects is ``yes'' to both. The U.S. Government offers a range of 
incentives to U.S. companies to invest in renewable and clean energy 
programs in developing nations. These range from the large portfolio of 
trade and export services provided by various Department of Commerce 
programs to specific project focused financial incentives from our 
export promotion agencies. For example, the Export-Import Bank (EXIM 
Bank) provides preexport working capital, short-term financing, and 
medium- to long-term loans and guarantees for renewable energy and 
clean energy projects in developing countries. Similarly, the Overseas 
Private Investment Corporation (OPIC) supports renewable energy 
investment through a $1.6 billion fund that provides political risk 
insurance for projects in developing countries.
    However, before these and any other financial export assistance 
incentives can realize the full promise of their intention--i.e., the 
dramatic increase in the export and adoption of U.S. renewable and 
energy efficient products and services--changes need to occur in the 
policy and regulatory frameworks within developing countries to 
accommodate and facilitate private sector investment. This is where the 
work of the State Department, often times in partnership with USAID, is 
of great value.
    Our work in China and India specifically, both through regional and 
bilateral programs, has been to introduce best practices in policy and 
regulatory measures required by the technological requirements of 
renewables and energy efficiency. We have launched a wide range of 
projects and activities that serve to build the capabilities of public 
policymakers, utility operators, building and facility managers, and 
the local financial community to better understand the economic, 
financial, and technical complexities surrounding these new 
technologies and the capacity to adopt those policies and practices 
necessary to lead to widespread deployment of the technologies. We have 
over the past 2 years launched a wide range of activities in green 
buildings, appliance standards, renewable energy, distributed 
generation, utility demand-side management, and manufacturing 
efficiency practices in these countries.

    Question B. Specifically, what measures are being taken to evaluate 
and implement small-scale energy generating technologies that can be 
used onsite or very close to the end user, like solar photovoltaic or 
fuel cells, as a viable alternative for producing power in developing 
nations? Are there particular areas where demonstration projects have 
been attempted, unsuccessfully or successfully?

    Answer B. The Department of State regional and bilateral programs 
are implementing a number of projects designed specifically to lead to 
massive scale-up in the dissemination and deployment of small-scale 
energy technologies. These distributed, modular renewable energy 
technologies are essential to the objective of increasing access to 
modern energy services to the millions of men, women, and children 
throughout the developing world currently suffering from energy 
poverty. For many of the 2 billion in the world without access to 
modern energy services, reliance on grid-connected electricity is not a 
viable option given the demographic patterns and economic conditions of 
these rural and periurban populations.
    We, along with USAID, are therefore working on a number of fronts 
to expedite the delivery of electricity and other services provided by 
decentralized solar, wind, biomass and hydro. For example, in India, we 
are funding a local solar entrepreneur who has developed a compelling 
business model of company franchises to expand his network of solar 
stores throughout the state of Karnataka. In each bilateral energy and 
climate partnerships, one major goal is to promote the massive scale-up 
in the adoption of renewable energy and energy efficiency technologies 
and practices. The scaled-up adoption of these technologies will not 
only have a dramatic impact on reducing greenhouse gasses, but will 
also lead to improved air quality while catalyzing sustainable economic 
growth.

    Question C. How effectively would the deployment of these small-
scale technologies in developing nations contribute to global energy 
security?

    Answer C. The deployment of small-scale technologies in developing 
countries results in a number of corresponding benefits, including 
energy security. Renewable energy and energy efficiency offer rich 
potential to maximize any country's energy security. However, 
particularly in developing countries, there is a strong need for 
capacity-building in order to realize the multiple benefits of a clean 
energy path. Public funds, from both the United States and the host 
country, will be required to transform these markets to the point where 
investment climates are ready for larger private sector investment.

    Question. Climate change threatens global food, ecosystem 
stability, and water availability and can contribute to overall 
political instability, among other problems. According to the United 
Nations ``Human Development Report from 2007/2008,'' it is estimated 
that up to $86 billion will be necessary annually to support adaptation 
in developing countries by 2015 to (1) protect the existing development 
investments that could be impacted by climate change; (2) adapt 
existing poverty-reduction programs to climate change, potentially 
creating green jobs in developing nations; and (3) strengthen the 
anticipated need for disaster response associated with climate change. 
The current financing mechanism through the United Nations to support 
adaptation to climate change in developing nations has, to this point, 
been underfunded.

   Looking toward a new international agreement, what 
        strategies and options need to be pursued in order to support 
        adaptation in developing nations?

    Answer. Climate change is at once an environmental, economic, 
energy and national security issue with serious implications for 
America's and the world's future. We are in the process of considering 
how we can enhance our effectiveness in helping countries to respond to 
climate change, both within the multilateral process and in our 
bilateral assistance programs, in order to address the needs of the 
most vulnerable.
    Adaptation is an immense challenge for all countries, especially 
for poor developing countries, which are particularly vulnerable to 
climate change. Our objectives in the U.N. Framework Convention on 
Climate Change (UNFCCC) negotiations are to: bring together the range 
of institutions and actors involved in adaption efforts; help Parties, 
in particular the most vulnerable, build a long-term adaptation 
approach; galvanize national and international support for adaptation 
priorities in a range of sectors; and promote climate resilient 
development in a manner that is practical, informed by the best 
science, and promotes on-the-ground results.
    The administration is requesting a tenfold increase in adaptation 
funding this year. The administration's FY 2010 State and AID Budget 
Request includes $232 million for adaptation (base funding plus $202M 
increase; $60M State, $172M AID). This significant, new $202 million 
funding request will be used to support UNFCCC adaptation funds and 
launch a major program for developing countries most vulnerable to 
effects of climate change (flooding, fresh water scarcity, food 
shortages, and population displacement from coastal zones).
    Funds will also be used to climate proof AID's development 
portfolio. Most development sectors are vulnerable in some way to 
climate change--the goal is to add a substantial climate change 
adaptation component to USAID mission activities in relevant areas. We 
want to maximize the impacts of our overall assistance by ensuring that 
projects are as resilient as possible to climate variability and 
change.
    We have requested specific funds for adaptation in order to ensure 
that activities for adaptation do not take away from other development 
projects and programs, which themselves contribute to adaptation by 
enhancing the overall resilience of countries and communities.
    Additional to this over $200 million increase, Treasury is 
requesting a new $80 million for FY 2010 from its Climate Investment 
Funds request to support this adaptation initiative by contributing to 
the World Bank's Pilot Program on Climate Resilience. In supporting 
integration of adaptation into development programs and project, this 
program will provide valuable lessons on how to enhance adaptation and 
institutional capacity in developing countries.
    However, even with these important increases in U.S. Government 
funding and recognizing that much of the costs of adaptation will be 
borne by developing countries themselves, funding will still fall far 
short of what will be required to help developing countries adapt to 
the effects of climate change.
    Estimates of the cost of adaptation in developing countries range 
from $10 to $50 billion per year.\1\ The broad range of cost estimates 
reflects uncertainty in how rapidly greenhouse gas emissions may be 
reduced, how climate change impacts manifest themselves, and the speed 
and success of development efforts that will reduce or adapt to those 
impacts.
---------------------------------------------------------------------------
    \1\ ``Adapting to Climate Change,'' Oxfam Briefing Paper, May 2007. 
Note the report does not provide a timeframe for the funding 
requirement.
---------------------------------------------------------------------------
    Over time, we will need to increase our share of support for 
adaptation in developing countries. Funding support for bilateral and 
multilateral assistance and creative approaches like adaptation set-
asides, as laid out in the Waxman-Markey proposed legislation, H.R. 
2454, are crucial to our success internationally. It is very important 
these kinds of provisions stay in whatever legislation moves forward. 
We will need to look at multiple avenues of funding to even begin to 
address expected need.
    We will also work to mobilize other donors to significantly 
leverage increased funding for adaptation, coordinate donor funding, 
and collaborate in identifying key countries and areas of opportunity.

    Question. As we know, effectively tackling climate change will 
require a cooperative effort and the involvement of a broad array of 
entities.

   What is the status of industry/NGO efforts to promote clean 
        and renewable technologies?

    Answer. Industry and NGOs are working vigorously to develop clean 
and renewable technologies, inform governments about policies that 
create enabling environments for these technologies, dissolve barriers 
to market entry and expansion, disseminate clean technology 
internationally, and promote public awareness of technology benefits. 
Between 2004 and 2008, global annual investment in renewable energy has 
increased fourfold, to $120 billion.
   usg engagement with ngos and private sector in diplomatic context
    In the context of bilateral and regional diplomatic engagements 
that concern energy and climate, we work extensively with a range of 
industry firms and NGOs on issues along the commercialization 
continuum, from policy and regulatory issues to project financing.

   NGOs have done a tremendous amount of work--often with USG 
        funding--throughout the developing world to help establish 
        preconditions for market readiness that the private sector 
        seeks. The State Department has made a concerted effort to work 
        closely with a range of NGOs to addressed issues like carbon 
        capture and storage guidelines and building energy efficiency 
        codes in China, and renewable energy and energy efficiency 
        projects in India. NGO expertise will continue to be a rich 
        asset for the State Department energy and climate change 
        strategy.
   Private industry is the primary driver of change in our 
        energy and climate strategy. Private industry wants to invest 
        in growing markets in the developing world yet needs accepted 
        principles like sanctity of contract, protection of 
        intellectual property, and rationalized pricing structures. 
        State will continue to work with other Federal agencies to 
        promote the adoption of necessary market reforms throughout the 
        developing world to support healthy, transparent, and 
        predicable market environments.
    span and trajectory of industry and ngo activity on clean energy
    Work in clean and renewable energy spans a wide range of 
technologies from power generation (wind, solar, hydro, geothermal) to 
petroleum demand (biofuels, electric vehicles) to energy efficiency 
(green buildings, sustainable communities). In the 4 years from the end 
of 2004 to the end of 2008, solar photovoltaic (PV) capacity increased 
600 percent, wind-power capacity increased 250 percent, and total power 
capacity from new renewables increased 75 percent (to 280 GW). In 2008, 
the United States led in new capacity investment with $24 billion, or 
20 percent of global investment, and in added and total wind-power 
capacity.
    Several examples illustrate the robust U.S. activity in promotion 
of clean and renewable technologies:

   The American Council for an Energy-Efficient Economy 
        (ACEEE), promotes dissemination of new technologies for energy 
        efficient buildings. ACEEE is also working on building energy 
        use disclosure and building labeling, to provide energy use 
        information at the time of transactions.
   The Durst Organization exemplifies the fast-moving activity 
        in the private sector focused on green buildings. Durst's 
        flagship tower at 4 Times Square was recognized as the first 
        ``green'' highrise office building in the United States, and in 
        2004 Durst broke ground on the $1 billion Bank of America 
        building, which it describes as the world's most 
        environmentally responsible highrise.
   The American Solar Energy Society (ASES) advances education, 
        research, and policy to promote solar energy. In 2008, ASES 
        published the ``Green-Collar Jobs'' report that showed 
        renewable energy and energy efficiency sectors generate more 
        than 9 million jobs and $1 trillion in annual revenue in the 
        United States.
   Installation by the U.S. wind energy industry--over 8,500 
        megawatts (MW) of new generating capacity in 2008, a record and 
        enough to serve over 2 million homes. This addition increased 
        the Nation's total wind-power generating capacity by 50 percent 
        to over 25,300 MW and channeled $17 billion into the economy. 
        The new wind projects completed in 2008 account for about 42 
        percent of new power-producing capacity added nationally that 
        year, according to initial estimates.

    Question. Are there any efforts within the State Department and/or 
USAID to promote renewable energy, energy efficiency, and 
sustainability in urban centers of developing nations?

    Answer. Yes, this is an increasingly critical component of our 
energy and climate change strategy. The State Department and USAID both 
are responding in a significant way to two global trends: first, 
urbanization; we now, for the first time in human history, live at a 
time when more people live in urban environments than rural locations; 
and second, increasing decentralization and devolution of economic and 
political power to subnational authorities. More and more around the 
world, state, provincial, and local authorities are being given the 
responsibility to provide local infrastructure services including 
housing, telecommunications, water and energy.
    USAID has for many years run impressive urban programs designed to 
build the capacities of local officials on myriad issues ranging from 
municipal finance, to water utility management, telecommunications 
policy frameworks, and electricity restructuring regulations.
    The State Department is also planning to promote cooperation 
between United States cities and cities in China and India. We envision 
this cooperation having three main components:

   Mayors and city leadership will share best practices in 
        municipal planning and development, as well as assist in 
        expanding business relationships for companies offering clean 
        energy technology. Involvement will give them a platform to 
        showcase their efforts on clean energy policy and help them 
        contribute to the growth of local businesses.
   Companies seen as green leaders in alliance cities will 
        identify opportunities to provide their sustainable solutions 
        to markets in these countries. While demonstrating leadership 
        in clean energy development, they will recognize new avenues 
        for business growth.
   Academic and Research and Development institutions will 
        participate in peer-to-peer discussions and collaborative 
        projects with their counterparts in partner countries. 
        Participation will present opportunities to not only learn from 
        fellow institutions, but to offer innovative research and 
        technical solutions to key developing countries.

    This network of municipal scale experts and practitioners could 
eventually be expanded to other countries and offers an invaluable 
series of opportunities not only for improved public policymaking but 
also job creation and economic prosperity for the United States and 
partner cities.
                                 ______
                                 

          Responses of Helene Gayle to Questions Submitted by
                        Senator Russell Feingold

    Question. The adoption of a new energy strategy is critical in 
order to effectively address climate change domestically and 
internationally. We have seen, for example, calls to construct a large 
solar power installation in the Sahara Desert to power both North 
Africa and Europe--this solution would require a huge infrastructure 
investment reaching across many countries.

   Are there any incentives offered by the U.S. Government to 
        encourage investment in renewable and clean energy in 
        developing nations? Are there particular areas where 
        demonstration projects have been attempted, unsuccessfully or 
        successfully?
   Specifically, what measures are being taken to evaluate and 
        implement small-scale energy generating technologies that can 
        be used onsite or very close to the end user, like solar 
        photovoltaic or fuel cells, as a viable alternative for 
        producing power in developing nations? Are there particular 
        areas where demonstration projects have been attempted, 
        unsuccessfully or successfully?
   How effectively would the deployment of these small-scale 
        technologies in developing nations contribute to global energy 
        security?

    Answer. As a development and humanitarian assistance organization, 
CARE is not currently conducting renewable and clean energy generating 
projects in developing countries and has not examined the issues of 
incentives, specific technologies, or current demonstration projects in 
these areas. We, therefore, are unable to speak directly to these 
matters.
    However, CARE has significant experience introducing clean energy 
products in vulnerable communities. For example, in Darfur, Sudan, CARE 
introduced fuel-efficient stoves to reduce demand on the region's scant 
supply of firewood--a source of communal tension and violence. In 
Rwanda, CARE has trained women, orphans, and vulnerable children to 
build energy-saving stoves to reduce deforestation and provide a source 
of income for participants. Likewise in Peru, CARE has successfully 
trained families to build improved stoves to reduce acute respiratory 
infections among children.
    CARE is now exploring the possibility of generating carbon credits 
through the expansion of clean energy products in poor communities. We 
have identified Uganda as a feasible location for this pilot. We will 
build on our network of well-established village savings and loan 
associations (VSLAs)--small, self-managed groups comprised primarily of 
women. CARE currently works with 100,000 VSLA members in Uganda--a 
number that is expected to reach half a million in the next decade. 
VSLAs provide both a means to finance clean energy products and to 
promote their wide distribution.
    For this proposed initiative, CARE's role will be to identify 
feasible clean energy products, recruit and train local distributors, 
provide information necessary for earning carbon credits on sales, 
guarantee investor risk and local distributor trade credit, and link 
distributors to VSLAs. CARE will also supervise the supply chain of the 
VSLA networks so that products are made available to large numbers of 
consumers, sellers and buyers are properly informed of the nature and 
use of the product, there is transparency about price and after sales, 
consumers have access to part replacement if necessary.
    By focusing on the introduction of clean energy products in 
vulnerable communities, and by exploring the possibility of generating 
carbon credits through these efforts, we are able to contribute to 
broader efforts to make carbon markets work for the poor. These 
vulnerable communities will be the hardest hit by the impacts of 
climate change and are often the least able to cope. It is therefore, 
vital that their energy needs and their potential to participate in the 
solution be considered in designing responses to climate change 
mitigation. U.S. efforts to promote clean energy development and 
dissemination have great potential to address the lack of energy 
resources among developing country populations and to enable these 
communities and counties to reduce their own greenhouse gas emissions.

    Question. Climate change threatens global food, ecosystem 
stability, and water availability and can contribute to overall 
political instability, among other problems. According to the United 
Nations ``Human Development Report from 2007/2008,'' it is estimated 
that up to $86 billion will be necessary annually to support adaptation 
in developing countries by 2015 to (1) protect the existing development 
investments that could be impacted by climate change; (2) adapt 
existing poverty-reduction programs to climate change, potentially 
creating green jobs in developing nations; and (3) strengthen the 
anticipated need for disaster response associated with climate change. 
The current financing mechanism through the United Nations to support 
adaptation to climate change in developing nations has to this point 
been underfunded.

   Looking toward a new international agreement, what 
        strategies and options need to be pursued in order to support 
        adaptation in developing nations?

    Answer. The communities CARE works alongside are doing the best 
they can to adapt to new conditions with limited resources. However, 
the amount of funding available to help communities in developing 
countries adapt is severely insufficient. A number of analyses have 
been conducted on how much money is needed for adaptation in developing 
countries. The World Bank suggests that costs will run between $9-$41 
billion per year (the low figure assumes no investment in community-
based adaptation) while Oxfam puts the price tag at more than $50 
billion per year by 2015, the UNFCCC estimates that costs will range 
between $28 billion and $67 billion per year by 2030 and the UNDP 
projects annual costs of $86 billion per year by 2015. While the range 
varies, consensus is growing that the annual need is on the order of 
tens of billions of dollars and will be significantly higher if 
greenhouse gas emissions are not reduced substantially in the near 
term.
    Unfortunately, few public financing options exist to help 
developing countries reduce their vulnerability and adapt to climate 
variability and change. There are three adaptation funding mechanisms 
under the UNFCCC. However as of December 2008, pledged commitments to 
the Least Developed Countries Fund (LDCF) and the Special Climate 
Change Fund (SCCF) total only $262.3 million. The UNFCCC estimates that 
the third fund, the Adaptation Fund, has the potential to raise between 
$25 to $130 million through 2012 and between $30 million to $2.25 
billion by 2030. There is a huge gap between what is needed and what 
has been pledged or can be raised through the UNFCCC mechanisms.
    Economically developing countries bear the least responsibility, 
are the most severely impacted, and have the least capacity to cope 
with climatic changes. If international adaptation continues to be 
inadequately resourced, climate change is projected to contribute to 
increased conflict over scarce natural resources, mass migration, and 
refugee crises.
    The United States must do its fair share and provide substantial 
new and additional funding, above and beyond official development 
assistance, to support adaptation in developing countries vulnerable to 
climate change. New and innovative mechanisms that can raise 
significant funds for adaptation and create incentives for mitigation 
should be pursued, such as the auctioning of emission allowances and 
levying the use of international maritime and aviation transport (so 
called ``bunker'') fuels.
    Robust funding for international adaptation is crucial. So, too, is 
guiding those funds so that they reach the people who need them most. 
Vulnerability is more than exposure to climate shocks and other 
stresses. CARE's experience has shown that vulnerability varies within 
countries, within communities, and even within households. It is in 
large part, determined by the economic, social, and political systems 
and structures that govern people's lives. Climate change will have the 
greatest impact on the poorest communities and most marginalized 
groups.
    Well designed, top-down, scenario-driven approaches to adaptation 
can play a role in reducing vulnerability to climate change; yet they 
may fail to address the particular needs and concerns of the most 
vulnerable communities. CARE believes that the most effective approach 
is to empower local communities and facilitate their ownership of 
adaptation strategies. Through community-based adaption, we can foster 
more resilient livelihoods, link people to basic services, strengthen 
local capacity, and support social and policy change to address 
underlying causes of poverty and vulnerability.
    The United States can provide leadership in ensuring that 
adaptation funds reach the people who need them most by ensuring 
systematic identification of the most vulnerable groups; inclusive, 
transparent, and participatory decisionmaking on the design and in the 
monitoring and evaluation of adaptation activities and mechanisms to 
support community-based adaptation.

    Question. As we know, effectively tackling climate change will 
require a cooperative effort and the involvement of a broad array of 
entities.

   What is the status of industry/NGO efforts to promote clean 
        and renewable technologies?

    Answer. While CARE cannot speak directly to the issue of clean and 
renewable energy, we do agree that this will require a cooperative 
approach. Many of our NGO partners are following discussions around the 
importance of clean and renewable energy technology--as it relates to 
the ability to achieve a successful deal in Copenhagen, the ability of 
developing countries to adopt clean energy development pathways, and 
efforts to increase access to energy among the energy poor in 
developing countries. CARE also believes that tackling climate change 
and moving to a clean energy economy provide the United States the 
opportunity to invest in new technologies. The innovation necessary to 
move to cleaner energy usage can fuel job creation at home and spur 
growth in exports to other markets as our global partners also work to 
reduce their emissions and adopt clean energy. The United States is 
still No. 1 in world competitiveness. We live in a country of immense 
ingenuity. With the right market incentives in place, the United States 
can leverage its openness, resilience, and entrepreneurship to lead the 
world in reducing greenhouse gas pollution and developing a new, low-
carbon global economy.
                                 ______
                                 

            Responses of Ned Helme to Questions Submitted by
                        Senator Russell Feingold

    The adoption of a new energy strategy is critical in order to 
effectively address climate change domestically and internationally. We 
have seen, for example, calls to construct a large solar power 
installation in the Sahara Desert to power both North Africa and 
Europe--this solution would require a huge infrastructure investment 
reaching across many countries.

    Question A. Are there any incentives offered by the U.S. Government 
to encourage investment in renewable and clean energy in developing 
nations? Are there particular areas where demonstration projects have 
been attempted, unsuccessfully or successfully?

    Answer A. There are a number of U.S. Government supported efforts 
to encourage investment in renewable and clean energy in developing 
nations. We have collected summaries of some programs and projects 
organized by the State Department, the Overseas Private Investment 
Corporation, the Asia-Pacific Partnership, and the U.S. Environmental 
Protection Agency. That information is attached as Appendix 1. There 
are other projects underway through the National Renewable Energy 
Laboratory in China, India, and Brazil. In addition, other DOE 
supported programs focus on technology collaboration, building codes, 
standards, and technology outreach. However, we would suggest 
contacting DOE directly for more information on these programs. We are 
not aware of evaluations carried out for these projects.

    Question B. Specifically, what measures are being taken to evaluate 
and implement small-scale energy generating technologies that can be 
used onsite or very close to the end user, like solar photovoltaic or 
fuel cells, as a viable alternative for producing power in developing 
nations? Are there particular areas where demonstration projects have 
been attempted, unsuccessfully or successfully?

    Answer B. The Center for Clean Air Policy is not involved in 
programs to implement small-scale energy generating technologies and 
would suggest that Senator Feingold contact the Solar Energy Industries 
Association (www.seia.org) and the Department of Energy for additional 
information on this topic.

    Question C. How effectively would the deployment of these small-
scale technologies in developing nations contribute to global energy 
security?

    Answer C. Global energy security is linked to global security, a 
connection that will increase over time in developing nations as the 
pressure to develop presses against the goal of reducing carbon 
emissions. The need to grow energy supply in developing countries will 
remain high, especially for those countries with large populations 
still in poverty. Adequate supplies of energy are critical for 
addressing health, food, and water security, as well as to avoiding a 
growing tide of economic, environmental, and climate security threats. 
Large-scale deployment of small-scale technologies can leapfrog the 
need for enormous and dirty traditional energy infrastructure and bring 
prosperity to millions who need it. Displacing fossil energy with 
small-scale technologies will reduce demand for fossil fuels and will 
decouple economic development from carbon, which will strengthen global 
and developing country energy security.

    Question. Climate change threatens global food, ecosystem 
stability, and water availability and can contribute to overall 
political instability, among other problems. According to the United 
Nations ``Human Development Report from 2007/2008,'' it is estimated 
that up to $86 billion will be necessary annually to support adaptation 
in developing countries by 2015 to (1) protect the existing development 
investments that could be impacted by climate change; (2) adapt 
existing poverty-reduction programs to climate change, potentially 
creating green jobs in developing nations; and (3) strengthen the 
anticipated need for disaster response associated with climate change. 
The current financing mechanism through the United Nations to support 
adaptation to climate change in developing nations has, to this point, 
been underfunded.

   Looking toward a new international agreement, what 
        strategies and options need to be pursued in order to support 
        adaptation in developing nations?

    Answer. The need for adaptation to climate change depends on the 
extent of climate change impacts, vulnerability of a particular 
location or group of people to these impacts and adaptive capacity of 
ecosystems and societies. Developing countries are usually more 
vulnerable to climate change impacts due to their geographic locations 
and low adaptive capacities associated with their overall stage of 
development. For this reason, adaptation in developing countries 
involves both stand alone adaptation measures and integration of 
adaptation concerns into development strategies. Adaptation in 
developing countries will also need to include infrastructure measures, 
such as sea walls in coastal areas, water reservoirs, irrigation 
systems; and soft measures such as altering agriculture practices, 
providing training to help people move away from subsistence 
agriculture, developing early warning systems, and developing new water 
policies that encourage efficient water use and water sharing, etc.
    Decisions about infrastructure investments should include 
information on climate change and other environmental concerns. 
Ignoring these impacts will undermine long-term economic growth. 
International assistance can play an important role, provided that 
national and local needs are fully taken into account and the 
development agencies have enough information about the projected 
climate change impacts in the regions where they work.
    Identifying and pursuing the wisest adaptation actions requires 
planning and a thorough review of local institutional, legal and 
regulatory frameworks in each country or region. Developed countries 
should assist developing countries with these efforts and provide best 
practice examples.
    Weak governance also exacerbates vulnerability to existing extreme 
weather events and climate change. Therefore, strengthening the 
fundamental building blocks of civil society will also contribute to 
adaptation. Transparent governance based on the rule of law, 
cooperation among government agencies, and involvement of stakeholders 
(including local communities) in the decisionmaking process are 
prerequisites for effective adaptation to climate change. Schooling, 
basic professional training and medical care accessible to all are 
essential elements of community-level capacity and are indispensable 
for adaptation to climate variability and change.
    To support adaptation in developing countries, several tools are 
needed:

   Ample financing from developed countries for capacity-
        building and adaptation projects in developing and least 
        developing countries;
   Capacity-building and support for adaptation planning and 
        integration of adaptation into sectoral and national planning 
        and development strategies;
   Creation of microcrediting and small-scale grant programs 
        that would allow direct and fast access to financing to local 
        communities;
   Development of forecasting and early warning systems in all 
        developing countries;
   Assistance with and development of incentives (e.g., through 
        insurance mechanisms) for preventive measures;
   Risk-sharing mechanisms, including insurance;
   Implementation of national adaptation program of actions 
        (NAPAs) that specify their priority adaptation actions; and 
        have already been developed by least developed countries;
   Extension of NAPA program for all developing countries, 
        assistance with formulating NAPAs, and substantial financial 
        assistance for implementing them;
   Assistance to all developing countries with vulnerability 
        assessments; and
   Assistance with down-scaling/localizing climate change 
        forecasts.

    Question. As we know, effectively tackling climate change will 
require a cooperative effort and the involvement of a broad array of 
entities.

   What is the status of industry/NGO efforts to promote clean 
        and renewable technologies?

    Answer. Significant new clean energy technology market 
opportunities will emerge worldwide in coming years, with tens of 
billions of dollars' worth of clean technology needed in developing 
countries. Industry and NGOs, on their own, working together and 
working with governments are involved in promoting this technology. 
Much is being done and even more remains to be done.
    Examples of NGO activities include the work of the World Resources 
Institute (WRI) with business to develop low carbon strategies, build 
markets for renewable energy, and work with financial institutions to 
integrate consideration of climate risks and low carbon opportunities 
into financial decisions. (http://www.wri.org/climate/sustainable-
business-and-markets) See also, Samantha Put Del Pino, et al., 
``Sharpening the Cutting Edge: Corporate Action for a Strong, Low-
Carbon Economy'' (WRI 2009) (http://www.wri.org/publication/sharpening-
the-cutting-edge).
    Examples of industry groups working to promote clean technology 
investment, deployment and exports include the International Clean 
Energy Alliance (www.ice-alliance.org) and The Clean Economy Network 
(www.cleaneconomy.net).
    Based on stakeholder consultations with business, NGO and other 
stakeholder groups, The National Renewable Energy Laboratory prepared 
recommendations on Strengthening U.S. Leadership of International Clean 
Energy Cooperation (December 2008) (http://www.nrel.gov/
applying_technologies/pdfs/44261.pdf).
    As significant as these activities are, greater possibilities are 
now emerging. For example, the major economies of the world, including 
the United States, Europe, Japan, China, India, and others recently 
declared they will undertake ``nationally appropriate mitigation 
actions, subject to applicable measurement, reporting, and 
verification, and prepare low carbon growth plans.'' \1\ This step 
toward a new global climate agreement to be concluded in Copenhagen 
this December is a preview of the way in which confronting climate 
change will drive greatly increased plans and actions to deploy clean 
technology. These efforts will involve increased demand driven by 
carbon markets and other forces such as high oil prices, which will 
mobilize trade, investment, and deployment of clean technology.
---------------------------------------------------------------------------
    \1\ Declaration of the Leaders, The Major Economies Forum on Energy 
and Climate, July 2009.
---------------------------------------------------------------------------
    In recent years, U.S. industry has stepped up production of wind, 
solar, and other clean technologies, but other countries, including 
those of Europe and Asia have moved ahead of us in important areas. The 
low priority the United States placed, until recently, on addressing 
climate change put the United States in a less active position on clean 
energy than key competitors. Nevertheless, great new opportunities are 
in the offing if the United States is prepared to seize them by 
boosting public-private cooperation and providing the overall framework 
to address climate change and energy security that will also provide 
incentives for clean technology.
    Many U.S. companies have impressive arrays of skills and 
technologies but have been left somewhat on the sidelines in the 
absence of clear U.S. policy to control GHG or promote new clean 
energy. The Cleantech Venture Capital Network represents a large number 
of financiers ready to invest in high-growth startups in the clean 
energy field. Innovative renewable energy companies are hampered by the 
lack of a strong domestic market but are fighting for market share in 
markets such as Europe and China. Even U.S. auto companies, which are 
now suffering as a lax regulatory regime has left their vehicles less 
efficient than their competitors', are now putting clean battery 
systems at the heart of their strategy for recovery.

                               APPENDIX 1

                  U.S. GOVERNMENT PROJECTS/INITIATIVES

(http://www.state.gov/g/oes/rls/other/2009/123185.htm)
                    biofuels partnership with brazil
    In November 2008, the U.S. and Brazil announced expansion of 
cooperation on biofuels to advance security and promote sustainable 
development. The agreement expands scientific collaboration in biofuels 
and will work with five new countries interested in developing their 
domestic biofuels industries: Guatemala, Honduras, Jamaica, Guinea-
Bissau, and Senegal. These new partners, along with the Dominican 
Republic, El Salvador, Haiti, and St. Kitts and Nevis, comprise a total 
of nine partner nations to benefit from U.S.-Brazil biofuels 
collaboration. The U.S., Brazil, and MOU partners have obligated over 
$4.3 million across twelve projects that are underway. All partners are 
working to develop local biofuels industries to reduce dependence on 
imported fuels and promote sustainable development.
    Overseas Private Investment Corporation (OPIC) has supported 
renewable energy Projects in India. Several examples provided by the 
State Department include:

   Solar Energy: 2 MW, Grid-connected photovoltaic project; 
        $6.2 million in financing for construction and operation.
   Hydropower: 12 MW; $10 million in financing and $6 million 
        in political risk insurance to a U.S. small business for the 
        rehabilitation, construction and operation of a hydropower 
        station.
   Wind Energy: $450,000 provided in political risk insurance 
        (+ $750,000 forthcoming) to a U.S. small business for 
        installation and operation of turbines in Tamil Nadu and 
        Maharashtra.
   Waste-to-Energy: Series of 20 rice-husk plants; $1 million 
        in financing for plants in rural villages.

    National Renewable Energy Laboratory International Program--Market 
development:

   China: Biofuels, RE law implementation, Wind development, 
        Rural electrification.
   India: Solar analysis, biofuels.
   Brazil: biofuels.

                                 IRENA

    The International Renewable Energy Agency (IRENA) was officially 
established in Bonn on 26 January 2009. The U.S. is one of 136 nations 
to join. According to it's website, IRENA is ``aspires to become the 
main driving force for promoting a rapid transition towards the 
widespread and sustainable use of renewable energy on a global scale. 
(http://www.irena.org/index.php?option=com_content&view=article&id
=47&Itemid=28)
    International Renewable Energy Agency (IRENA). Member countries 
will give a financial contribution according to total budget and IRENA 
scale of assessment (based on U.N. scale).
            u.s. led projects with asia-pacific partnership
(http://www.app.gov/app/usled/)

    According to the Asia-Pacific Partnership website, U.S. led 
projects under the partnership include a Renewable Energy and 
Distributed Generation Task Force (REDG) (http://www.app.gov/
taskforces/renewable/). The first set of projects approved by the Task 
Force has the potential to achieve deployment of an additional 1.8GW of 
renewable energy and distributed generation capacity within five years. 
The Task Force promotes investment in these technologies and attempts 
to address market and technical barriers to adoption.
    The Task Force is to identifying barriers to technology deployment 
and financing associated with the deployment of REDG technologies. 
Australia, South Korea, and the United States are working together to 
analyze regulatory barriers in Partner countries and create an enabling 
framework for renewable energy deployment. The Republic of Korea is 
examining smart grid integration of distributed generation sources, 
working in cooperation with China, India, and Japan. The United States 
is working to commercialize distributed power generation using 
hydrogen--fueled generators in India. This project is targeting 
identified rural communities in India that can benefit from stable 
sources of electricity and will potentially increase by 1,000 to 2,000 
the number of homes or small businesses with access to clean, reliable 
electricity.
    The Partnership is helping provide customized power solutions based 
on local fuel sources in rural parts of India and China by partnering 
industry with U.S. government. Deployment of gasified biomass-fueled 
engines will provide power to some of the almost 400 million rural 
residents who lack adequate and/or reliable power supplies, and will 
power schools, health clinics, small industry, and agricultural 
production. The United States, in public-private partnership, will 
deploy combined heat and power systems in China that use petroleum coke 
oven gas for electricity and thermal energy. Australia is facilitating 
investment in a Mega Solar Project in South Korea that will both 
broaden the visibility of solar photovoltaic technology and contribute 
added capacity to help with peak load reduction.

Projects:

   Grid connected renewables energy (RE) and distributed 
        generation (DG) partnerships (U.S. Dept. of State, U.S. Energy 
        Association): project facilitating deployment of RE and DG 
        technology in India by identifying enabling environments 
        including but not limited to finances, regulations and 
        policies.
   Rural Entrepreneurship Zones--Bridging the Economic Divide 
        through Renewable Energy Based Empowerment (U.S. Dept. of 
        State, Society for Development Alternatives): This project is 
        resulting in the increased deployment of green power in India 
        by establishing Rural Entrepreneurship Zones (REZ) and 
        providing critical outreach and support services to businesses 
        in key sectors. This project is promoting green power by 
        developing a portfolio of connected businesses, focused on the 
        building materials and traditional skill-based craft sectors, 
        coupled with necessary support services such as green power. 
        Additionally this project is demonstrating the financial and 
        institutional viability for REZs and is building and nurturing 
        partnerships for leveraging policy support and financial 
        investments to accelerate the adoption and replication of REZs 
        throughout India.
   Facilitating a 1MW Solar Photovoltaic plant Pilot Project to 
        be integrated into North Delhi Power Ltd. (U.S. Dept. of State, 
        Morse Associates, Inc.): This project is currently facilitating 
        the development of a first, large-scale (1 MW), solar 
        photovoltaic power plant for the Tata Power Company, Ltd around 
        the city of Mumbai, India. India has a large potential solar 
        market. Expanded use of large-scale solar PV will create a 
        growing, but not yet quantifiable, contribution to GHG emission 
        reductions. This project is already making a small, but 
        significant contribution to clean, pollution- and GHG-free 
        power production, particularly in comparison to the current 
        dominant Indian power production based on low-quality coal 
        resources. This project is also developing a systematic 
        assessment of solar generating opportunities in Tata's service 
        areas by identifying areas with additional power needs, finding 
        suitable sites for solar generation, and assisting Tata in 
        negotiations to obtain financing for a 1 MW SPV plant.
   Accelerate Commercialization of Renewable Energy for 
        Distributed Generation in India (U.S. Dept. of State, Orb 
        Energy, Ltd.): India's commercial solar PV market is mainly 
        concentrated in the southern or middle parts of Karnataka. This 
        project enables the grantee to conduct market-scoping 
        activities in areas where potential customers have limited, if 
        any, options to purchase solar power units. Currently this 
        project is facilitating the establishment of 50 new franchised 
        branches in new markets (on top of 20 branches in existing 
        markets in south and mid-Karnataka). This project is already 
        well ahead of schedule and is also improve consumer finance 
        terms for the purchase of 1 mega-watt of PV systems and is 
        demonstrating to partner banks the merits of retaining such new 
        terms on an on-going basis.
   Market Development for Renewable Energy (U.S. Dept. of 
        State, U.S. Agency for International Development--India): The 
        government of India's renewable energy policy provides the 
        regulatory framework to facilitate the rapid market oriented 
        growth and development of renewable energy technologies for 
        rural electrification. This specific project advances green 
        technologies such as biomass, solar, waste-to-energy, wind, 
        small hydro, fuels cells, and micro turbines, in partnership 
        with state agencies and local utilities. This project results 
        in policy advocacy, reform and fiscal measures which enhance 
        the share of renewable energy technologies in India's energy 
        mix.
   Creating an Enabling Framework for Renewable Energy 
        Deployment. (U.S. Dept. of State, U.S. Dept. of Energy--
        National Renewable Energy Laboratory): This project is being 
        implemented to identify priority resource assessment and 
        decision support tools needed in India in order to better 
        inform renewable energy and distributed generation project 
        planning and policy development in India. The project is 
        strengthening and training Indian institutions in the field of 
        incorporating current data into decision making tools and is 
        producing a usable solar map product for Indian industry and 
        government stakeholders. This project is providing technical 
        collaboration to and with Indian counterparts on market 
        relevant resource data and outreach to enhance industry access 
        to, and awareness of, resource information tools.
   Identifying Optimal Legal Frameworks for Renewable Energy in 
        India (U.S. Dept. of State, Renewable Energy and International 
        Law Project): REIL and its sub-contractors are providing an 
        overview of the regulatory and policy situation for renewable 
        energy in the key, rapidly-developing Asia Pacific Partner 
        country of India, using case studies, especially those that 
        demonstrate positive steps already being taken to promote 
        increased investment in renewable energy markets. This project 
        is encouraging and enhancing the capacity for emission 
        reduction efforts in India, by promoting legal and regulatory 
        measures to help create the enabling environments for the 
        uptake of renewable energy.
   Solar PV Standards and Testing (U.S. Dept. of Energy): U.S. 
        DOE is collaborating with SunTech, the largest solar energy 
        company in China, and the China General Certification Center to 
        engage Chinese manufacturers on photovoltaic module 
        qualification standards and methodologies currently being used 
        in the U.S. and Japan. This project will ensure that world 
        photovoltaic manufacturers embrace and adopt state-of-the-art 
        reliability practices.

                        U.S. EPA MOU WITH CHINA

(http://epa.gov/international/air/chinaair.html)

    In December of 2003, EPA and the Chinese State Environmental 
Protection Administration, since renamed the Ministry of Environmental 
Protection signed a Memorandum of Understanding (MOU) providing a forum 
for EPA and China to be more strategic in cooperative efforts. The MOU 
established the Working Group on Clean Air and Clean Energy to 
coordinate and facilitate the implementation of the Strategy for Clean 
Air and Energy Cooperation.

Renewable Energy Projects:

   Wind Technology Partnership

     The Wind Technology Partnership is a joint U.S. EPA and U.S. DOE 
        program in China to accelerate the development and utilization 
        of grid-connected wind power in China. The program is an 
        extension of the Technology Cooperation Agreement Pilot Program 
        in China, where wind power was one of four technologies 
        selected by China as priorities. WTP is being implemented by 
        the U.S. in partnership with China's National Development and 
        Reform Committee, China's Energy Research Institute and China's 
        Center for Renewable Energy Development. WTP is currently 
        focusing on overcoming institutional and market barriers to 
        grid-connected wind power in China, with a focus on Hebei 
        province.

   Methane to Markets Partnership

     Under the multilateral Methane to Markets Partnership, EPA is 
        engaging in capacity-building, and project implementation 
        activities in China to facilitate methane capture and use 
        projects in the Coal, Landfill and Agriculture sectors. For 
        example:

        In the Coal Sector EPA funds the China Coalbed Methane 
        Clearinghouse. This Clearinghouse, housed by the China Coal 
        Information Institute. The Clearinghouse provides information 
        and logistical support to private businesses and foreign and 
        domestic government agencies interested in coal bed methane and 
        coal mine methane development in China. Visit the China Coal 
        Information Institute's website for notices about upcoming 
        projects and activities.
        In the Landfill sector, USEPA is working with the Chinese 
        government to develop feasibility studies for projects in 
        Beijing where landfill gas is used as an alternative vehicle 
        fuel. This work is being done in coordination with the EPA's 
        Beijing Olympics Air Quality Subgroup.
        For more information the on the partnership or specific 
        activities in China please visit www.methanetomarkets.org, or 
        the EPA Web site for Methane to Markets.
                                 ______
                                 

           Responses of Paul Camuti to Questions Submitted by
                        Senator Russell Feingold

    Question. The adoption of a new energy strategy is critical in 
order to effectively address climate change domestically and 
internationally. We have seen, for example, calls to construct a large 
solar power installation in the Sahara Desert to power both North 
Africa and Europe--this solution would require a huge infrastructure 
investment reaching across many countries.

   Are there any incentives offered by the U.S. Government to 
        encourage investment in renewable and clean energy in 
        developing nations? Are there particular areas where 
        demonstration projects have been attempted, unsuccessfully or 
        successfully?

    Answer. The ability to move large amounts of power in developing 
nations requires large investments. Oftentimes, the power grid is 
inadequate, if there is a power grid. Technology like high voltage DC 
(HVDC) transmission is available today to address this concern. This 
technology has been demonstrated on a large scale. For instance, 
Siemens has completed projects linking hydroelectric-generated power in 
remote regions of China to their city centers. Siemens also completed 
an HVDC project from power sources in New Jersey to power customers on 
Long Island, NY. Similar transmission needs exist in the United States, 
especially to link renewable energy sources to population centers. The 
most effective government incentive for this and many clean energy 
technologies (such as carbon capture and storage) is to provide a clear 
and predictable market signal for carbon dioxide emissions.

    Question. Specifically, what measures are being taken to evaluate 
and implement small-scale energy generating technologies that can be 
used onsite or very close to the end user, like solar photovoltaic or 
fuel cells, as a viable alternative for producing power in developing 
nations? Are there particular areas where demonstration projects have 
been attempted, unsuccessfully or successfully?

    Answer. The application of small-scale energy generation, or 
distributed generation, entails trade-offs with respect to efficiencies 
as well as the availability of generation technology. If the generator 
is closely linked to the load, better demand management and more 
flexible deployment of renewable technologies is possible. There are 
many technologies at various stages of development and deployment 
including photovoltaic, fuel cells of varying types, and micro wind 
turbines. In the process of developing these technologies, many small-
scale pilot projects have been completed, more as proof of concept than 
large-scale demonstration.
    There a few concerns:
    First, introducing many distributed generation sources to the grid 
will have an impact on the grid. More computerized and ``intelligent'' 
controls will be required to enable the technology and to protect the 
reliability of the power system. This is a key reason why ``smart 
grid'' solutions are sought after. The current focus on Department of 
Energy ``smart grid'' demonstration projects must include large scale 
demonstration of the integration of distributed generation.
    Second, distributed generation, particularly utilizing solar or 
wind power, will require advances in energy storage. The Department of 
Energy should prioritize funding for energy storage research and 
demonstration. The Department currently is funding energy storage for 
transportation, which may also lead to benefits for grid-scale storage.
    Siemens has completed a unique demonstration project for a special 
type of distributed generation called off-grid lighting. In Lake 
Victoria, Kenya, Siemens installed ``energy hubs,'' or photovoltaic 
powered battery charging stations that are not connected to a power 
grid. The charging stations are used to charge batteries for lights 
used for night fishing, reading, cooking, and night-time activities 
that were previously illuminated only by kerosene lamps. The 
replacement of roughly 175,000 kerosene lamps will save approximately 
50,000 tons of carbon dioxide.

    Question. How effectively would the deployment of these small-scale 
technologies in developing nations contribute to global energy 
security?

    Answer. The deployment of small-scale technologies will have a 
significant impact on global energy security. Many developing 
countries' energy challenges are in the area of off-grid or microgrid 
applications (like the battery-powered lamp example) due to poor 
transmission (grid) development that may not be remedied in the short 
term. Large-scale power projects may not be affordable or practical. 
There is therefore a need to adapt technology for developing nations in 
order to make products and solutions easier to deploy, use, maintain, 
and repair.

    Question. Climate change threatens global food, ecosystem 
stability, and water availability and can contribute to overall 
political instability, among other problems. According to the United 
Nations ``Human Development Report from 2007/2008,'' it is estimated 
that up to $86 billion will be necessary annually to support adaptation 
in developing countries by 2015 to (1) protect the existing development 
investments that could be impacted by climate change; (2) adapt 
existing poverty-reduction programs to climate change, potentially 
creating green jobs in developing nations; and (3) strengthen the 
anticipated need for disaster response associated with climate change. 
The current financing mechanism through the United Nations to support 
adaptation to climate change in developing nations has, to this point, 
been underfunded.

   Looking toward a new international agreement, what 
        strategies and options need to be pursued in order to support 
        adaptation in developing nations?

    Answer. Our experience shows that solutions for developing nations 
require a combination of technology expertise and understanding of 
local economic, political, and cultural conditions. We have established 
research and development teams in China and India in order to better 
understand local requirements and develop solutions for rural areas 
(such as the compact fluorescent lighting example in Paul Camuti's 
written testimony). We suggest providing the private sector incentives 
to establish these facilities in developing countries. The Clean 
Development Mechanism (CDM) has yielded positive results in technology 
transfer and adaptation in developing nations, but as stated in Paul 
Camuti's written testimony, much attention is needed to address 
streamlining the process of applying for CDM project status.

    Question. As we know, effectively tackling climate change will 
require a cooperative effort and the involvement of a broad array of 
entities.

   What is the status of industry/NGO efforts to promote clean 
        and renewable technologies?

    Answer. As the demand for clean energy increases (through 
government incentives, a market price for carbon, the market's need to 
reduce costs through efficiency, performance standards or renewable 
electricity standards), industry will respond by developing solutions. 
Our expanding wind energy market is a good example of the market at 
work.
    Through our work in the United States Climate Action Partnership 
(comprised of major industry and prominent environmental NGOs), we 
advocate for an economywide cap and trade regime, performance standards 
for fossil-fuel fired powerplants, and a variety of incentives for 
clean energy including payment for tons of carbon sequestered (see the 
Blueprint for Legislative Action at www.us-cap.org). Within USCAP, and 
with the support of major NGOs such as the Alliance to Save Energy, we 
advocate for energy efficiency measures including building codes. 
Siemens also supports a robust national renewable electricity standard, 
and this is supported by most of the major NGOs.

    Responses of Special Envoy Todd Stern to Questions Submitted by
                      Senator Robert P. Casey, Jr.

    Question. China has a priority interest, and understandably so, of 
furthering their economic progress and eradicating poverty relative to 
committing to hard and fast reductions in greenhouse gas emissions. In 
light of this and the urgency to move quickly to stabilize global 
atmospheric concentrations of greenhouse gases, what incentives exist 
to ``encourage'' China and India to commit to reducing their emissions 
of CO2 and other greenhouse gases?

    Answer. China and India both do have very real development needs. 
In China, average incomes are just over $3,000, with more than 450 
million people living on less than $2 per day. In India, the statistics 
are even more dire, with over 800 million people living on less than $2 
per day. Sustaining rapid economic growth is necessary for both to 
continue to lift their citizens out of poverty and up the development 
ladder.
    Working together to reduce greenhouse gas emissions is an important 
part of the overall United States-China and United States-India 
bilateral relationships, and there are clear incentives for these 
emerging economies to reduce their greenhouse gas emissions. It is not 
sustainable for them to ignore this problem, as climate change could 
cause severe damage to their own countries. The atmosphere is 
unforgiving, and it is both unsustainable for them and unacceptable to 
the world, for China or India to take a path that makes it impossible 
to limit greenhouse gases to a relatively safe level.
    Further, the future of our global economy will belong to those who 
move down the low-carbon path. There are rich economic opportunities 
for countries that head in this direction going forward. India and 
China are increasingly starting to see this.
    What all countries need to see--and here the United States must 
lead by example--is that economic growth and the growth of emissions 
must be separated; that is what a low-carbon development path is all 
about.

    Question. One approach that could be used to ``encourage'' 
countries like China and India to participate in a global climate 
change mitigation agreement are border adjustments that would impose a 
tax or tariff on imported products. What are your thoughts on the 
efficacy of border adjustments?

    Answer. At this time, the administration has not supported a border 
tax or any specific competitiveness measure. An effective international 
agreement would help make border tariffs or taxes unnecessary by 
ensuring that all countries are doing their part in reducing emissions. 
It is our aim to negotiate such an agreement with China, India, and the 
international community. This is the most effective way to create a 
level playing field for U.S. manufacturing and other energy-intensive, 
trade-exposed industries.
    Domestic policy should provide targeted measures to address 
competitiveness impacts on energy-intensive, trade-sensitive 
industries, if they are found to be necessary. The Waxman-Markey 
legislation addresses this issue by taking transition measures whereby 
free allowances offset the cost of climate policy for vulnerable 
industries. In fact, Waxman-Markey covers 100 percent of both the 
direct and indirect costs of the bill for qualifying trade-exposed, 
carbon-intensive industries.
                                 ______
                                 

            Response of Paul Camuti to Question Submitted by
                      Senator Robert P. Casey, Jr.

    Question. Coal and low-cost electricity from coal is critical to my 
state and many states like Ohio, Indiana, West Virginia, and Michigan. 
Your company is working on advanced coal technology. What is your 
perspective on when carbon capture and storage will be commercially 
available, and what the role of the Federal Government in funding clean 
coal research and development should be?

    Answer. As a member of the United States Climate Action Partnership 
(USCAP), Siemens supports a national strategy to repower, retrofit, or 
replace existing high emitting coal plants with low emitting coal 
technologies to help meet current and future electricity demand in the 
United States.
    In order to have a meaningful impact on climate change, carbon and 
capture and storage (CCS) technologies would need to be deployed in 
large scale. Some technologies like precombustion gasification are 
available today. But, market entry is delayed by uncertainties in 
carbon policies and financing difficulties, as well as the need for 
large-scale storage demonstration. In addition, a number of promising 
new post-combustion technologies have been demonstrated on a smaller 
scale, but full-scale demonstrations are needed to reduce the 
technology risks for powerplant owners and operators. The need for 
successful demonstrations places commercial availability in a timeframe 
of 2015 and beyond.
    In order to increase commercial deployment of CCS while preventing 
excessive runup in natural gas prices due to fuel switching, USCAP 
recommends that Congress provide substantial financial incentives (via 
a dedicated and protected trust fund that is outside the appropriations 
process) and needed regulatory certainty to facilitate and accelerate 
the early deployment of CCS technology. Specifically, USCAP recommends 
that Congress immediately:
          (1) Direct all relevant federal agencies to develop a unified 
        strategy and by January 2010 promulgate all necessary rules to 
        implement a strategy to address the key legislative and 
        regulatory barriers that impede CCS deployment;
          (2) Increase funding to complete a national assessment of the 
        capacity for geologic storage of carbon dioxide by January 
        2013;
          (3) Increase funding for early grants to fully demonstrate 
        the viability of CCS in commercial practice. The program would 
        establish at least 5 gigawatt of CCS-enabled coal-fueled 
        facilities operating with an emissions rate of no more than 
        1,100 lbs/megawatt hour, including at least one pulverized coal 
        retrofit by no later than 2015.
    Federal incentives in the form of tax credits and loan guarantees 
are needed to accelerate market entry and speed early application of 
CCS technologies. It is essential that the Federal Government continue 
to sponsor clean coal research and development through early-stage 
research in both second and third generation capture technologies to 
reduce their costs and improve their performance and reliability.
    The USCAP ``Blueprint for Legislative Action'' (available at 
www.us-cap.org) contains additional recommendations, which we endorse, 
for performance standards for new coal and other solid fueled 
facilities emitting more than 10,000 tons of carbon dioxide per year, 
as well as a CCS direct cash payment funding program for sequestering 
carbon dioxide from coal and other fossil-fuels in both power 
generation and industrial operations.
    We also note that clean coal technology refers to many technologies 
whose goal is to reduce the environmental impact of coal energy 
production. Technologies to reduce sulfur dioxide emissions, nitrogen 
oxide emissions and particulate emissions are commercially available 
today, but regulatory uncertainty has affected the market for these 
technologies. Siemens recognizes that the uncertain status of the U.S. 
EPA's Clean Air Interstate Rule, the Clean Air Mercury Rule and the New 
Source Review provisions under the Clean Air Act has had a chilling 
effect on the acquisition of this emission-reducing technology.

                                  
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