[Senate Report 105-54]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 120
105th Congress                                                   Report
                                 SENATE

 1st Session                                                     105-54
_______________________________________________________________________


 
    CONDITIONS REGARDING U.N. FRAMEWORK CONVENTION ON CLIMATE CHANGE

                                _______
                                

                 July 21, 1997.--Ordered to be printed

_______________________________________________________________________


   Mr. Helms, from the Committee on Foreign Relations, submitted the 
                               following

                              R E P O R T

                       [To accompany S. Res. 98]

    The Committee on Foreign Relations having had under 
consideration a resolution expressing the sense of the Senate 
regarding the conditions for the United States becoming a 
signatory to any international agreement on greenhouse gas 
emissions under the United Nations Framework Convention on 
Climate Change, reports favorably thereon, and recommends that 
the resolution do pass.

                       I. Background and Purpose

    In May 1992, the United States Senate gave its advise and 
consent to the ratification of the United Nations Framework 
Convention on Climate Change. The treaty, which was intended to 
address the global emission of greenhouse gases, was signed by 
President Bush at the Rio Earth Summit. Under that treaty the 
United States, like other developed countries, committed to a 
non-binding target of containing emission levels at 1990 rates 
by the year 2000. The treaty entered into force in March, 1994 
and is not fully implemented.
    Soon after entry into force Parties began preparing for the 
First Conference of the Parties (COP-1) in Berlin, Germany, and 
began drafting of a new legal instrument to address emissions 
reductions beyond the year 2000. At COP-1 in March 1995, the 
``Berlin Mandate'' was adopted by the Parties. That document 
set the broad framework for negotiations to follow, including a 
decision that no commitments would be included in a new 
agreement for countries with developing economies, as defined 
in the Framework Convention. Countries that would not incur new 
commitments include China, Brazil, Mexico, and India. The COP-1 
also established the Ad Hoc Group on the Berlin Mandate (AGBM), 
which was tasked with developing the text of a new agreement.
    The Second Conference of the Parties (COP-2) in Geneva, 
Switzerland, in July 1996, took an additional step in 
negotiations, calling for ``legally binding'' commitments that 
could have significant impact on many world economies. 
Specifically, Parties agreed to work toward establishing 
emissions reduction commitments requiring specific, legally 
binding emissions limits and policies for the period beyond 
2000. The ``Ministerial Declaration'' issued at COP-2 called 
for accelerated negotiations on the elements of a new legal 
instrument that would limit emissions of greenhouse gases. That 
legal instrument continues to be under negotiation on a 
timetable to be opened for signature at the Third Conference of 
Parties in Kyoto, Japan, in December 1997.
    The next round of negotiations is scheduled for July 1997 
in Bonn, Germany. At this round of negotiations members will 
have for the first time a full negotiating text with 
submissions from all parties. The Clinton administration 
submissions include the following key elements: 1) the target 
for reduction of greenhouse gas emission levels should be 
binding; 2) the target should focus on the years 2010 to 2020; 
and 3) countries should have flexibility nationally in 
implementation of the new commitments.
    Other U.S. proposals include: 1) the creation of an 
``emissions budget'' which would allow nations to ``trade'' 
emissions in order to meet targets, and ``bank'' emissions for 
future years, and ``borrow'' from future years (with a 
penalty); 2) establishment of procedures to ensure reporting, 
measurement, review and compliance of emissions standards; 3) 
involvement of developing countries (without requiring binding 
emission reductions), including graduation requirements for 
developing countries; and 4) provision for ``joint 
implementation,'' which would permit parties to assume 
reductions through activities in other countries.
    Resolution 98 was introduced by Senators Byrd and Hagel and 
has more than 50 cosponsors. Supporters believe that the 
resolution sends a clear and unambiguous signal as to the basic 
conditions that must be met if the United States is to accept 
legally binding commitments to reduce greenhouse gas emissions. 
In addition, the resolution recommends that a bipartisan group 
of Senators be appointed by the Majority and Minority Leaders 
of the Senate to monitor the status of negotiations on climate 
change and report periodically to the Senate. This degree of 
oversight is unusual and serves to emphasize the high level of 
member interest in ensuring that the United States ratify a 
treaty only if U.S. interests are adequately protected.
    The attached appendix is an expansive compilation of the 
testimony of Senators, administration officials, economists, 
scientists, and U.S. industry and labor. A thorough reading of 
the testimony indicates that the issues are complex, both in 
terms of the scientific data that exists on global warming and 
the potential impact on the U.S. economy if certain proposals 
are implemented in the United States.

                          II. Committee Action

    The Subcommittee on International Economic Policy, Export 
and Trade Promotion held two public hearings on June 19 and 
June 26, 1997. The hearings were chaired by Senator Chuck 
Hagel. The Committee on Foreign Relations considered Senate 
Resolution 98 on July 17, 1997, and ordered the resolution 
favorably reported by a voice vote.

                    III. Section By Section Analysis

    Section One of Senate Resolution 98 has two parts. The 
first paragraph specifies two key conditions that the Senate 
expects to see included in any international agreement that the 
United States signs related to reducing greenhouse gas 
emissions. This section states that it is the sense of the 
Senate that any agreement that the United States signs that 
would impose additional legal commitments on the United States 
related to the United Nations Framework Convention on Climate 
Change should include commitments for countries with developing 
economies (termed non-Annex I countries under the existing U.N. 
Framework Convention), and should not result in serious harm to 
the economy of the United States. The section makes clear that 
these requirements apply to any agreement reached during 
scheduled negotiations in Kyoto Japan in December 1997 or any 
agreement reached thereafter.
    The second paragraph states the sense of the Senate 
regarding the materials that must be included in the 
transmittal documents that would accompany any agreement that 
is submitted to the Senate for its advice and consent to 
ratification. Such transmittal documents should include: 1) a 
detailed explanation of legislation or regulations that would 
be required to implement the agreement; 2) a detailed analysis 
of the financial and economic costs to the United States 
incurred by implementing the agreement submitted to the Senate.
    Section Two of the Resolution requires the Secretary of the 
Senate to transmit a copy of the Resolution to the President.



                            A P P E N D I X




               STATUS AND IMPLICATIONS OF UNITED NATIONS

                      CLIMATE CHANGE NEGOTIATIONS





                            C O N T E N T S

                               __________

                        Hearing of June 19, 1997

                                                                   Page

Byrd, Hon. Robert C., U.S. Senator from West Virginia............    12
    S. Res. 98...................................................    21
Dingell, Hon. John D., U.S. Representative from Michigan.........    26
    Prepared Statement...........................................    30
Fay, Kevin J., Executive Director, International Climate Change 
  Partnership, Arlington, Virginia...............................    76
    Prepared Statement...........................................    78
Gilchrist, Hon. Wayne T., U.S. Representative from Maryland, 
  Prepared Statement.............................................    33
Neidig, Bryce, President, Nebraska Farm Bureau Federation, 
  Lincoln, Nebraska..............................................    70
    Prepared Statement...........................................    73
Trumka, Richard L., Secretary-Treasurer, American Federation of 
  Labor and Congress of Industrial Organizations, Washington, DC.    68
Wirth, Hon. Timothy E., Under Secretary for Global Affairs, 
  Department of State............................................    34

                        Hearing of June 26, 1997

Cunningham, William J. Jr., Legislative Representative, AFL-CIO, 
  Washington, DC.................................................   102
Jasinowski, Hon. Jerry J., President, National Association of 
  Manufacturers, Washington, DC..................................   115
    Prepared Statement...........................................   119
Michaels, Dr. Patrick, Professor of Environmental Sciences, 
  University of Virginia, Charlottesville, Virginia..............   140
    Prepared Statement...........................................   145
Montgomery, Dr. W. David, Vice President, Charles River 
  Associates, Washington, DC.....................................   105
    Prepared Statement...........................................   108
Repetto, Dr. Robert, Vice President and Senior Economist, World 
  Resources Institute, Washington, DC............................   122
    Prepared Statement...........................................   125
Robock, Dr. Alan, Maryland State Climatologist, Department of 
  Meteorology, University of Maryland, College Park, Maryland....   151
    Prepared Statement...........................................   154

                               Appendices

                         June 19, 1997 Hearing

Letter to the The President opposing the climate change 
  agreement, signed by 18 organizations..........................   169
``Climate Change Speech,'' by John Browne, Group Chief Executive, 
  British Petroleum (BP America).................................   170
``Greenpeace Dumps Coal and Oil Barrels on Capital Steps to 
  Protest `Byrd-Brained' Attempt to De-Rail Climate Treaty.''....   176
``Authors of Economists' Statement on Climate Change Urge Action 
  at the Summit of the Eight in Colorado.''......................   177
Statement of the American Farm Bureau Federation, Supplemental 
  Statement......................................................   179
``Global Warming: Our Nation's Capitol at Risk,'' by Dr. Janine 
  Bloomfield and Sherry Showell, Environmental Defense Fund......   271

                         June 26, 1997 Hearing

``I. Decisions Adopted by the Conference of the Parties.''.......   279
``Review of the Implementation of the Convention and of Decisions 
  of the First Session of the Conference of the Parties.''.......   280
Letter from Robert N. Burt, Chairman and CEO, FMC Corporation to 
  Chairman Hagel.................................................   282
Letter from M.B. Oglesby, Jr., Association of American Railroads 
  to Chairman Hagel..............................................   284
Prepared Statement of Richard K. Davidson........................   286
Greenpeace submissions:..........................................
  ``Global Warming and Avoiding Dangerous Human Interference with 
    the Climate''................................................   287
  ``Global Warming and the Carbon Budget''.......................   288
  ``Global Warming and the Greenpeace Solution''.................   288
  ``Greenpeace Demands''.........................................   289
Prepared Statement of the Global Climate Commission..............   290



         GLOBAL CLIMATE CHANGE NEGOTIATIONS: THE ROAD TO KYOTO

                              ----------                              


                        THURSDAY, JUNE 19, 1997

                           U.S. Senate,    
     Subcommittee on International Economic
                Policy, Export and Trade Promotion,
                     of the Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:33 a.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Chuck Hagel 
(chairman of the subcommittee) presiding.
    Present: Senators Hagel, Thomas, Sarbanes, and Kerry.
    Senator Hagel. The committee will come to order.
    Today the subcommittee meets to receive testimony regarding 
the status of U.N. Global Climate Change Negotiations. We have 
before us this morning a group of very distinguished witnesses 
representing a variety of views from Congress, the 
administration, and the private sector. We look forward to 
their testimony.
    Welcome.
    We are dealing with an issue that has potentially drastic 
consequences for American foreign, domestic, and economic 
policy. The course of action we take on this issue will affect 
for future generations our economy, environment, future energy 
use, energy costs, economic growth, trade, jobs, global 
competitiveness, national defense and, perhaps most important, 
our national sovereignty.
    We all agree on the need for a clean environment. We all 
want to leave our children a better, cleaner, more prosperous 
world. I have yet to meet one American or one Member of 
Congress who wants dirty air, dirty water, a dirty environment 
or declining standards of living for their children and 
grandchildren.
    This debate will not be about who is for or against a clean 
environment. It never has been. Nor will the debate be about 
motives, personalities, or politics. This debate is about 
finding the truth, the facts. It will be about asking the 
necessary questions and expecting straight-forward answers.
    What is the issue? What are the problems? What are the 
solutions? What are the costs? And what are the consequences?
    The debate we are about to enter will be conducted in both 
Houses of Congress, in numerous committees of jurisdiction, and 
with the full participation of the administration and the 
private sector. This initial hearing will focus on educating 
and informing the public, the media, and the Members of 
Congress.
    We need to insure that any agreement negotiated and signed 
by the administration will be fair to America, the world, and 
that it will not adversely affect America's global 
competitiveness, our economy, and will not challenge our 
national sovereignty.
    We are all interested in understanding where we are on this 
issue and how we got here. I have heard reports and read papers 
in the newspapers of how the American position changed from 
advocating a position of supporting voluntary emissions 
reductions to one of calling for legally binding reductions for 
ourselves and only commitments for others. We look forward to 
hearing why we changed in mid-stream this course of action, if 
we did, how that decision was reached, and to what extent the 
Congress was consulted.
    We are also interested in why the administration is 
advocating legally binding emissions reductions for the United 
States and not for nearly 130 other countries, like China, 
Mexico, South Korea, Singapore, Indonesia and other countries.
    We look forward to hearing from Under Secretary Wirth on 
this issue and the apparent inequalities inherent in any such 
agreement.
    Related to this, we are also interested in how the 
administration intends to curb the future growth of greenhouse 
gas emissions in countries like China, who would not be subject 
to the same legally binding emissions, but whose emissions will 
soon eclipse our own.
    We are concerned about the primacy of American sovereignty 
in any new emissions reduction scheme and look forward to 
hearing testimony on how the U.S. economy and fuel consumption 
and use might be monitored by any new international body. How 
is that going to work? Should it work?
    I look forward especially to seeing how exactly any new 
U.N. treaty dictating our domestic energy use will affect the 
U.S. economy, not just in terms of lost GDP or lost jobs, lost 
opportunities and global competitiveness, but, more 
specifically, how it will affect the standard of living of 
everyday Americans and future generations of Americans.
    We must also take a long, hard look at how our future 
competitiveness will be affected if American businesses are 
forced to be subjected to new international regulations while 
their global competitors are not.
    Each of the witnesses before us today will offer a unique 
and important perspective on the current negotiations as we 
begin this debate. I thank them in advance for their time, 
their courtesy, and their testimony.
    As this debate moves forward, the U.S. Senate will offer 
its own unique and important perspective. It is our 
constitutional responsibility to do so.
    We should be very clear to the administration, the American 
public, and governments around the world that the U.S. Senate 
intends to be very involved and will have a serious, informed, 
and strong voice in helping shape the American position on this 
important issue.
    With that, my distinguished colleague from Maryland and 
ranking Democrat on this subcommittee, Paul Sarbanes, is not 
yet with us. I would welcome now my colleague from Wyoming, 
Senator Craig Thomas.
    Senator Thomas. Thank you, Mr. Chairman. I have a statement 
I would like to have included. I want to thank you for having 
this hearing and to welcome our friends, Senator Byrd and 
Congressman John Dingell.
    At the outset, I want to express my concern and opposition 
regarding the unilateral efforts to push for legally binding 
targets and timetables on developed countries to reduce 
greenhouse emissions, while at the same time exempting 
developing countries from identical requirements.
    We have talked about this before with Under Secretary 
Wirth.
    I want to hear from the administration on how they believe 
putting American industries in a strait-jacket will ensure that 
it does anything less than worsen the problem they claim to 
want to fix.
    Mr. Chairman, I firmly believe the goals of economic growth 
and environmental protection do not have to be mutually 
exclusive. We can do both. We need sound, peer-reviewed science 
and a cost benefit ratio process.
    We can do it. But we cannot achieve our goals by making 
agreements unilaterally that put a handicap on us and leave the 
rest of the world producing much of the problem untouched.
    I am pleased to be a part of the resolution that Senator 
Byrd and Senator Hagel have introduced. Sixty-one Members of 
the Senate have joined in that effort.
    There will be a great deal of work taking place between now 
and December, and I strongly urge the administration to work 
with the Congress in a bipartisan way so that we can express 
these concerns and come up with real solutions.
    Thank you.
    [The prepared statement of Senator Thomas follows:]
               Prepared Statement of Senator Craig Thomas
    Thank you, Mr. Chairman, for taking the time to schedule this 
important hearing to discuss the Clinton Administration's policy on 
global climate change. Given the significant timing of this issue, and 
the effects it will have on our nation's economy, I look forward to the 
information that will be shared and the testimony that will be 
presented.
    At the outset, I want to let my concerns and opposition be known 
regarding the Clinton Administration's effort to push for legally-
binding targets and timetables on developed countries to reduce 
greenhouse gas emissions, while at the same time exempting developing 
countries from those identical requirements. I realize that the United 
States is responsible for significant quantities of carbon dioxide 
emissions in the atmosphere. On the other side of this equation, 
however, ``developing'' countries such as China, Mexico, South Korea, 
Brazil and India emit over half of all greenhouse gases. For example, 
in China -- a country with 1.2 billion people -- almost 80 percent of 
the energy for home cooking and heating comes from high sulfur coal. In 
India, the second most populous country in the world, the airport in 
the capital of New Delhi is regularly closed -- for lengthy periods of 
time -- because the smog is so bad airplanes cannot land because of 
poor visibility. Our diplomats in New Delhi receive hazard pay because 
of the air quality and many actually carry oxygen tanks with them. I 
would like to hear from the Administration on how they believe placing 
America's industries in a straight jacket will ensure nothing less than 
the worsening of the problem they claim to want to fix?
    This concept is frustrating to me because it is our businesses and 
industries that are aware of the problems and are attempting to reduce 
harmful air pollutants. The U.S. and other Annex I countries are the 
ones with the knowledge and technology necessary to produce a safer 
environment. No one can argue that our industries are cleaner than in 
underdeveloped countries.
    Nevertheless, if the Administration, led by Undersecretary of State 
for Global Affairs Tim Wirth, succumbs to binding agreements for 
industrialized countries in Kyoto, Japan, this December, we will let 
underdeveloped countries off the hook. They will not have to meet the 
uncompromising regulations that will be placed on our industries, which 
will do nothing but jeopardize the United States' sovereignty. Simply 
put, imposing legally binding sanctions on the U.S. and other developed 
countries just doesn't make sense.
    Mr. Chairman, I firmly believe the goals of economic growth and 
environmental protection do not have to be mutually exclusive. We can 
do both. But it will take a willingness from all countries to evaluate 
how they will administer new programs in order to obtain better 
results. The basis for this balance must come from several areas: 
sound, peer-reviewed science and a cost-benefit approach. Using good 
science, rather than emotional rhetoric, ensures we're spending our 
limited resources on actual problems. Cost-benefit goes beyond whether 
we ought to be doing something, but rather lets us decide how best to 
spend our money. Once we decide to address a problem, we need to take 
initiatives that give us the best results for the smallest cost.
    However, rushing into agreements that will hurt America's economic 
competitiveness for questionable benefits will only make solutions less 
effective and worsen the environment as developing countries increase 
their production levels. Furthermore, if an international treaty is put 
in place that legally binds Annex I countries to specific targets and 
timetables, I am concerned the U.S. will also see a shift of jobs from 
our soil to overseas.
    I will do everything I can to stop the Administration from 
committing the United States to any binding international agreement 
regarding global climate change that imposes one set of obligations on 
us and other developed countries, but excludes those standards on 
developing countries. Recently, I became an original cosponsor of 
Senate Resolution 98, sponsored by Senators Byrd of West Virginia and 
Hagel of Nebraska, Chairman of this subcommittee, calling on the 
Clinton Administration not to adhere to any protocol or agreement which 
would do just that. Although we should constantly work to reduce air 
pollution around the world, this must be done in a manner that does not 
threaten jobs or our international competitiveness and sovereignty. I 
thank them for their work and was pleased that so many of my colleagues 
cosponsored the initiative.
    I commend the Chairman for holding this hearing today. Global 
climate change is a critical measure to our industries and the nation 
as a whole. A great deal of work and negotiating will take place 
between now and December and I strongly encourage the Administration to 
listen to the bipartisan concerns being expressed by the Congress. 
Additionally, the administration needs to be frank with the American 
people and explain the economic and social impacts of any proposed 
changes. Folks need to be aware if a reduction in the Gross Domestic 
Product will occur, or if gas taxes will increase as a result of their 
actions. Thank you, and I look forward to hearing from our guests.

    Senator Hagel. Senator, thank you. The first panel this 
morning will consist of the distinguished senior Senator from 
West Virginia, Senator Robert Byrd, and our distinguished 
colleague from the House, Representative John Dingell. Each of 
you has a long history and tradition of service to this 
Congress and to our Nation. Each has contributed mightily in 
many areas. Each of you has particular perspectives and bring 
great leadership to this issue.
    So on behalf of our committee, I welcome you both. We are 
most, most pleased that you are here and look forward to your 
thoughts on this very important issue. Senator Byrd, I would 
ask you to begin. Thank you.

   STATEMENT OF HON. ROBERT C. BYRD, U.S. SENATOR FROM WEST 
                            VIRGINIA

    Senator Byrd. Thank you, Mr. Chairman, members of the 
committee. Let me say at the beginning that I listened 
carefully to your statement and that of Mr. Thomas. I think you 
quite correctly, carefully, methodically, and meticulously set 
out the problem and where we need to go.
    Let me also say at the beginning that I am very privileged 
to share this opportunity as a witness with my friend John 
Dingell. I served in the House of Representatives with 
Congressman Dingell's father. I have watched Congressman 
Dingell over the years and I think on most issues, with the 
exception possibly of the Byrd Rule, we are much in agreement.
    Mr. Dingell. And you beat me fair and square on that one.
    Senator Byrd. So, I am just very proud to have this 
opportunity to work with and to share this time with John 
Dingell. He is a very articulate, very capable, very highly 
respected Member of the House and that respect also exists in 
the Senate.
    Mr. Chairman, before I read my prepared statement, let me 
begin like this. I will soon be 80 years old. I do not need any 
scientific analysis to tell me that something is wrong out 
there, that something is happening. I have seen it in my own 
lifetime. The winters are different. The summers are different 
from what they were when I was a boy. Something is at work out 
there. I can't explain it, but I think we must understand that 
there is something going on that is causing the storms, the 
floods, causing the elements to be so unpredictable. It seems 
to me that we are all in this boat together, the developed 
world and the developing world.
    So I begin with that premise, that there is something going 
on that is very serious. It is already having an impact upon my 
life, your life, and the lives of all Americans and peoples 
around the world.
    I also begin with the premise that if we recognize that 
fact and agree that there is something going on, we need to 
work together in dealing with this problem. It won't get better 
of itself. We need to work together or else my children, my 
grandchildren, and their grandchildren will have an intensified 
problem and one which will be even more costly in its 
resolution, and more painful.
    So with that beginning, I thank you for the opportunity to 
appear before the subcommittee to discuss the critically 
important issue of the negotiations aimed at signing a protocol 
during the Third Session of the Conference of the Parties to 
the United Nations Framework Convention on Climate Change, 
which is scheduled to be held in December in Kyoto, Japan. I am 
concerned that the protocol that results from these 
negotiations could have a serious impact on American industry 
and on the American economy while, at the same time, failing to 
address a looming threat to the global environment.
    And so, on June 12, I introduced, together with the 
chairman of the subcommittee, a Sense of the Senate Resolution. 
We were joined by a bipartisan group of our colleagues which 
now numbers 61 in toto. It addresses the conditions for U.S. 
agreement to revisions to the United Nations Framework 
Convention on Climate Change. The resolution has been co-
sponsored, as I say, by 61 Senators, including ourselves, from 
both sides of the aisle. This resolution states the Sense of 
the Senate that the developing world must fully participate in 
the treaty negotiations and commitments and play a meaningful 
role in effectively addressing the problem of global climate 
change.
    In essence, the resolution accepts the thesis, which is 
still the subject of some dispute, that the increasing release 
of carbon dioxide and its accumulation in our atmosphere are 
causing a very gradual heating of the globe which has many 
adverse consequences for us all. I believe the administration 
should be commended for its efforts on this issue and I commend 
this subcommittee for its attention to the matter. If 
substantial steps are going to be taken to influence carbon 
dioxide and other greenhouse gas emissions, we need to 
accelerate new technologies, anticipate new developments, and 
encourage public/private sector participation.
    President Bush signed the United Nations Framework 
Convention on Climate Change, the so-called Rio Pact, in 1992, 
which was subsequently approved by the Senate and calls on the 
industrialized nations to aim to reduce their greenhouse gas 
emissions to their 1990 levels by the year 2000, a goal which 
will not be achieved by the U.S. nor by the vast majority of 
the industrialized nations.
    The parties to the Framework Convention met in Berlin in 
1995 to discuss the future direction of the treaty in light of 
this projected failure to meet the voluntary objectives, 
agreeing that any new commitments would be binding upon the 
signatories. Specifically excluded--and this was a mistake--
specifically excluded from any new commitments, however, would 
be the countries that comprise the developing world. The 
rationale for the so-called Berlin Mandate was that it is the 
industrialized OECD nations that have been the major emitters 
of greenhouse gases in the past and will continue to be for the 
next decade.
    There are two intrinsic problems with the Berlin Mandate. 
First, while the industrialized world is the primary 
contributor to the current problem, that will not be the case 
in just a few years.



                                Chart 1

    Senator Byrd. As this chart demonstrates, the emissions of 
the developing world are rapidly increasing on a sharp upward 
slope. These emissions will actually surpass those of the 
industrialized OECD nations by the year 2015. In short, the 
developing world is rapidly becoming a clone of the OECD 
nations.
    Now let us assume that the current negotiations for a new 
protocol, which are to be concluded in Kyoto this December, 
result in a binding commitment that the OECD nations must 
reduce their emissions to 1990 levels by 2010. 



                                Chart 2

    Senator Byrd. This chart demonstrates that under such a 
scenario, the OECD nations will sharply reduce our emissions of 
greenhouse gases. The price we will pay in order to achieve 
these reductions is open to debate as estimates differ. 
Nonetheless, the key point is that this responsibility will not 
be shared because of the Berlin Mandate, for the chart clearly 
shows that the emissions of the developing world continue on 
their inexorable upward track, even as we, in the OECD group, 
make the painful and costly adjustments necessary to force down 
our own emissions.
    This demonstrates the second problem with the Berlin 
Mandate, which is that we gave away the store and we received 
nothing in return. Many of the biggest emitters of greenhouse 
gases in the developing world have refused to even discuss, let 
alone seriously consider, taking any emissions limitations 
commitments upon themselves. In what can only be viewed as an 
act of environmental irresponsibility, the developing nations 
have adamantly refused to recognize that they will, over the 
next 2 decades, become the primary cause of the problem in 
terms of annual emissions.
    The refusal of the developing world to discuss any future 
emissions limitations commitments has become a central issue, 
for any attempt to bring them into the process is labeled by 
some as a treaty killer. I have a different perspective. I am 
not interested in killing the treaty. My resolution and yours, 
Mr. Chairman, is not a treaty killer. It is, in fact, a treaty 
enhancer. It calls upon the administration not to agree to a 
protocol unless it includes new commitments to limit or reduce 
greenhouse gas emissions for developing countries parties 
within the same compliance period. Our resolution improves the 
treaty, for any treaty that does not include emissions 
limitations provisions for the developing world is inherently 
unsound and ineffectual on its face. Environmentally we are all 
in the same global boat.
    So I ask the rhetorical question: What good does it do for 
the United States and other developed nations to work 
feverishly to plug the holes that we have drilled in the bottom 
of the boat over the past decades while at the same time the 
developing nations will be drilling holes, larger holes, at the 
other end just as fast as we plug them on our end? Be assured 
that the global boat will sink just as rapidly and we are all 
going to be in for a long, long swim.
    Bringing the developing world in under the climate change 
tent as part of any future treaty will not only increase the 
prospect of Senate ratification--of Senate approval, I should 
say; the Senate does not ratify treaties, it approves the 
ratification of treaties--will not only improve the prospects 
of Senate approval, it will also be enormously beneficial for 
the international environment.
    Let me further clarify that point.



                                Chart 3

    Senator Byrd. The chart before you shows the world of 1995 
in terms of world carbon emissions in millions of metric tons 
of carbon. The United States and OECD nations, shown in red, 
are responsible for a little over half of that total.



                                Chart 4

    Senator Byrd. The next chart projects the world as it might 
be after the currently proposed treaty is adopted with only the 
developed world taking action to reduce greenhouse gas 
emissions. The difference is startling. The difference, again, 
is startling. The developing world, shown in purple, has 
assumed the U.S. and OECD nations' place as the biggest global 
polluters. The problem remains the same. Only the names have 
changed. And, again, because of the flawed Berlin Mandate, all 
of these emissions from the developing world will be completely 
uncontrolled and free to increase even further. From this 
perspective, it is the Berlin Mandate and the fact that it lets 
the developing world off the hook Scot-free that will seriously 
harm the global environment in future years.
    Finally, let us examine the role of China. Despite 
possessing a strong and growing economic and industrial base, 
despite possessing a nuclear capability, despite possessing the 
ability to launch satellites into orbit, China is still counted 
among the family of developing nations. But its industrial 
growth is matched by its growing contribution to global 
pollution. 



                                Chart 5

    Senator Byrd. This chart compares China's contribution to 
global carbon emissions with the contribution made by the 
United States. On the left, we can see that, based upon current 
trends, China will surpass the United States in carbon 
emissions by the year 2015. On the right, we can see that if 
current proposals are adopted, under which we would reduce our 
carbon emissions to 1990 levels while imposing no requirements 
upon the developing world and China, China, all by itself, will 
greatly exceed the United States in metric tons of carbon 
emitted.
    Now if that isn't enough to make environmentalists' hair 
curl, I don't know what will.
    I find it disturbing that, despite its future role as the 
world's leading contributor to the problem of carbon emissions, 
China has indicated steadfast refusal to apply any type of 
binding obligations upon its own economy and its own industry. 
I believe that if the treaty we are negotiating today does not 
equally commit developing nations, like China, to binding 
commitments, there will be no incentive for China and the other 
nations of the developing world to make responsible and 
environmentally sound choices as they develop. There will be no 
incentive for the Senate to approve such a treaty. I can 
guarantee you that there will be a mountain in the way which a 
mustard seed of faith will not, in itself, remove.
    You can be sure that after China assumes its role as a 
leading carbon emitter, she will not be very eager to make the 
tough and costly corrections to retrofit her industries to 
reduce emissions of greenhouse gases. Indeed, she may expect to 
benefit from a treaty in which she escapes binding commitments 
because it may allow her to import industries from OECD nations 
that would choose to relocate there rather than change their 
ways and clean up their acts at home.
    Now I am not here to bash China. But I am here to say that 
we, in the developed world, have to look out after our future 
as well, our industry, our jobs, the health of our people. We 
are all in the same boat together. It goes round. What they 
breathe, we will breathe. There is no way to avoid it.
    My message to U.S. negotiators is that all nations, but 
particularly those that are making and will make a significant 
contribution to greenhouse gases emissions, need to, (1) make 
commitments at Kyoto that unequivocally demonstrate an action 
program to tackle this problem; and (2) start with aggressive 
efforts to act on those commitments immediately and not settle 
for vague promises to return to a future negotiation to get 
serious. In other words, there is no point in our agreeing to 
meet at some future time at which time we will agree. We must 
agree now.
    Finally, while countries have different levels of 
development, each must make unique and binding contributions of 
a pace and kind consistent with their industrialization. It is 
important. Let's read that again. While countries have 
different levels of development, each must make unique and 
binding contributions of a pace and kind consistent with their 
industrialization. The developing world must agree in Kyoto--if 
not in December, why not in January? If not in January, why not 
in February? The developing world must agree in Kyoto to some 
manner of binding targets and commitments that would begin at 
the same time as the developed world in as aggressive and 
effective a schedule as possible given the gravity of the 
problem and the need for a fair sharing of the burden.
    I note that our resolution states that any treaty presented 
to the Senate be accompanied by a detailed explanation of any 
legislation or regulatory actions that may be required to 
implement the protocol or other agreement and should also be 
accompanied by an analysis of the detailed financial costs and 
other impacts on the economy of the United States which would 
be incurred by the implementation of the agreement. We need to 
know that when this protocol comes before the Senate. We need 
to know that. There surely will be costs. Nobody is getting off 
scot-free. There surely will be costs if the United States is 
to make the changes to our existing industrial base and to our 
existing lifestyle necessary to meet the goals of this treaty. 
Our smokestacks must be cleaner and our automobiles more 
efficient. There are many ways to achieve these goals. But we 
must be able to tell the American people what will be required 
to meet any proposed commitment.
    Politically, I believe there needs to be a strong consensus 
between the President and Congress about any plan of action. 
The administration's policy of follow-on multilateral 
negotiations to deepen the impact of the Rio Pact requires very 
substantial consensus building with the Congress. This is one 
of the reasons why, Mr. Chairman, we felt we ought to start now 
and let the administration know we are going to be looking over 
their shoulder and that we want to participate. That is why we 
have the ``whereas'' clause, which indicates that the Senate 
expects to have independent observers appointed not by the 
administration but by the Majority and Minority Leaders of the 
Senate, who will monitor the developments and who will report 
back to the Senate on those developments.
    This is the way to build a consensus. The administration 
cannot go down the road happily on its own, looking back over 
its shoulder. We have to be in this boat together, and there 
must be broad educational activities to bring the American 
public along.
    This is why we want this debate to start now, not in 
November, not next January. To impose effective, legally 
binding measures on the United States economy will mean having 
the strong support of the Senate and the House. We all 
represent the same people.
    We Senators need to be deeply concerned over the alarm that 
has been expressed to us by a very broad range of American 
industry and labor over the impacts on our economy of a treaty 
which commits the United States to deep emission reductions and 
which does not spread the burden of responsibility equitably 
across the globe. It has to do that.
    These assessments by bedrock American industry must be 
taken seriously. They will be taken seriously. I hope that this 
hearing will result in new Senate attention to the progress of 
these negotiations and that this committee will serve to 
interact regularly with the State Department and administration 
policymakers as our negotiating strategy is developed and 
refined.
    The resolution that Senator Hagel and I introduced and 
which has won the support of a majority of 60 Senators, no, 61, 
is aimed at that negotiation and beyond. Since carbon and other 
greenhouse gases can accumulate in the atmosphere and persist 
for long periods, we will not, as a community of nations, get a 
handle on these threats to our global climate unless everyone 
participates and does its share to solve the problem. We all 
share our Earth in common. We breathe the same air. We are 
exposed to the same global climate system. We must all accept 
our share of the responsibility for the global climate. We must 
keep this fragile boat afloat together, and the sooner we have 
commitments from all of its passengers to work together in that 
effort, the better.
    Mr. Chairman, I ask unanimous consent that the resolution 
which we have joined in sponsoring and co-sponsoring appear at 
this point in the record.
    Senator Hagel. Without objection.
    [The information referred to follows:]



    Senator Byrd. That completes my prepared statement.
    Senator Hagel. Senator Byrd, thank you.
    We would now like to hear from your distinguished 
colleague, Congressman Dingell.
    Congressman, thank you for coming over this morning and 
giving us your thoughts. I have been joined, as you note, here 
at the desk by my distinguished colleague, Senator Sarbanes, 
from Maryland, who has asked to make some comments after 
Congressman Dingell's remarks.
    Senator Sarbanes. Mr. Chairman, I will defer my comments 
because I know our colleagues have other business to attend to. 
I would be happy to hear from Congressman Dingell, Ranking 
Member Dingell--I'm sorry, John.

  STATEMENT OF HON. JOHN D. DINGELL, U.S. REPRESENTATIVE FROM 
                            MICHIGAN

    Mr. Dingell. Thank you, Mr. Chairman and thank you members 
of the committee.
    I want to thank you for holding this hearing and commend 
you for it. There are a lot of questions that need to be 
answered and I was much comforted by your opening statements, 
Mr. Chairman, and I am delighted that you are doing this 
because there are a lot of questions that need answering.
    I want to say hello to my good friends, Mr. Thomas and Mr. 
Sarbanes, who are old and dear friends of mine. They served in 
the House with me. I am delighted to see them.
    I am particularly pleased also to be here with my old 
friend and colleague from better days, when he served in the 
House, Senator Byrd, for whom I have enormous affection and 
respect. As he mentioned, the only significant difference that 
I can think of that we have between us is the Byrd Amendment, 
on which he has taught me a lot of valuable lessons.
    Mr. Chairman, I do not appear before the committee as a 
critic of the idea that this country should engage in global 
climate change negotiations nor do I criticize the idea that we 
should go forward. In fact, I believe that there is good reason 
to think that it is time for the world to address the fact that 
we may be changing the climate and that there is need to 
address that. But, as Senator Byrd has so wisely pointed out, I 
think that it is necessary that, if we are going to do it, we 
insist that all participate fairly, the United States not bear 
unfair burdens, and that the rules of the game be both founded 
on good knowledge, good science, careful analytical work, a 
sound and careful appraisal of our national interests and our 
policy goals and the well being of our people, as well as the 
needs of the situation.
    With respect to the global climate change negotiations, I 
have some questions on which I have yet to receive satisfactory 
answers.
    One, have we overreached the science?
    The State Department has concluded that the current science 
proves that global warming is ``dangerous'' and requires 
immediate emissions reductions. The official U.N. scientific 
body has gone only so far as to identify a link between human 
activity and global warming. But their own document on science 
states, and I quote: ``Our ability to quantify the human 
influence on global climate is currently limited.'' In other 
words, we do not know with any degree of precision how big the 
problem is, we don't know how fast it is moving or how it can, 
or should, be mitigated.
    My friend and colleague, Secretary Wirth, who will testify 
later this morning, agrees on this point. At a public forum 
this February, he said there is, and I quote, ``No doubt about 
the theory'' of climate change. I think that it should be 
quoted again. ``We don't know where, how much or how fast.''
    Second, is what we are seeing a classic example of mission 
creep?
    It is a very interesting thing. We have observed as this 
negotiation has gone forward in some curious, imperceptible, 
and inexplicable fashion that United States policy has changed. 
Initially, the administration's policy was based on voluntary 
agreements with industry and reliance on ``joint 
implementation'' of mutually beneficial partnerships between 
U.S. industry and developing countries. Strangely, that 
approach has changed and has vanished. In regard to that, U.S. 
companies would get credit for helping developing countries to 
build clean power plants. But sometime early in 1996, the 
change became evident and the tone was different. Mandatory 
emissions reduction became the goal.
    Three, who is representing America's interests? The 
question I think underneath that is the one that you expressed, 
Mr. Chairman, and that my good friend Senator Byrd expressed. 
Are we setting the United States up for an economic fiasco? Are 
we going to assume burdens that no one else in the world is 
assuming?
    In a letter to me in 1995, President Clinton promised not 
to agree to anything that would adversely affect U.S. 
competitiveness. That is a good policy. I think it should 
probably be communicated to the State Department.
    The State Department has signed on to agreements that are 
procedurally and substantively disadvantageous to the United 
States. The outcome may be an agreement late in 1997 in Kyoto 
imposing mandatory emissions reductions on the developed 
countries and at best only voluntary steps for the developing 
nations. I would note that if you look at how this is going to 
go, the U.S. and the OECD countries will appear to be absorbing 
heavy burdens. If you look, you are going to find that the OECD 
countries are very liable not to be assuming heavy burdens and, 
in fact, to have wonderful escape clauses which they can flee 
through while the United States remains trapped. I think that 
is a question into which this committee should inquire most 
carefully.
    We have already committed ourselves to steps to control 
emissions and potentially to harm the competitiveness of the 
United States. Those agreements or at least those 
pronouncements and those positions have been put on the table 
already.
    The developing countries are scot-free. We do not have a 
single binding commitment from them. I would note also that 
Eastern Europe and the Soviets are indicating small desire to 
be helpful in anything which would be an even sharing of the 
responsibilities that this global warming treaty, agreement, or 
whatever it might happen to be, is going to impose on the world 
and upon the United States.
    My friends in the administration argue that they are being 
hard-nosed because they have rejected the more extreme 
proposals advanced by such powerful groups as the Association 
of Small Island States, or the AOSIS. That I am sure took an 
enormous level of effort by the administration. However, I find 
scant reason to congratulate our negotiators for refusing the 
chance to submit our unconditional surrender to so small an 
adversary.
    Fourth, even if you agree that global climate change is a 
problem, is the administration really doing anything to protect 
the environment?
    The theory of global warming holds that greenhouse gases 
have an effect no matter where in the world they are emitted. 
This is not like the debate over acid rain or ozone, where 
emissions from one part of the country are thought to cause 
problems in another identifiable region.
    As Senator Byrd has told the committee, China will surpass 
the United States in terms of emissions early in the next 
century. If you accept the theory of global warming, those 
emissions will cause as much harm to the climate as emissions 
from the developed countries today. Of course, that will be 
true because there are going to be substantial increases from 
almost everyone in the world, except the United States, if we 
bind ourselves to the curiously uncompetitive position of the 
United States being bound and nobody else being bound.
    Fifth, how is this whole matter going to work?
    I have yet to see the proposed negotiating text that 
includes specific dates and numbers. These are important 
matters, but there are some other important and fundamental 
issues at hand. Who will have to do what? Who will enforce the 
agreement? And how timely would enforcement be? If we establish 
a trading system, how will it be enforced? Can we be assured 
that that trading system is going to be one which will work 
fairly and which will work for the United States in fair 
fashion and also in fair fashion as regard to any other 
country?
    The question I think we need to ask is this: Is China or 
any other developing country going to be allowed to keep the 
credits for themselves as a country or will there be a trading 
around the world for these credits? Or will companies be 
allowed to use them to offset operations elsewhere in the 
world? Or, for example, would China keep them home?
    Does anyone seriously believe that China or any other 
country, for that matter, will act on altruistic motives and 
make the credits, if such there will be, available to other 
countries for economic development? I seriously doubt that.
    This leads me to my sixth and final question. Why are we 
doing all of this before we have the most basic information 
about how climate change policies will affect our economy? In 
short, has the administration bothered to do its homework?
    I would observe that the administration has been before our 
committee on at least several occasions. I can think of two, 
and there may perhaps be three or more. In each instance, the 
questions that I have raised were raised and the answers were 
promised. But no answers have been forthcoming.
    So I am particularly pleased, Mr. Chairman, that you and 
this committee are doing this because it is perhaps possible 
that through your powers and the exercise of your wisdom, we 
will get the answers that we, in fact, need.
    We were supposed to have the analysis and assessment of the 
impact of climate change policies on the U.S. economy by the 
end of last year. It is now something over a year since this 
was promised and it is something over a year since it was 
supposed to be done.
    The assessment and the analysis have not been made 
available to the Congress. It is quite certain that they are 
not yet completed and, despite the fact that the administration 
has made repeated promises to the Congress and to industry that 
it would be available before important policy decisions are 
made, we are rushing head-long toward Kyoto. We have moved 
forward toward agreement in all fashions in ways which we 
cannot gauge against any measurable set of standards, any 
analysis of the U.S. interests, or any assessment of the impact 
on climate changes.
    It is very clear that the State Department has either been 
rushing forward without information, has been suppressing the 
information, has not been making it available to the Congress, 
or has not been cooperating with us in providing the 
information we need to evaluate what it is they are doing, how 
they are doing, and how it is going to impact the country.
    We also do not have the vaguest idea of what their 
assessment is about, what the real need is, or what it is we 
have to do to come forward with an intelligent agreement that 
is going to serve the best interests of the United States.
    The State Department formally proposed a ``cap and trade'' 
negotiating position in January. Again, no analysis or 
assessment was available to them or to us at that time.
    In short, the analysis is self-evidently too late to inform 
the process. It may perhaps be arriving here before the 
Congress just in time to justify what the administration has 
already decided on doing or what the administration has already 
agreed to do.
    So perhaps you in the Senate will find yourselves presented 
with this wonderful assessment after they have completed the 
negotiation and which was not available either to them or to us 
as the negotiation went on.
    It appears that the intelligent participation of the United 
States in these negotiations cannot be going forward under 
those circumstances and, just as clearly, public participation 
and comment on the analysis and assessment, indeed upon the 
whole process, appears to be irrelevant in view of the fact 
that they have not done the work that an intelligent negotiator 
would do and should do as they go forward into something that 
is going to affect the entire future of the United States.
    It is interesting to note that the Department of Commerce 
official in charge of the analysis and assessment has moved on 
to pursue other career opportunities. It may be as you go 
forward in these matters, Mr. Chairman, that you might want to 
have the Department of Commerce come up here to assist you 
because of their responsibilities over climate.
    I have asked the administration whether when they go to 
Kyoto next December they will refuse to sign any agreement that 
binds the United States to new emissions obligations unless it 
holds our economic competitors in the developing world to 
equivalent obligations. I have not received a reassuring answer 
to this matter.
    My concerns here I think parallel those of yourself and the 
members of the committee. They also parallel those of American 
labor. I am delighted that you will be hearing from my good 
friend and Senator Byrd's good friend, Secretary-Treasurer 
Trumka of the AFL-CIO. I commend to you the resolution on 
climate change adopted by the AFL-CIO Executive Council as well 
as the Senate Resolution offered by my good friend, Senator 
Byrd, which has, I think, touched the basic good judgment of 
the Senate and prompted an enormous outpouring of support 
there.
    I am hopeful that this resolution will have a favorable and 
beneficial effect upon the administration and will perhaps 
induce them to recognize that they may just have a treaty 
agreement that they are working on that is not going to get 
approved because of the slovenly work which they have done to 
bring themselves to an ultimate agreement toward which they are 
rushing madly, again without either scientific support for what 
it is they are doing or without a real appreciation of the 
economic consequences of that.
    I want to close, Mr. Chairman, by thanking you very much 
for the privilege of being here and for the fact that you are 
inquiring into this. I would urge you and the committee to 
proceed most diligently and vigorously to get the answers that 
we in the House have not been able to get. I suspect you can do 
rather better than we have done.
    I also want to tell you again that I am not opposed to 
international negotiations on climate change. I would, however, 
approach these negotiations the way I would approach a high 
stakes poker game--with an open mind but not with a blank 
check. As Senator Thomas might tell you, there is an old 
Western story about a fellow who was seen walking along early 
Sunday morning. Somebody said to him where are you going. He 
said I'm going to one-eyed Minnie's. He said I'm going to play 
poker. They said why are you going to play poker at one-eyed 
Minnie's? Everybody knows it's a crooked game. He said I know, 
but it's the only game in town.
    Mr. Dingell. Well, this is not the only game in town and I 
urge us to be more careful.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Dingell follows:]
          Prepared Statement of Representative John D. Dingell
    Mr. Chairman, I appreciate your holding this hearing. I consider it 
a great honor to testify beside my good friend and highly respected 
colleague from West Virginia, Senator Byrd.
    I do not appear before this Subcommittee as a critic of the idea 
that we are engaged in climate change negotiations and that we are 
moving forward. I'm critical of the idea that we are negotiating 
without the full and proper information that we need.
    With respect to the climate change negotiations, I have several 
questions to which I have yet to receive satisfactory answers.
    One: Have we overreached on the science?
    The State Department has concluded that current science proves that 
global warming is ``dangerous'' and requires immediate emissions 
reductions. But the official U.N. scientific body has gone only so far 
as to identify a link between human activity and warming, but their own 
document on the science states, and I quote, ``our ability to quantify 
the human influence on global climate is currently limited.'' In other 
words, we don't know with any degree of precision how big the problem 
is, we don't know how fast it's moving, or how it can be mitigated.
    My friend and former colleague Tim Wirth, who will testify later 
this morning, agrees on this point. At a public forum this February he 
said there is ``no doubt about the theory'' of climate change and that 
``we don't know where, how much or how fast.''
    Two: Is what we're seeing here a classic example of mission creep?
    We've seen a shift from voluntary to mandatory policies. Initially, 
the Administration's policy was based on voluntary agreements with 
industry and reliance on ``joint implementation'' of mutually 
beneficial partnerships between U.S. industry and developing countries. 
For instance, U.S. companies would get credit for helping developing 
countries build clean power plants. But sometime early in 1996, the 
tone changed. Mandatory emissions reduction became the goal.
    Three: Who is representing America's interests? Are we setting 
ourselves up for an economic fiasco?
    In a letter to me in 1995, President Clinton promised not to agree 
to anything which would adversely affect U.S. competitiveness. But the 
State Department has signed onto agreements that are procedurally and 
substantively disadvantageous. The outcome may be an agreement late in 
1997 in Kyoto imposing mandatory emissions reductions on developed 
countries, and at best only voluntary steps for developing nations.
    We've already committed ourselves to steps to control emissions and 
potentially harm our competitiveness. The developing countries are 
scot-free. We've gotten not a single, solid, binding commitment from 
them.
    My friends in the Administration argue that they are being hard-
nosed because they have rejected the more extreme proposals advanced by 
groups such as the Association of Small Island States, or AOSIS. But I 
find scant reason to congratulate our negotiators for refusing the 
chance to submit our unconditional surrender.
    Four: Even if you agree that climate change is a problem, is the 
Administration really doing anything to protect the environment?
    The theory of global warming holds that greenhouse gases have an 
effect no matter where in the world they are emitted. This is not like 
the debate over acid rain or ozone, where emissions from one part of 
the country were thought to cause problems in another, identifiable 
region. China will surpass us in terms of emissions early in the next 
century. If you accept the theory of global warming, those emissions 
will cause as much harm to the climate as emissions from the developed 
countries today.
    Five: How is all this going to work?
    I've yet to see a proposed negotiating text that includes specific 
dates and numbers. Those are important matters, but there are some 
other fundamental issues at hand: Who will have to do what? Who will 
enforce the agreement, and how timely would enforcement be? If we 
establish a trading system, is China or any other developing country 
going to be allowed to keep credits for themselves as a country? Or 
will companies be allowed to use them to offset operations elsewhere in 
the world? Does anyone seriously believe China, or any other country 
for that matter, will act on altruistic motives?
    This leads me to my sixth and final question. Why are we doing this 
before we have the most basic information about how climate change 
policies will affect our economy? In short, has the Administration 
bothered to do its homework?
    We were supposed to have the vaunted analysis and assessment of the 
impact of climate change policies on the U.S. economy by the end of 
last year. It has not been completed yet, despite repeated promises to 
Congress and industry that it would be available before important 
policy decisions are made. But the State Department formally proposed a 
cap-and-trade negotiating position in January. In short, the analysis 
is self-evidently too late to inform the process, and likely will be 
used to justify what the Administration has already decided to do. Just 
as clearly, public participation and comment on the analysis and 
assessment is irrelevant. And the Department of Commerce official in 
charge of the analysis and assessment has moved on to pursue other 
career opportunities.
    I have asked the Administration whether, when they go to Kyoto next 
December, they will refuse to sign any agreement that binds the U.S. to 
new emissions obligations unless it holds our economic competitors in 
the developing world to equivalent obligations. I cannot in all truth 
say that I have received a reassuring answer.
    My concerns very closely parallel those of American labor, and I am 
delighted that you will be hearing from Secretary-Treasurer Trumka of 
the AFL-CIO. I commend to you the resolution on climate change adopted 
by the AFL-CIO Executive Council, as well as the Senate resolution 
offered by Senator Byrd.
    Let me close by noting again that I am not opposed to our being 
part of international negotiations on climate change. But I would 
approach those negotiations the way I would approach a high-stakes 
poker game: with an open mind, but not with a blank check.

    Senator Hagel. Congressman Dingell, thank you for those 
wise departing colloquialisms. I will pass those on to Senator 
Thomas. He will be very proud that you quoted him.
    Senator Hagel. Congressman, thank you.
    Senator Sarbanes.
    Senator Sarbanes. I have no questions. Thank you.
    Senator Hagel. In the interest of time, gentlemen, your 
time, you have other areas and obligations to address here this 
morning. On behalf of the Foreign Relations Committee, I add 
again my thanks for your wise counsel, your experience, and 
your leadership. You have both brought forward what I think is 
the essence of the issue here and both in your own ways have 
contributed mightily to this debate.
    I am grateful, and on behalf of all of us. Thank you.
    Senator Byrd. Mr. Chairman, my earlier request that a copy 
of the resolution appear in the record of the hearings goes to 
the Star print that was just made overnight because it includes 
all of the then-60 signatories plus the additional ``whereas'' 
clause dealing with the monitoring group that would be 
appointed by the two leaders in the Senate, whereas the 
original resolution does not have those.
    Senator Hagel. The record will reflect that as well, 
Senator. Thank you.
    Senator Byrd. I thank all Senators and I thank my friend, 
John Dingell, for being allied with us in this effort.
    Senator Hagel. Thank you, gentlemen.
    The next panel will be Secretary Wirth, Under Secretary of 
State for Global Affairs. Tim Wirth is before us.
    Tim, thank you for coming this morning. We had an 
opportunity to visit a little bit a couple of days ago, to get 
acquainted, which I thought was valuable. You obviously are no 
stranger to this body and to this process. So we again thank 
you for your time, because much of what has been said so far 
and will continue to be said today obviously cuts in your 
direction. We are looking for some answers to these questions 
and I know you will help get us there. But first, Senator 
Sarbanes.
    Senator Sarbanes. Mr. Chairman, I'm sorry I was not able to 
be here right at the outset of the hearing, but I did hear most 
of the testimony from our Congressional colleagues.
    The issues surrounding global climate change and proposals 
for addressing it are extremely complex. I think it is an 
understatement to say they are often contentious.
    I take it this is the first in a series of hearings, and I 
think it is important to have such a series. I think it is 
important to make sure that we are exposed to the great 
diversity of views which exist on this issue.
    The Congress obviously needs to examine this question in a 
rational and constructive manner and I hope that will be the 
outcome of these deliberations. So I look forward, I assume, to 
further hearings. I think there is one scheduled already for 
next week, or there are tentative plans to have one next week. 
These will provide an opportunity for those responsible people 
who wish to be heard on this issue to present their views to 
the Congress.
    In this regard, my Maryland colleague, Congressman 
Gilchrist, I understand had hoped or wanted to be here this 
morning. But in any event, he has written testimony which he 
has asked me to submit for the record and I certainly do that 
at this point. This is from Congressman Wayne Gilchrist, who 
represents the First Congressional District in my State. I ask 
consent that that be included in the record.
    Senator Hagel. The record will reflect that.
    Senator Sarbanes. Thank you.
    [The prepared statement of Representative Gilchrist 
follows:
        Prepared Statement of Representative Wayne T. Gilchrest
    Mr. Chairman and members of the committee, thank you for the 
opportunity to submit testimony today on the important subject of 
global climate change. This is a complex problem and the Congress 
should be fully engaged in understanding the facts and fiction 
surrounding it. I would like to touch on three subjects this morning: 
the science, the economics, and finally, the negotiations and the role 
of developing nations.
Science
    I know that the science of climate change is complex. It involves 
interpretation of data from a wide range of sources, over long time 
scales. But this is also an area where we have more scientific 
consensus than virtually any other environmental issue. Do not be 
mistaken, this is not an issue where there is an even split in the 
scientific community. 2,400 IPCC scientists concur that the planet is 
warming, that human contributions of greenhouse gases are disrupting 
global climate, and that the impacts of a destabilized climate system 
are occurring and will continue to escalate if we do nothing. Another 
2,400 scientists yesterday signed a statement endorsing the IPCC 
report, and observing that ``the further accumulation of greenhouse 
gases commits the earth irreversibly to further global climatic change 
and consequent ecological, economic and social disruption.'' Skepticism 
is an inherent part of the scientific process, but it should not be 
used as an excuse to do nothing.
    To the people of my district, the cost of doing nothing is too much 
to bear. The primary industry in my district is agriculture, followed 
closely by tourism to places like Ocean City. These are two industries 
that will be severely impacted by the effects of a sea level rise, more 
frequent and severe weather events, such as hurricanes and droughts.
Economics
    We do need to look at the economic implications of any policy that 
we take. But we must not fall victim to alarmist gloom and doom 
scenarios. The US marketplace has demonstrated time and again that we 
can utilize flexible, innovative, market-based solutions to 
environmental problems. I am heartened by the numerous studies that 
have come out showing that significant emissions reductions can be made 
with little or no disruption to the economy.
    It is significant to consider the fact that in a global context, 
the US uses energy far less efficiently than our economic competitors 
and trading partners. On a per capita basis, the US uses twice as much 
energy to produce a unit of GDP than do Germany or Japan. These 
inefficiencies are more than an environmental waste--they represent 
lost economic opportunity, as well as increased oil imports and 
decreased energy security. As a result, numerous studies have found 
that there is tremendous room for energy efficiency and productivity 
gains in the US economy through cost-effective investments in energy 
efficiency and advanced energy technology. A 1991 study by the National 
Academy of Sciences concluded that ``the United States could reduce or 
offset its greenhouse gas emissions by between 10 and 40 percent of 
1990 levels at low cost, or at some net savings . . . the efficiency of 
practically every end use of energy can be improved relatively 
inexpensively.''
    The IPCC 1995 Second Assessment report further confirms that 
significant energy efficiency gains can be made at no cost or even at a 
savings to the economy by improving conservation measures and utilizing 
existing technologies. The report states that ``numerous studies have 
indicated that 10-30% energy efficiency gains above present levels are 
feasible at negative to zero cost in each of the sectors in many parts 
of the world through technical conservation measures and improved 
management practices .... Using technologies that presently yield the 
highest output of energy services for a given input of energy, 
efficiency gains of 50-60% would be technically feasible in many 
countries over the same period.''
    I would also like to note that recently a statement was signed by 
2,300 economists--including eight Nobel laureates and many other 
distinguished economic thinkers--who recognize that ``significant 
environmental, economic, social and geopolitical risks'' are posed by 
climate change, that ``preventive steps are justified,'' and that 
``economic studies have found that there are many potential policies to 
reduce greenhouse gas emissions for which total benefits outweigh the 
total costs. For the U.S. in particular. sound economic analysis shows 
that there are policy options that would slow climate change without 
harming American living standards, and these measures may in fact 
improve U.S. productivity in the long run.''
Negotiations
    Clearly, mitigating climate change is a global problem, requiring 
full participation of both developed and developing nations. There is 
no question that we need commitments and timelines for full 
participation by developing nations. But in order to address this 
problem we have to act now, and the US needs to maintain its leadership 
role.
    The US has been the world's leading emitter of greenhouse gases for 
decades, and with only 5% of the world's population we account for 20% 
of global emissions. In addition, we have failed to meet our 1992 
convention agreement to hold emissions at 1990 levels through the year 
2000. Instead, it is projected that we will exceed 1990 levels by 13%. 
Voluntary programs and targets are a good idea, but they have not been 
sufficient. Binding targets and emissions trading options are one 
possible solution. I believe the US should work toward a protocol that 
provides flexibility and incentives for reducing emissions using 
market-oriented approaches and that sets a clear time line for bringing 
developing countries on board. A good climate treaty will need to 
provide a mechanism whereby all parties are brought into the solution 
over time.
    Recently several leaders from the business community have made 
strong statements regarding the necessity and importance of addressing 
the climate change problem. As John Browne, Group Chief Executive with 
British Petroleum, said in a speech at Stanford University in May of 
this year, ``There's a lot of noise in the data. It is hard to isolate 
cause and effect. But there is now an effective consensus among the 
world's leading scientists and serious and well informed people outside 
the scientific community that there is a discernible human influence on 
the climate, and a link between the concentration of carbon dioxide and 
the increase in temperature. The time to consider the policy dimensions 
of climate change is not when the link between greenhouse gases and 
climate change is conclusively proven--but when the possibility cannot 
be discounted and is taken seriously by the society of which we are 
part.''
    Some members have called for continued debate of the issue and an 
open discussion of the policy options that can be used to address it. I 
agree, but I most strongly urge my colleagues not to give up now and 
walk away from the negotiations. We have the potential to lead with 
fair, flexible. sensible strategies that can stabilize climate without 
disrupting the economy. Climate change is one of the most compelling 
issues of our time and the moment for action is upon us.

    Senator Hagel. Thank you. Secretary Wirth, welcome.

STATEMENT OF HON. TIMOTHY E. WIRTH, UNDER SECRETARY FOR GLOBAL 
                  AFFAIRS, DEPARTMENT OF STATE

    Mr. Wirth. Thank you very much, Mr. Chairman. I am pleased 
to join you this morning to discuss the importance of climate 
change and to outline the United States negotiating position as 
we move toward the Third Conference of the Parties to be held 
in Kyoto in December.
    I am especially pleased to follow this morning two 
gentlemen I consider important mentors to me. John Dingell was 
my first tutor legislatively. I was the ranking Democrat on the 
first Energy Committee on the old Commerce Committee in the 
mid-1970's. Robert C. Byrd taught me about the importance of 
institutions and how they demand our continuing, patient 
attention as we work to continue the success of our democratic 
institutions. Thank you, Senator Byrd.
    Climate change is probably--excuse me, Mr. Chairman. I am 
in the throes of a heavy flu. Climate change is probably the 
most important environmental challenge facing the world. The 
ecological, human, economic, and political consequences are of 
enormous importance for the mid-term and for the long-term, and 
each of us needs to understand them. We look forward to active 
and frequent consultations with this committee and with other 
Members of the Congress as we seek to reach an agreement and as 
we set up the needed long-term process. The ``serious, 
informed, and strong voice'' which you noted in your opening 
remarks, Mr. Chairman, will be most welcome, and we look 
forward to working closely with you.
    I would like to begin this morning with the science, 
because scientists were the ones who drew our attention to 
climate change in the first place and because we continue to 
base our policies on the best evidence and the most rigorous 
scientific analysis available.
    Let me highlight some of the key scientific issues on which 
there is a global consensus.
    Human activities have significantly increased the 
atmospheric concentration of greenhouse gases over the last 
century. Global average temperatures have already increased 
about \1/2\ to 1 degree Fahrenheit. The balance of evidence 
suggests a discernible human influence on global climate. 
Projections of the future change based on complex climate 
models and on our best understanding of the physics of the 
climate system suggest an increase of another 2 to 6.5 degrees 
Fahrenheit by 2100, an average greater than any seen in the 
last 10,000 years.
    Sea levels are projected to rise an additional 1.5 feet by 
2100 from expansion of the oceans due to global warming and 
from a melting of glaciers and ice sheets. Climate change is 
likely to have wide-ranging and mostly adverse effects on human 
health with direct and adverse effects leading to increased 
mortality.
    Coastal populations and infrastructure are vulnerable. A 20 
inch rise in sea levels would put about 100 million people at 
risk each year from storm surges with significant costs.
    Natural and managed ecosystems are at risk as ideal ranges 
shift with the climate. The location of forest and agricultural 
zones will change significantly.
    Future unexpected changes in the climate are not included 
in the models. These surprises may have impacts of global 
magnitude, such as fundamental changes in global ocean 
circulation or ecosystem behavior.
    These are the conclusions of the Intergovernmental Panel on 
Climate Change, an international body of more than 2,500 
scientists, expert in all aspects of climate change, including 
the physical sciences, the social sciences, and the economics. 
U.S. Government experts have endorsed their work as have the 
academic communities in the United States and around the world.
    An excellent summary of the science and the impacts that 
could occur as a result of global climate disruption was 
presented yesterday on behalf of nearly 2,500 leading American 
scientists, and I would like to include their statement for the 
record.
    [The information referred to follows:]
        
                          SCIENTISTS STATEMENT
                       GLOBAL CLIMATIC DISRUPTION
                             June 18, 1997
    We are scientists who are familiar with the causes and effects of 
climatic change as summarized recently by the Intergovernmental Panel 
on Climate Change (IPCC). We endorse those reports and observe that the 
further accumulation of greenhouse gases commits the earth irreversibly 
to further global climatic change and consequent ecological, economic 
and social disruption. The risks associated with such changes justify 
preventive action through reductions in emissions of greenhouse gases. 
In ratifying the Framework Convention on Climate Change, the United 
States agreed in principle to reduce its emissions. It is time for the 
United States, as the largest emitter of greenhouse gases, to fulfill 
this commitment and demonstrate leadership in a global effort.
    Human-induced global climatic change is under way. The IPCC 
concluded that global mean surface air temperature has increased by 
between about 0.5 and 1.1 degrees Fahrenheit in the last 100 years and 
anticipates a further continuing rise of 1.8 to 6.3 degrees Fahrenheit 
during the next century. Sea-level has risen on average 4-10 inches 
during the past 100 years and is expected to rise another 6 inches to 3 
feet by 2,100. Global warming from the increase in heat-trapping gases 
in the atmosphere causes an amplified hydrological cycle resulting in 
increased precipitation and flooding in some regions and more severe 
aridity in other areas. The IPCC concluded that ``The balance of 
evidence suggests a discernible human influence on global climate.'' 
The warming is expected to expand the geographical ranges of malaria 
and dengue fever and to open large new areas to other human diseases 
and plant and animal pests. Effects of the disruption of climate are 
sufficiently complicated that it is appropiate to assume there will be 
effects not now anticipated.
    Our familiarity with the scale, severity, and costs to human 
welfare of the disruptions that the climatic changes threaten leads us 
to introduce this note of urgency and to call for early domestic action 
to reduce U.S. emissions via the most cost-effective means. We 
encourage other nations to join in similar actions with the purpose of 
producing a substantial and progressive global reduction in greenhouse 
gas emissions beginning immediately. We call attention to the fact that 
there are financial as well as environmental advantages to reducing 
emissions. More than 2000 economists recently observed that there are 
many potential policies to reduce greenhouse-gas emissions for which 
total benefits outweigh the total costs.
    The Framework Convention on Climate Change, ratified by the United 
States and more than 165 other nations, calls for stabilization of 
greenhouse gas concentrations in the atmosphere at levels that will 
protect human interests and nature. The Parties to the Convention will 
meet in December, 1997, in Kyoto, Japan to prepare a protocol 
implementing the convention. We urge that the United States enter that 
meeting with a clear national plan to limit emissions, and a 
recommendation as to how the U.S. will assist other nations in 
significant steps toward achieving the joint purpose of stabilization.
                          INITIAL SIGNATORIES
          Dr. John P. Holdren              Dr. Peter H. Raven
          Dr. Jane Lubchenco               Dr. F. Sherwood Rowland
          Dr. Harold A. Mooney             Dr. George M. Woodwell
        
        Signed by 2409 scientists as of 6:19 PM on June 17, 1997

 Ozone Action 1636 Connecticut Avenue, NW Washington, DC 20009 Voice: 
                   (202) 265-6738 FAX: (202) 986-6041
    Mr. Wirth. We do not yet have all the answers with respect 
to the science. We cannot yet say with certainty what the local 
effects of climate change will be, but with better scientific 
data the picture is becoming clearer.
    For instance, in the United States, 20 inches of sea level 
rise would inundate 9,000 square miles of U.S. coastal land, 
with great loss of property and infrastructure. Rising 
temperatures could double the number of heat related deaths. We 
now know that the 10 warmest years since records began all 
occurred since 1980. Some of the most recent data shows that 
four of the five hottest years have occurred since 1990. With 
CO2 concentrations doubled in the atmosphere, heat 
waves like the one that killed 500 people in Chicago 2 summers 
ago would be 4 to 6 times as likely to occur.
    While we acknowledge uncertainties about where, how fast, 
and when climate change will occur and, while we continue to 
press for research that will help us to answer these important 
questions, the basic fact remains that we are having a 
discernible impact on our climate.
    Our policy is based on the current scientific consensus and 
the need to achieve the most cost effective emissions 
reductions possible. Our policy has three simple and straight-
forward objectives, which are outlined in detail in the 
framework proposal which we submitted to the climate convention 
in January, which we discussed with the Congress and submitted 
to you at the same time. The proposal was shared with this 
committee, as I noted, and was distributed widely with the 
public. The three objectives are as follows.
    First, we are seeking to establish a legally binding 
emissions target for developed countries which is verifiable, 
credible, and realistic.
    Second, we are seeking an agreement in Kyoto that maximizes 
the flexibility for each country to meet this legally binding 
target, including the use of market mechanisms.
    Third, we recognize the importance of involving all 
countries in the agreement. To this end, we have incorporated 
extensive language into our proposal that calls for developing 
countries to act.
    Let me go through each of these three elements in greater 
detail if I might, Mr. Chairman. First is the target.
    It is clear that the Framework Convention on Climate Change 
has not proven adequate to the task of reducing global 
emissions. We anticipate that only two countries will meet the 
convention's nonbinding aim of lowering emissions to 1990 
levels by the year 2000. We ourselves will miss the aim by 
about 10 percent.
    We believe a binding legal obligation to act will result in 
the passage of domestic laws in all countries that compel 
action. In order to build in some flexibility, our proposal 
calls for the targets to be multi-year in nature. Without this 
sort of legal obligation, countries will continue to pay only 
lip service to their efforts to solve this problem. The past 
shows that this is not enough.
    Second is flexibility. Solving the problem of climate 
change is a long-term proposition that will require enormous 
effort over a sustained period. It is, therefore, vital that we 
achieve emissions reductions as cost effectively as possible. 
Our approach to climate change seeks to do this. We have 
recommended that each country be given the maximum flexibility 
to meet its legal obligation and we have rejected common, 
harmonized policies and measures recommended by some countries. 
We have also learned from the successes of the past and are, 
wherever possible, focusing our efforts on the use of market 
mechanisms to reduce costs.
    One of the most innovative of these is the introduction of 
emissions trading into the lexicon of international agreements. 
This concept has been successfully used to reduce costs as much 
as tenfold in meeting the standard set for power plant 
emissions of sulfur dioxide. A similar program has also been 
successfully implemented in the Montreal Protocol on substances 
that deplete the ozone layer.
    In the climate context, we envision that parties would be 
allowed to trade their emissions, seeking to reduce them where 
it is most cost effective to do so. While we are still engaged 
in working through some of the details of how to implement this 
proposal, it is clear that such a program could significantly 
reduce the costs, some studies suggest, by up to 50 percent.
    Another piece of our strategy on flexibility is joint 
implementation. Through joint implementation, countries are 
allowed to undertake emissions reductions projects in 
developing countries and count these reductions against their 
own emissions. We believe that joint implementation holds 
enormous potential to reduce global greenhouse gas emissions, 
again in a cost effective manner. Joint implementation would 
also produce other benefits, such as encouraging technological 
innovation, promoting the use of cost cutting U.S. energy 
technologies and protecting forests and other critical habitat 
around the world.
    The U.S. has extensive experience with successful joint 
implementation projects. Recently, our approach on joint 
implementation received a major boost when President Clinton 
received the endorsements of the Dominican Republic and the 
seven Central American nations to endorse our concept of joint 
implementation for credit. This is a good example of our 
commitment to pushing through flexible mechanisms to implement 
new commitments under the climate change protocol.
    Third concerns developing countries. We recognize the 
importance of including developing countries in this agreement. 
Their participation is critical to achieving any kind of 
lasting success in combating the threat of climate change. For 
this reason, Mr. Chairman, the participation of developing 
countries has been a central piece of our negotiating strategy. 
We must seek a level playing field in which all countries that 
contribute to the problem contribute to its solution.
    Developed countries, including the former Soviet Union and 
the countries of Eastern Europe, contribute about 60 percent of 
global emissions today, as Senator Byrd pointed out earlier, 
and developing countries account for about 40 percent. What do 
these numbers tell us?
    They tell us, first, that the developed countries have 
historically contributed the greatest amount to the current 
heightened concentrations. We have fouled the nest. But the 
developing countries are rapidly growing, as are their 
emissions. The United States, with 5 percent of the world's 
population, is the largest greenhouse gas emitter, with more 
than 20 percent of the world's emissions. But China is not far 
behind and is expected to pass us sometime in the first quarter 
of the 21st Century, although on a per capita basis, its 
emissions are projected to be less than one-fifth of our own 
even then.
    There is a clear concern about the potential impacts on our 
international competitiveness. Let me assure you that 
developing countries are part of our negotiating strategy and 
they must join us in order to insure that no country suffers 
significant competitive disadvantage.
    We are all in this together with different histories but 
with the same future.
    To add to Senator Byrd's appropriate metaphor of the boat, 
let me add that we pull a heavier oar at the beginning; over 
time, we must all pull together.
    Our policy has to be calibrated to reflect this reality. We 
cannot expect to solve the global problem unless all countries, 
developed and developing, participate in the solution. To this 
end, we have proposed three separate elements for developing 
countries in our proposal for Kyoto.
    First, we call on developing countries to continue to 
elaborate on their commitments in the convention, including by 
providing information on emissions on an annual basis, the same 
as for developed countries and by taking no regrets measures, 
actions which may be valuable in their own right and which may 
also mitigate climate change. We also call for a regular review 
of the actions developing countries are taking, again using a 
review process similar to that established to assess our own 
actions.
    Second, we call on the newly developed countries, such as 
Mexico and South Korea, to take on binding legal obligations to 
reduce emissions, recognizing that, while the targets they 
adopt may not be the same as our own, such commitments will 
codify their new status and differentiate them from the lesser 
developed countries. We are now working with potential members 
of this group to seek their agreement on such a step. While by 
no means an easy task, we believe that in Kyoto we can find 
some language to insure that countries in this category that 
are graduating to OECD status, for example, will take on 
commitments that correspond to their more developed status.
    Third, we call for the negotiation of a new legal 
instrument which will include legally binding obligations for 
all countries, including all developing countries, as a next 
step in the past for the ultimate stabilization of greenhouse 
gas concentrations in the atmosphere at a level that is not 
dangerous. This step, too, faces significant difficulty in the 
negotiations leading toward Kyoto.
    Finally, I want to take this opportunity to note that one 
of the most important, potential incentives with regard to 
additional developing country participation in the Global 
Environmental Facility would be seriously undermined if 
Congress does not fully fund the U.S. contribution to this 
program. I hope that you and the committee, Mr. Chairman, will 
support our request of $100 million for the GEF for this year.
    Let me close this morning by briefly reviewing for you the 
negotiating process between now and December 1, when we meet in 
Kyoto. We have two more 1-week officials-level negotiating 
sessions, the first one in late July in Bonn and the second one 
in late October, also in Germany. During these 2 weeks, we will 
be examining and negotiating the extensive text which is a 
compilation of all the materials submitted by all the 
countries. This is an extremely divergent and broad document, 
reflecting many interests around the world, and it must be 
moved toward some consensus.
    At one end of the spectrum, reflecting their strong 
commitment to making an aggressive statement, the European 
Union has proposed that developed countries reduce emissions by 
15 percent below 1990 levels by the year 2010. The Organization 
of Small Island States has proposed a 20 percent reduction by 
the year 2005.
    At the other end, reflecting their concerns with the 
potential impact of various emissions reduction proposals, 
particularly on reductions on the consumption of fossil fuels, 
OPEC countries have introduced a proposal that they be 
compensated for any economic cost they might incur as a result 
of treaty requirements.
    Other countries have introduced recommendations that they 
be allocated an individualized, different target. This 
commitment to so-called differentiation is not yet defined but 
is used by many countries as a first step toward finding their 
own way of joining the negotiating process.
    As we examine these proposals and develop our own 
negotiating strategy, we will continue to be guided by our own 
principles of feasibility and economic opportunity. We are, as 
you know, doing extensive economic modeling and, while some 
drafts have been leaked, we have not yet completed the process. 
We expect the modeling will soon be completed and available to 
all interested parties.
    I am aware of stories that interpret some of the model's 
early findings. Some report that impacts on specific industries 
and sectors may be negative, while others suggest that the 
development of new technology will offset the cost. Others 
still point to the economically beneficial effects of joint 
implementation and emissions trading, two of our cornerstone 
approaches to meeting the climate challenge.
    I think it is useful, as we think about the economic 
impacts of reducing greenhouse gas emissions, that we remember 
over 2,300 economists, including 8 Nobel laureates, have 
endorsed a statement which in part states, ``As economists, we 
believe that global climate change carries with it significant 
environmental, economic, social and geopolitical risks and that 
preventive steps are justified. For the United States in 
particular, sound economic analysis shows that there are policy 
options that would slow climate change without harming American 
living standards, and these measures may, in fact, improve U.S. 
productivity in the long run.''
    We agree with the statement of these ecologists and I would 
ask that their statement be included in the record.
    [The information referred to follows:]



    Mr. Wirth. Finally, I should note that we understand that 
Kyoto is but one more step in the long road toward stabilizing 
the atmospheric concentrations of carbon and other greenhouse 
forcing gases. The long-term goal, Mr. Chairman, is 
stabilization of concentrations of greenhouse gases in the 
atmosphere at an acceptable level.
    Let me state that again, Mr. Chairman, because this is the 
fundamental issue that has to be understood by all students of 
this issue. The long-term goal is stabilization of 
concentrations of greenhouse gases in the atmosphere. This is a 
task that must begin now but which will require a sustained 
effort over many decades to come.
    Kyoto is a first step, but a very important one. The 
message that we send by what we do is enormously important. We 
believe that we can succeed by developing new technologies and, 
thus, improving the way we fuel our economy, transport 
ourselves and process materials; using flexible economic 
instruments and market mechanisms, such as emissions trading 
and joint implementation; bringing in developing countries as 
full partners as the thrust of your resolution, Mr. Chairman; 
fulfilling the obligation of our leadership role.
    Through this process we can continue to promote economic 
development and improve the standard of living for the American 
people while we protect the environment.
    It is important in Kyoto that we set up a system that will 
work, one that will allow us to reduce our emissions at the 
lowest possible cost, so that we can achieve the maximum 
protection of the environment. It is also important that we 
send a clear signal to governments and industries so that they 
can make significant investments in the new technologies that 
will be required if we are to achieve our ultimate goal. 
Although those of us in the developed world must take the lead, 
everyone must participate in moving toward the solution.
    Let me briefly comment, if I might, also, Mr. Chairman, on 
the Byrd Resolution or the Byrd-Hagel Resolution which has been 
discussed this morning.
    We agree with the analysis found in Senator Byrd's 
resolution and we agree with the thrust of the resolution's 
approach toward the developing world. What has to be worked out 
are the points of definition of what those commitments ought to 
be.
    What steps do we have to take to show that we are meeting 
our leadership responsibilities, as defined in the climate 
treaty. At what level of development do the emerging countries 
kick in? Is it when they achieve OECD status? Is it when they 
achieve some level of per capita development? These are 
important and critical questions which we must come to 
understand and work with them on. When should such a trigger 
kick in?
    Let me say that I believe that the resolution introduced by 
you and 59 of your colleagues can be very helpful to us. There 
is one small part of it, as we have discussed, that causes us 
to want to have some further discussions with you. But, as a 
general proposition, we think it is very helpful and a very 
good sign, Senator, of joining in a very thorough and complete 
discussion with all of you.
    Finally, we should, I believe, join in the spirit, as well, 
of Senator Byrd's statement. It is the obligation of leaders to 
recognize dangers to the populace. One of the primary 
requisites of leadership is to anticipate, rather than just 
respond, to the problem after it occurs. That is what this 
issue is all about, Mr. Chairman.
    It is about understanding this issue, coming to grips with 
the fundamental science, and then beginning to move and 
exercising our leadership in the United States.
    We look forward to working closely with you and your 
colleagues on this most challenging and complex of 
environmental issues.
    Thank you very much. I will be happy to answer any 
questions which you may have.
    Senator Hagel. Secretary Wirth, thank you very much.
    We have another panel behind Secretary Wirth. In the 
interest of everyone's time, since there are just two of us 
here, Senator, I propose we do a 7 minute question period and 
rotate.
    Mr. Secretary, let me begin my questions with a couple of 
overview comments.
    As we thread our way along this morning, I want to get to 
some of the points that Congressman Dingell and Senator Byrd 
pointed out in their testimony on some of the specifics. We 
will get to those. But I want to say this to you at the outset 
so that you can frame this in your own mind, as you heard both 
Congressman Dingell's and Senator Byrd's testimony.
    Mr. Wirth. I did, Mr. Chairman.
    Senator Hagel. First, can you assure this committee that 
whatever action is taken by this administration regarding 
global climate change will come in the form of a treaty?
    Mr. Wirth. Well, it will either be a protocol to a treaty 
or an amendment to a treaty. But it will have to come back up 
in front of the U.S. Senate, both for agreement and we will 
have an implementing stage as well. Whatever we do is going to 
require, as well, implementing legislation.
    So there would be, I anticipate, two areas, one, approval 
of our actions, and second, the implementing legislation that 
will be necessary to carry it out.
    Senator Hagel. You mentioned a number of times in your 
testimony economic decisions and economic well-being. The term 
``economy'' or ``economics'' was brought out a few times in 
your remarks.
    Based on the last 4 years of analysis, one of Congressman 
Dingell's points was that we have still not seen the 
administration's economic model, even though, as Congressman 
Dingell pointed out, it has been promised for more than a year.
    I would be interested to know what the problem is.
    Second, perhaps more importantly, Mr. Secretary, how can 
you make any decisions on the economics and consequences of 
these actions without any road map, without any analysis, 
without any assessment, without any model?
    You can dive into that, Mr. Secretary, wherever you wish.
    Mr. Wirth. Let me be very careful in what I say because I 
personally share many of your own frustrations in not having 
the models out. I think many of us have been very frustrated by 
the great difficulty that has been reflected in attempting to 
take the three different fundamental models that are used and 
merge them into one.
    That process has been going on since our announcements in 
Geneva in 1996. We had hoped, Mr. Chairman, to have those out 
early in the year. The task proved significantly more 
complicated than we thought it was going to be.
    For example, there were three different models. None of 
them was really sensitive to including the very important joint 
implementation and emissions trading operations, which changes 
the whole nature of this. That had to be Federal in nature and 
worked. That also proved to be very difficult.
    Second, we have discussed publicly in as many ways as we 
can the general approach that we are taking to this. I don't 
think it is any mystery what are the general parameters of what 
we are discussing. Most people know what they are. In fact, as 
I noted in my testimony, the first analysis out for peer review 
on May 15 has been broadly discussed in public. It was in 
``Inside EPA.'' One of your future panelists used it as the 
basis of a broad discussion with dozens of highly respected 
individuals in Baltimore 10 days ago or 2 weeks ago. So, in 
fact, that first draft for peer review has been out very 
publicly.
    We are now accepting all of the comments. We are in the 
process of taking all of the comments. We have been asked if we 
would peer review it. We said yes, we would. It went out for 
peer review. It got leaked. That information is out. We have 
that back and we hope to have that in very soon.
    Third, as a non-economic modeler, Mr. Chairman, although I 
have listened to all of these people to the point of almost 
becoming thoroughly anesthetized by them, I do believe that one 
can put a certain amount of faith in these models and they only 
go so far.
    These models are not going to determine a whole lot of 
things. These are the same models that were very wrong about 
what happened with the energy bump-up in pricing after the Arab 
oil boycott of 1972. They were models that, for the most part, 
were very wrong about the costs of the Clean Air Act. They were 
models that do not reflect a lot of other aspects, what happens 
with certain investments that we make in alternative energy 
programs, for example. There are other groups out.
    As a final comment, for example, the Union of Concerned 
Scientists and NRDC have estimated that we could achieve a 10 
percent reduction by the year 2010 with investments that pay 
back to us, focused predominantly on conservation activities.
    Recently, the National Energy Laboratories Group came out 
saying that we could stabilize by the year 2010 at the 
equivalent cost of $20 a ton, which would be about $10 billion 
a year in overall cost to the U.S. economy, which would then be 
Federal back into the economy. Many think that would be a wash 
and may be even beneficial.
    So there are all kinds of different ways of looking at 
these models.
    We will have it out as soon as possible. Everybody will 
look at the models. But the models are one high priest of 
economic activity. Ultimately, we are all going to have to make 
judgments about what we do economically and environmentally and 
what makes the most sense.
    Senator Hagel. I understand that. But you reference cost 
savings, for example, and you reference the economics of some 
of the actions and the consequences of those actions.
    So I am still confused as to how you get there if you 
partially dismissed economic models. If you have dismissed 
economic models, why is it important for us to have an economic 
model?
    Somehow along the way, Mr. Secretary, we have to, in some 
way, base our actions and understand the consequences as best 
we can, as you suggest. But we should have some assumptions. As 
you know so well, we put budgets together in the Senate based 
on assumptions. If you believe what Senator Byrd's charts 
indicated this morning and other references to those numbers 
today, it seems to me that the economics of this are probably 
at the first grade level.
    I don't know what the problem is within the administration, 
but you should have those numbers, Mr. Secretary, because that 
is going to be a problem.
    Mr. Wirth. Mr. Chairman, if I might just very briefly, I am 
not dismissing economic models. I am just saying that economic 
models are a helpful tool, like other things, to the ultimate 
judgment that has to be made by the Congress and the 
administration in broad discussion.
    Now they are not going to tell you exactly what to do. But 
they are helpful indicators which provide us with information 
and further grist for the discussions that are going to have to 
occur.
    When I mentioned cost savings and economic efficiency, 
those references, Mr. Chairman, were to joint implementation 
and to emissions trading. It is very clear and I don't think 
anybody disagrees with the fact that joint implementation and 
emissions trading will make the process and the cost of 
reducing greenhouse gases significantly lower.
    I think there is broad consensus on that. There is a great 
deal of economic data available.
    Senator Hagel. Well, I don't think there is broad consensus 
on that, Mr. Secretary, not at all.
    Senator Sarbanes.
    Senator Sarbanes. Does the Secretary want to respond to 
that?
    Mr. Wirth. Oh, I will be happy, Mr. Chairman, to do so. If 
you have questions about where the consensus may or may not be 
on emissions trading or joint implementation, I really would be 
delighted to respond.
    Senator Hagel. I do have a lot of questions on that. But it 
is Senator Sarbanes time to ask questions. I will defer to him 
and then I will have my round when we can come back to that.
    Senator Sarbanes. I would like to try to trace through how 
we are where we are now.
    The Framework Convention that was adopted in October 1992 
was where the parties committed to voluntarily bring down the 
greenhouse gas emissions. Is that correct?
    Mr. Wirth. Yes, Senator Sarbanes. The term of art is a 
``nonbinding aim.''
    Senator Sarbanes. How many countries were there? I saw that 
153 countries, I think, signed that. How many ratified it in 
the end?
    Mr. Wirth. 161 countries have now ratified.
    Senator Sarbanes. Was each of the countries that ratified 
committed to the nonbinding objectives?
    Mr. Wirth. No. There was differentiation between countries, 
Senator Sarbanes, in what are called Annex I countries and non-
Annex I countries.
    Senator Sarbanes. What was that differentiation?
    Mr. Wirth. The Annex I countries were developed countries, 
largely the OECD countries, and Russia and the states of the 
former Soviet Union.
    Senator Sarbanes. What commitment did they undertake?
    Mr. Wirth. They undertook the agreement to attempt to reach 
emissions reductions at the 1990 level by the year 2000; to try 
to stabilize their emissions at 1990 levels by the year 2000.
    Senator Sarbanes. What commitment did the other countries 
undertake?
    Mr. Wirth. The other countries had commitments of reporting 
and commitments of--let me just ask my staff very specifically 
what specific items were in there. [Pause]
    Mr. Wirth. They had to inventory gases and to take policies 
and measures that would move them toward greater efficiency. 
But they did not have the specifics of the nonbinding aim that 
the developed countries had.
    Senator Sarbanes. But were they committed to trying to 
reduce their emissions?
    Mr. Wirth. There was no specific commitment that they had. 
They understood that this was the direction in which we'd go, 
but there was written into the treaty no specific that they had 
for reductions.
    Senator Sarbanes. Now the commitments on the part of the 
Annex I countries were voluntary, is that correct?
    Mr. Wirth. They were nonbinding aims, essentially. 
``Voluntary'' means something different because the action plan 
that we together was fundamentally voluntary.
    Senator Sarbanes. Let me write that phrase down and then I 
will make sure that I use it. Nonbinding aims, OK.
    Now did the Berlin Mandate put you in the framework of 
requiring shifting from nonbinding aims to mandatory? What do 
you call them now? You don't call them nonbinding.
    Mr. Wirth. We believe and we stated in Geneva--Berlin was 
in 1995, Geneva in 1996--we stated in Geneva that we thought 
that the nonbinding aims written into the original treaty were 
not adequate, that countries were stating what they were going 
to do but were, in fact, not doing so, and that the gap between 
rhetoric and reality was growing broader and broader.
    Consequently, we said that we believed that the way in 
which we were going to achieve some real results in the area of 
climate change was to make these aims required, to make them 
compulsory, and that countries would, therefore, not only 
adhere to that but would follow and draft their own domestic 
programs to adhere to what they said they were going to do.
    Senator Sarbanes. What was the rationale when you shifted 
from nonbinding aims to compulsory aims of maintaining the 
differentiation between Annex I countries and all other 
countries?
    I can understand the differentiation and the burden on the 
Annex I countries is a nonbinding aim, because then they can, 
in effect, act with an evaluation of what's happening 
everywhere. But when you then move to compulsory aims, what is 
the rationale for sustaining the differentiation between the 
two groups and leaving the--well, are the non-Annex I countries 
simply called ``non-Annex I'' countries or is there another 
name for them?
    Mr. Wirth. They are not called anything. They are known to 
be non-Annex I countries.
    Senator Sarbanes. They are not. All right.
    What is the rationale for that?
    Mr. Wirth. Well, there were two rationales to that, Senator 
Sarbanes. The first was the obligation, under the climate 
treaty, as originally agreed to in Rio in June 1992 and then 
approved by countries around the world, that the developed 
countries had an obligation to move first. That was in the 
treaty.
    So we continued that obligation under the treaty.
    Second, it is very clear that most of the greenhouse 
forcing gases in the atmosphere today were put there by the 
developed countries. We have an obligation to move first.
    Senator Sarbanes. Let me interrupt you right at that point.
    Do you agree with the factual assertions that have been 
made that by the year 2015, I think it's 2015, that China will 
be putting more emissions into the atmosphere than the United 
States?
    Mr. Wirth. Yes. We think that is approximately right and I 
stated that in my testimony. Yes.
    But the question is we have to demonstrate that we are 
willing, as the people who, as I stated in my testimony, fouled 
the nest to begin with, that we are prepared to do something 
about cleaning that up and prepared to take steps in the 
future.
    Senator Sarbanes. How will you insure that the countries 
that are not under compulsory aims will be included within it?
    Mr. Wirth. That is the whole trick to the crossing of the 
lines that were in Senator Byrd's charts. That is precisely the 
issue. At what point is there a trigger where the developing 
countries graduate to status of obligations and what should 
those obligations be?
    Senator Sarbanes. Well, I keep reading these articles that 
say that the only commitment that will be made is to 
participate in negotiations to seek to determine that. Is that 
correct?
    Mr. Wirth. In my testimony, Senator Sarbanes, we point out 
three elements that are essential to our approach to the 
developing world. First is that they have to elaborate, in 
other words, draw out in much greater detail what they are 
going to do with special reference to the no regrets policies 
that they can be taking. A good example of that is pricing of 
energy. You don't know how to conserve energy unless you can 
put a price on energy. There are some very fundamental areas of 
economics in energy where that is a very, very important step 
to take.
    A second element that we point out is that there are 
countries which are now graduating to OECD status--Mexico and 
South Korea--we believe. We have stated that and that is part 
of our negotiation, that they should have further obligations 
than the other non-Annex I countries.
    Third is we think that the evolution of all of this we 
ought to move into a point with a further negotiation where the 
developing world will then, in that further negotiation, assume 
over a period of time obligations so that we are all in this 
together, say by 2030 or something like that.
    Senator Sarbanes. Mr. Chairman, may I just pursue that one 
point?
    Senator Hagel. Sure.
    Senator Sarbanes. How can you assure yourself that the 
further negotiations will result in an undertaking of 
compulsory aims on the countries that were not committed to 
that? How can you guard against a situation in which one group 
of countries is bound by compulsory aims, by international 
treaties that have been approved, and another group of 
countries, their undertaking is that they will negotiate at 
some point coming under compulsory aims?
    Mr. Wirth. A number of things are happening around the 
world, Senator, related to this.
    First, increasingly countries are coming to understand that 
their undertaking of actions related to climate change will not 
only be beneficial to them, such as the pricing issue I 
referred to earlier, but also enormously beneficial to them in 
terms of health of their populace and the livability of their 
cities.
    This is found, in particular, as you talk to provincial 
Governors throughout China, where they understand that there 
are very significant problems that they have. They are moving 
slowly, but surely, in beginning to undertake obligations.
    A second thing that happens is that, if we are successful 
with joint implementation and in including that, that becomes a 
very real incentive for the sharing of technology which, as 
countries are building, for example, great hundreds of very 
large power plants, they would like to have that sharing 
technology with us. In the most efficient kinds of power 
plants, joint implementation is a real tool to getting there.
    Third, many developing countries with excellent science--
here I will cite again the Chinese--are coming to understand 
that the impacts of climate change are going to be extremely 
deleterious to them, probably moreso than to us. What happens 
on sea levels and their ability to adapt to sea level rise? 
What is happening to them in terms of agriculture and the 
drawing out of hinterlands and agricultural areas which we can 
probably adapt to in a better way? There is the use of water 
and our much greater efficiencies--not as much as they ought to 
be, but our much greater efficiencies. We are seeing all kinds 
of indications like this that countries are coming to 
understand the importance of their taking on these obligations.
    Senator Sarbanes. Well, now, I am not on any of these 
resolutions. As I indicated at the outset, I think this is a 
very complex subject and I think it has to be very carefully 
examined.
    I find that answer very soft for the following reason. All 
of those arguments would apply to the effort to achieve 
nonbinding aims which you have said the Annex I countries have 
fallen short on.
    Every one of the three arguments you have just listed, 
which, according to you, would lead these countries that are 
not committed to some binding aims but in effect would cause 
them to do so, apply now to the Annex I countries.
    Apparently it didn't work there. So now you want to do 
compulsory aims. But I don't understand why if you are going to 
move to compulsory aims it would not be all encompassing.
    I cannot carry through on it by being given arguments as to 
why countries not under the compulsory aim regime would take 
these measures on the basis of arguments which exist now and 
have not led the Annex I countries to take these measures.
    Mr. Wirth. Well, first, we believe, as I pointed out, that 
compulsory aims are critical in order to provide exactly the 
sort of incentives that we need in terms of signals in the 
economy, in terms of moving toward the kinds of stabilization 
that we eventually have to go toward. The compulsory nature of 
this is imperative.
    Senator Sarbanes. But you are placing a certain group of 
countries in that regime and leaving another group of countries 
outside that regime.
    Mr. Wirth. Yes.
    Senator Sarbanes. Then when I ask you why would the second 
group of countries in effect undertake these aims, you give me 
as the answer a series of arguments in terms of a perception of 
their self interest and so forth and so on that have not worked 
for the Annex I countries and are now leading you to seek to 
put the Annex I countries under a compulsory regime.
    If that is the case, why shouldn't that analysis lead you 
to seek to put all countries under a compulsory regime?
    Mr. Wirth. We eventually would like to see all countries 
under a compulsory regime. We have stated that. That is 
something that we think is an appropriate thing to do down the 
line.
    But right now, one, we have to demonstrate that we, who 
were there first fouling the nest, most significantly the 
people who put most of the carbon up into the atmosphere, are 
going to be seriously demonstrating that we are willing to take 
on the problem. Second, as we do so, it is clear, the history 
of all of this is that what we do is followed very, very 
closely by other countries. The developing world looks very 
closely at what we do.
    Third, if the developed world together is putting on this 
kind of pressure, if we can reach this kind of step in the 
right direction, we think that the developing world would, 
therefore, be able to come into line a lot more likely than 
they are now.
    If we don't have this kind of evolutionary process, we are 
not going to get anywhere. That is also the blunt reality of 
this. We can say we are going to take all of our cards and go 
home tomorrow if you don't have exactly the same obligations 
that we do.
    Senator Sarbanes. They may not be exactly the same. But as 
I understand the differentiation you have made, it's between 
obligation and no obligation, not between--I have overrun my 
time, Mr. Chairman. I apologize.
    Senator Hagel. No, please, go ahead and finish.
    Senator Sarbanes. It's not between the extent of the 
obligation. I mean, I'm concerned about a situation in which 
you have Annex I countries who have committed to a mandatory 
regime and you have other countries that are not committed to 
any sort of mandatory regime. You then say well, these other 
countries will, in effect, come aboard because they will 
perceive it to be in their interest to come aboard, and the 
very arguments that were used with respect to Annex I countries 
that have not proven out will now lead you to seek a mandatory 
regime.
    I can pursue this in the next round. Thank you, Mr. 
Chairman.
    Senator Hagel. In fact, I would like to follow on--I know 
you are pleased about this, Secretary Wirth--I would like to 
follow on what Senator Sarbanes is getting at. It seems to me 
Senator Sarbanes has been pursuing the core of this issue.
    I am, like Senator Sarbanes, somewhat confused. If these 
amendments are in the enlightened self interest of all these 
countries, why do we need binding regulations or legally 
mandated commitments in the first place? If this is such a good 
thing for everybody, then why don't we go back to 5 years ago, 
when we talked about voluntary obligations?
    Mr. Wirth. Bluntly, Mr. Chairman, because we have not done 
what we said we were going to do.
    Senator Hagel. Who is ``we?''
    Mr. Wirth. The United States of America and every other 
developed, every other Annex I country except for Germany and 
Great Britain.
    Senator Hagel. What did we say we would do?
    Mr. Wirth. We said we would--it was a nonbinding aim--but 
we said we would reduce our emissions to 1990 levels by the 
year 2000. We have missed that, as I pointed out in my 
testimony, by about 10 percent for a number of reasons. It was 
not for any malevolence, by any means. There was a good plan to 
do it. But our economy grew much faster in the 1990's that we 
anticipated.
    Economic models, by the way, suggested that it was going 
to.
    Second, the price of oil, the price of energy, remained 
significantly lower than we thought it was going to and than 
the economic model suggested.
    Third, we did not have the support in the Congress for the 
implementation of a lot of the action plan that was necessary, 
for example, in areas of conservation, building standards, and 
so on, that were necessary to achieve that plan.
    The same is true for reasons of their own of the Canadians, 
the Japanese, the Australians, and all of the other Annex I 
countries, again, with the exception of Great Britain, which 
changed from a coal to a natural gas economy and, therefore, 
reduced their emissions of carbon very significantly, and of 
Germany, which inherited the very dirty and inefficient 
economies of East Germany and shut them down. So they got 
credit for all of that shutdown in terms of the overall 
emissions.
    Senator Hagel. So one of the alternatives would be slow 
down our economic growth? Is that one of the problems that we 
have?
    Mr. Wirth. No, I'm not saying that that is the alternative.
    I am saying that one of the reasons that we did not achieve 
our goal is that our economy grew much more robustly during the 
1990's than it had been anticipated as all the economic 
modelers were looking at where we were going to be over the 
decade of the 1990's.
    Senator Hagel. So you think that is good enough reason to 
shift, as we have, from voluntary to legally binding mandates?
    Mr. Wirth. Well, I don't know what the alternative is, Mr. 
Chairman. We had nonbinding aims to achieve this and if, in 
fact, we are able to set a standard which establishes what the 
aim is going to be, everybody agrees that's what's going to 
happen, and it's done over a long enough period of time with 
the kind of flexible economic instruments, then we will see our 
industries, as happened in 1973, after the Arab Oil Boycott, 
the anticipated rise in the price of energy caused very, very 
significant changes in the way in which we viewed energy, the 
way in which we treated energy, the way in which we priced 
energy, and the efficiency with which we used energy.
    That same sort of thing, that same sort of framework, that 
same sort of certainty is necessary for us.
    We are not going to get out of this without a very 
significant long-term technological commitment to change if, in 
fact, we believe that we ought to limit the concentrations of 
carbon in the atmosphere.
    Now I think that there is probably almost no scientist who 
would agree that if we went long-term, say a quadrupling the 
concentrations of carbon in the atmosphere, that that would be 
a good thing. I don't think that anybody would say that this is 
where we want to be.
    Do we want to go to tripling? Well, there may be a few who 
would say maybe we could go to tripling. Most are saying that 
when we get around to doubling, it is time for us to stabilize 
the overall concentrations.
    Well, how are we going to get from here to there? That is 
the conundrum in which we find ourselves. That is what this 
instrument is designed to do.
    For our commitments, for the flexible economics, and to 
begin to engage the developing world as well--those are the 
three corners of this negotiation.
    Senator Hagel. Have we not, in fact, done better than what 
you had stated in Berlin, when I believe you had said something 
to the effect that we probably would miss by 30 percent?
    Mr. Wirth. It depends on what the percentage is--a 
percentage against what? What are you talking about?
    Senator Hagel. Well, what were you referring to?
    Mr. Wirth. In Berlin, we were emitting about 14,000 million 
tons--in 1990 levels, about 13,000 million tons of carbon. We 
are going to be at over 14,000 million tons of carbon. So we 
are going to miss by an overall percentage of close to 10 
percent, of the overall goal. We are going to miss it and it 
will probably be at 1,370 or something like that. So we will 
miss the gap by about 50 percent. We will miss the overall, an 
overall percentage of our reduction by about 10 percent.
    If you look at the base being, say, 1,300, we are going to 
get at the end of this decade to more than 1,400.
    Senator Hagel. How did you come up with those numbers?
    Mr. Wirth. I think those are very--the scientific community 
measured the amounts of carbon in the atmosphere and what we 
are emitting based upon what our economy does, the amount of 
gasoline that is used, the kind of fuel that is used in our 
utilities. I don't think there is any disagreement over those 
base numbers, Mr. Chairman.
    Senator Hagel. Let's go back to what you said in Berlin and 
what you are now saying. I believe you told me in my office on 
Tuesday that the ultimate goal was a 70 percent reduction in 
emissions. Do you recall that?
    Mr. Wirth. Let me go back. We are talking about two 
different kinds of reductions, Mr. Chairman.
    The first kind of reduction, the first step that we have to 
take is to stabilize our own emissions at some level at some 
date. The original aim was to stabilize our emissions at 1990 
levels by the year 2000. That was our first aim for our own 
emissions.
    That is a first step toward the much bigger and much more 
difficult job of stabilizing the concentrations of carbon in 
the atmosphere. That is the overall loading of carbon in the 
atmosphere.
    We have to reduce now in order for everybody in the world, 
for all of us, to end up with concentrations in the atmosphere 
that may be double the historic standard. Again, if you think 
about this as a swimming pool, we are piping water into that 
swimming pool. We are piping carbon into the atmosphere.
    The pipe that is pouring water into the swimming pool is 
getting bigger, and bigger, and bigger. Our economy is growing, 
the European economy is growing, the developing world is 
growing. The pipe pouring carbon into the atmosphere, pouring 
water into the swimming pool is getting bigger, and bigger, and 
bigger.
    Now if we continue in this way, the swimming pool is going 
to overflow very rapidly. If we even stabilize the size of that 
pipe, our own emissions, you are still pouring a lot of carbon 
into the pool, a lot of water into the swimming pool. We have 
to reduce that trickle of water in order to get to the point 
where the swimming pool does not overflow.
    Now that metaphor where, it is overflowing, we will 
generally assume that overflowing is at about double the 
concentrations of carbon in the atmosphere. Others would say 
that maybe it is somewhere between two and three times. It 
certainly is not four times.
    But we have to get to a stabilization of the levels of 
carbon in the atmosphere. As I said to you in your office, this 
is the single, most important concept in studying and thinking 
about climate change one has to understand, concentrations of 
carbon in the atmosphere.
    Senator Hagel. But are you still saying, as you told me a 
couple of days ago, and as you said in your testimony, that the 
ultimate goal, is well beyond Kyoto: a 70 percent reduction in 
emissions?
    Mr. Wirth. Well, if we set the concentrations, Mr. 
Chairman, to be double the historic standard, which would be 
about 520 parts per million of carbon, if that is the ultimate 
standard, the ultimate concentration that we believe we can 
tolerate, if you choose that number--there is no number that 
has been chosen, but for the purposes of illustration let's say 
if we choose that number, and if we decide that we want to try 
to get to that number sometime toward the middle of the 21st 
century, that will require, ultimately, a 70 percent reduction 
in the amount of carbon that we are pumping into the 
atmosphere, to get from here to there.
    Senator Hagel. One last point and I will yield. We have 
been joined by our distinguished colleague from Massachusetts, 
John Kerry.
    I can tell you as a member of the Senate Foreign Relations 
Committee, Mr. Secretary--and you may want to check the State 
Department on this, your reference in responding to Senator 
Sarbanes' questions about developing countries, their self 
interest and why would they participate--unless China has 
changed policy as of this morning, it has continuously and 
resolutely said that it will not be bound by any mandatory 
restrictions.
    Mr. Wirth. I am very aware of that. I have dealt with and 
negotiated with them all along for a long time.
    Senator Hagel. But that is not the way you answered the 
question.
    Mr. Wirth. Excuse me?
    Senator Hagel. That is not the way you answered the 
question.
    Mr. Wirth. Mr. Chairman, there are all kinds of negotiating 
statements that are made and I know what people say in 
negotiations when they are saying things publicly, and I know 
what goes on and what people say when they are talking to you 
about OK, where do we go from here. You have had that 
experience, I know, in a very distinguished political career 
and a very distinguished economic career. There are certain 
things that you say for consumption here and then you sit down 
and try to figure out how you get from here to there. That is 
what a negotiation is about, to try to figure out how do we get 
from here to there.
    Now if you sat in on an economic negotiation in your 
business or a political negotiation and said this is where I 
want to get to, that's all I'm going to do, people will assume 
that whatever is that bottom line is the beginning of your 
negotiating position.
    Senator Hagel. Well, if that is your interpretation of 
where the Chinese are, we may want to get back to the 
Ambassador on this and determine their position.
    But it is now Senator Sarbanes' turn.
    Senator Sarbanes. Thank you, Mr. Chairman.
    I just have a few points I want to make. First of all, in 
defense of the Organization of Small Island States, since 
Congressman Dingell dismissed them sort of out of hand in his 
testimony, I ought to observe that, while they may not be 
powerful, they obviously have an intense interest in this 
issue. This is because if this issue is not properly resolved, 
they may cease to exist. So I think you can understand why they 
would be quite exercised about it. I just want to make that 
observation.
    I accept the science. I think the science here is pretty 
overwhelming. In any event, if one has questions about the 
science, what is wrong with taking steps to address the problem 
if those steps can be done rationally? In other words, the 
National Academy of Sciences, apparently in a 1991 study, said 
about the U.S., at least, that we could reduce or offset our 
greenhouse gas emissions by between 10 and 40 percent of 1990 
levels at low cost or at some net savings. The efficiency of 
practically every end use of energy can be improved relatively 
inexpensively.
    Of course, they cited the fact that we use about twice as 
much energy on a per capita basis to produce a unit of GDP than 
does Germany or Japan. So it seems to me that if you have, as I 
think we do, pretty strong scientific evidence that there is a 
problem, even if one wanted to question that, then you would 
say well, there are things that can be done to address this 
problem that do not require a tremendous dislocation and that 
those things need to be looked at just to be prudent, careful, 
and cautious.
    The thing that is difficult here, though, is this 
differentiation, it seems to me.
    Let me ask you this question. Did the Berlin and Geneva 
decisions now put you within a framework of negotiating that 
the differentiation between the Annex I countries and the other 
countries is an accepted proposition? I'm trying to search 
here. In other words, I mean when you go to negotiators, you go 
to Kyoto. Has that been established as a sort of negotiating 
principle or framework within which you have to operate? Or is 
that open so that a decision could be reached that would 
encompass all countries within a mandatory regime?
    Mr. Wirth. In the climate treaty agreed in 1992 and then 
reaffirmed in the Berlin Mandate, there is a distinction 
between Annex I and non-Annex I countries. That becomes a 
basis.
    Senator Sarbanes. But the regimes were nonbinding.
    Mr. Wirth. Yes. That has become the basis upon which most 
negotiations go on.
    We in the United States are attempting to push this 
negotiation--and I will tell you at this point without much 
support from our colleagues in the developed world--for the 
developing world to assume much greater obligations.
    We have been very clear over and over again, and I outlined 
the three parts of our proposal related to the developing 
world, to try to move them more rapidly toward the assumption 
of broader obligations.
    Senator Sarbanes. But are you operating under 
understandings reached that the non-Annex countries will remain 
outside of a compulsory regime, or is there inclusion within a 
compulsory regime open to negotiation?
    Mr. Wirth. We would like to bring them into a compulsory 
regime. Our proposal says those three things. One, we would 
like to elaborate in greater detail those items which they can 
do now. Second, we want to bring countries like Korea and 
Mexico, which have graduated to a higher status, into much more 
specific obligations. Third, we want the developing world to 
recognize that eventually they have to get into this, they have 
to evolve into this, and that we should have a next negotiation 
related directly to their becoming involved in it.
    Senator Sarbanes. Well now, is that the limit to which you 
can go in the negotiation?
    Mr. Wirth. We think that is as far as--we are going to have 
a great deal of difficulty, Mr. Chairman, in getting the other 
two elements that we want. We want emissions trading and joint 
implementation. We don't have a lot of support for that.
    We want the developing world to have greater obligations. 
We don't have a lot of support for that. One of the fundamental 
reasons that we don't have a lot of support for that is the 
world looks to us, with 5 percent of the world's population and 
20 percent of the world's emissions, missing our target very 
significantly and not appearing to be very serious about it.
    So we are attempting, from a negotiating point of view, to 
strengthen the position that we're taking in terms of what we 
do so that that helps us to get the economic instruments that 
we want and that, in turn, will help to bring in the developing 
countries.
    Senator Sarbanes. Yes. But you leave us, then, exposed to a 
regime in which we are under a mandatory framework and a number 
of significant countries are not when both the environmental 
trend lines and the economic trend lines raise serious 
questions. So we could be down the road somewhere and still 
find ourselves within the mandatory regime.
    You would then say that these countries ought to be in the 
mandatory regime now, by any standard. But they are not. They 
refuse to be.
    At this point, we--and when I say we I mean the Annex I 
countries--are in the mandatory regime and the other countries 
are not.
    Mr. Wirth. And that is where we are today. We are trying to 
set up a process to bring the developing world into the 
mandatory regime.
    Senator Sarbanes. Well, no. Your process does not assure 
that. Your process, as I perceive it--I'm trying to find this 
out here--your process assures that the Annex I countries will 
be within the mandatory regime.
    Mr. Wirth. Which is where we are today.
    Senator Sarbanes. Well, no, we're not.
    Mr. Wirth. That's where we are today.
    Senator Sarbanes. No, we are not there today.
    Mr. Wirth. It is with the assurance that the Annex I 
countries have requirements. You know, the nonbinding aims were 
world listed.
    Senator Sarbanes. We're not in a mandatory regime now.
    Mr. Wirth. But we're listed as having requirements today.
    Senator Sarbanes. I understand that. But they are 
nonbinding.
    Now you are going to make them binding.
    Mr. Wirth. Uh-huh.
    Senator Sarbanes. But there is no assurance that these 
objectives will become binding on the non-Annex I countries----
    Mr. Wirth. That is true.
    Senator Sarbanes [continuing]. In the regime you are going 
to put us into. This is how I understand it.
    Mr. Wirth. That is right. We are going to set up a series 
of ways in which they elaborate their responsibilities and will 
be required to do so, and other OECD countries, like Mexico and 
South Korea, that graduate to status, have newer obligations, 
and that we undertake a further negotiation to bring in the 
developing countries.
    Now there is no guarantee, that is true.
    Senator Sarbanes. Yes. But that negotiation may not lead to 
anything----
    Mr. Wirth. That's true.
    Senator Sarbanes [continuing]. And they may stay out.
    Mr. Wirth. That's right--at which point, then, I think the 
whole treaty falls apart.
    Senator Sarbanes. Well, no. By that time you have a treaty.
    Mr. Wirth. What was that?
    Senator Sarbanes. By that time you have a treaty.
    Mr. Wirth. But you don't have a treaty that really makes 
sense to anybody at that point.
    Senator Sarbanes. Then what are you going to do, denounce 
the treaty?
    Mr. Wirth. Well, I think you'd get to a point where you'd 
have to look very carefully at where we are under the 
obligations of the treaty.
    Senator Sarbanes. Well, why don't we negotiate a treaty 
that does not contain in it the prospect of denouncing it?
    Mr. Wirth. Well, if you could figure out, Senator Sarbanes, 
if you could figure out how to bring the developing countries 
into this process, how with 151 people who are negotiating on 
this, in which there are all of these major parties, how we do 
that immediately--we are setting up a process that we think is 
the best that we can do in terms of bringing the developing 
countries into their set of responsibilities over a period of 
time.
    Senator Sarbanes. I understand the difficulty. But the 
problem is you then end up putting us into a mandatory regime 
without the assurance that the others will be in a mandatory 
regime. That, it seems to me, is a difficult problem. In fact, 
people that are supporting your efforts to negotiate have 
pinpointed that particular aspect of it as raising very 
significant difficulties.
    Mr. Wirth. Well, as I said to Senator Byrd yesterday, the 
single most difficult area in all of these negotiations beyond 
our own domestic political will to make the changes that are 
necessary is this issue of bringing the developing countries 
in. That is something that is going to take continuing work, a 
lot of work over a long period of time.
    Senator Sarbanes. Thank you, Mr. Chairman.
    Senator Hagel. Senator Kerry.
    Senator Kerry. Thank you very much.
    Welcome, Mr. Secretary.
    Mr. Wirth. Thank you.
    Senator Kerry. I apologize in that I have been in a markup 
in the Commerce Committee.
    Let me try to get at not only what Senator Sarbanes was 
getting at but sort of the broad confrontation that we face 
here.
    You, in your testimony, which I was just looking through, 
lay out some of the sort of science findings with respect to 
where we are heading--the warmth, the increase, the potential 
increase in the next days of the temperature.
    What would you say to Americans is the most compelling set 
of scientific facts that mandate action? I mean, if you want to 
really grab people's attention and say listen, this is why we 
have to incur cost and why there is sacrifice demanded, what 
are those most compelling scientific rationales?
    Mr. Wirth. Well, 2 years ago, in a heat wave in Chicago, 
500 people died. The likelihood of that kind of heat wave 
occurring again is 4 to 6 times greater. Temperatures in the 
upper latitudes are going to increase more than they will at 
the equator. It is much more likely we are going to get those 
kind of hot and intense heat events. Four of the five hottest 
years have occurred since 1990.
    Senator Kerry. The implications of that are, obviously, 
significant crop dislocation, significant agricultural costs, 
and others.
    Mr. Wirth. I was thinking specifically of the health 
impacts on people living in big cities.
    Second is the point that you make, a very good one, related 
to the drying out of agricultural areas and the changing of our 
capacity to grow crops. Probably we, in the United States, 
would adapt pretty well to that with all of the bioengineering 
that we currently have and our ability to rotate and change 
crops in agriculture. The impact that that would have on the 
developing world would be much more serious. This would be at a 
time when there are already more than a billion out of 5.7 
billion people in the world who are living below any kind of 
level of nutrition.
    That is an open invitation to enormous political 
instability in some very fragile areas of the world, long-term 
not in our interest.
    Third, I would speak to the question of sea level rise. If 
we continue in the direction in which we are going, all the 
models suggest that sea level is going to rise somewhere 
between a foot and 30 inches. The implications of that in the 
United States----
    Senator Kerry. The minimum it would raise is a foot?
    Mr. Wirth [continuing]. A foot.
    Senator Kerry. And the minimal rise that we know will 
happen means what over what period of time?
    Mr. Wirth. That means that by the middle of the next 
century, we are going to see some very significant dislocations 
in the Mississippi River Delta, South Florida, the Cape, the 
areas of the San Francisco Bay, estuaries in San Francisco Bay, 
and the impacts, in turn, on wetlands, which are remarkable, as 
you well know, a remarkable source of life all around the 
world. They will be flooded with sea water, wetlands that are 
very, very fragile and are the source of life of practically 
everything. A very large percentage of living things will be 
inundated.
    Senator Kerry. I recently asked for a briefing from our 
scientists on this and learned something new which I was not 
aware of. It is that the half life of these gases is such that, 
even if we were to stop today, what is currently in the 
atmosphere will result in some 75 years of sort of status quo.
    Is that accurate?
    Mr. Wirth. That is at a minimum, 75 years. The carbon 
dioxide, when it goes up there, stays there for somewhere 
between 100 and 150 years. So the average of what is up there 
would be about 75.
    Senator Kerry. I understand also that the oceans are 
critical in the consumption of the carbon dioxide, that a very 
significant amount of that carbon dioxide in warming is 
diminished by virtue of ocean consumption. But no one 
scientifically can tell us at what point you might have sort of 
a nuclear reaction within the oceans where the capacity to 
consume the CO2 is saturated. So, you'll have an 
exponential increase. Is that accurate?
    Mr. Wirth. This is one of the single most important 
research issues. We have come to understand a lot in El Nino 
about ocean currents, ocean temperatures, and the impact that 
that has. That has been a major breakthrough in the last 5 
years.
    We hope that continuing research on this effort will give 
us a much clearer understanding about concentrations of carbon 
in the oceans, about the conveyor belt, about the cold water 
that comes from the Arctic and flows underneath the Atlantic 
and comes back up again as the Gulf Stream. It moves around and 
that is what allows Europe to exist. The Gulf Stream keeps 
Europe warm.
    If that conveyor belt, for reasons of climate change, for 
reasons of melting of the ice caps, if that conveyor belt 
stops, and circulations in the Atlantic stop, Europe is in 
very, very significant difficulty, as are we.
    Senator Kerry. Now historically, the 8,000 or so years that 
human kind has existed, as we know ourselves to have existed, 
those 8,000 years measured against what we are learning from 
the ice core analyses we are making are, in fact, the most 
tepid period of human existence, as we measure it historically. 
Isn't that accurate?
    Mr. Wirth. That's true. We have had, for the most part, 
very favorable weather.
    Senator Kerry. And when you measure it against the ice age 
periods and the great climate swings that we have had, I would 
assume that a conservative minded, respectful human being would 
measure those 8,000 years against those other periods and come 
to a conclusion, as most scientists have, that we are really 
playing with some very dangerous possibilities here.
    Mr. Wirth. There is a broad school of analysts, Senator 
Kerry, who look at this from the perspective of a clear 
national security problem; that the threats to us from this are 
so significant that we ought to view it in that way and view 
the kinds of changes that we invest in as, in fact, a kind of 
insurance policy.
    Senator Kerry. Now I gather yesterday or the day before you 
cited these 2,500 scientists who came together. I know there is 
some argument about exactly what kind of local impact might 
occur and the models are not capable of telling you exactly 
what the cloud cover may or may not do, et cetera. But I also 
take it there is no argument among these scientists about a 
sort of de minimis level of this negative impact which, in and 
of itself, is--what--catastrophic, or serious? How do you 
characterize it?
    Mr. Wirth. I think there are two answers. I think there are 
remaining a handful of scientists who would doubt the science 
or are critical of the IPCC. The overwhelming 2,500 scientists 
around the globe, the best of the world's climate scientists 
from all over the world, participated in the IPCC and came out 
with the results that I summarized in my testimony. I think the 
overwhelming evidence is there. We believe that prudent 
individuals should look at that. That is what the scientific 
community overwhelming is saying to us. We ought to act and 
respond to that particular data.
    Senator Hagel. Senator Kerry, I'm sorry to interrupt but we 
have another panel behind Secretary Wirth. I know he is not 
going to be disappointed to escape. But I think in the interest 
of our other panelists, we need to move on. Obviously we will 
keep the record open.
    Senator Kerry. Mr. Chairman, can I just get a couple of 
things on the record because I think this is very important?
    Senator Hagel. Well, one question, if you would, Senator. 
It is not fair to the other panelists. I'm sorry you were late. 
But ask a question and then we can, if it is appropriate, add 
the rest for the record. These gentlemen have other 
obligations.
    Senator Sarbanes. Why don't you give him a couple of 
minutes more.
    Senator Hagel. Oh, I will. I am going to give him a couple 
of minutes.
    Senator Kerry. Thank you, Mr. Chairman.
    Let me sort of jump ahead because I was trying to come 
through a logical process. We are 10 percent behind or worse of 
where we promised we were going to be and we are the world's 
largest greenhouse gas emitter.
    Mr. Wirth. That's true.
    Senator Kerry. So when you look at--there are two questions 
here that are part of the same question, I guess. When you look 
at the Byrd Resolution and you just read it as a citizen, you 
say to yourself well, we are spending money, we are asking our 
citizens to shell out in order to reduce. Now admittedly, we 
are not reducing at the rate we committed to, which is sort of 
question No. 1. What are we going to have to do to live up to 
our part of the bargain?
    But question No. 2 is linked to that. Why is it 
inappropriate, if we are going to put ourselves under that kind 
of mandate and we are going to ante up to try to do it, to 
require that, as China comes on line, as Southeast Asia comes 
on line, as all of these countries do so--I mean, the President 
has said repeatedly we cannot afford to have them make our 
mistakes. Absent some sort of required regime, it is hard for 
common sense to share a notion of how we get from here to there 
in a shared sacrificial way.
    So how would you address Senator Byrd and the country in 
saying that it is inappropriate for us to try to come to some 
kind of requirement that they also are going to develop in a 
way that won't repeat those mistakes and will, in fact, join us 
on a proportional level or on some level in those reductions?
    Mr. Wirth. Well, at the end of my statement, Senator Kerry, 
and this was not in the written statement which I delivered 
this morning, we said that we agree with the analysis in 
Senator Byrd's resolution. The question is a definition of what 
the commitments ought to be. What do we do first? That has to 
be part of this. At what level of development do emerging 
countries kick in? Do they do that on a per capita basis? Do 
they do it on an overall basis? Do they do it on a percentage 
of carbon going into the atmosphere basis? Do we pick 20 
countries and say we are the biggest emitters, let's us 20 get 
together? That has been proposed by some.
    It is a matter of definition as to when this trigger kicks 
in. As Senator Sarbanes has been pursuing, at what point is it 
binding when it does kick in? That is the single most difficult 
part of this negotiation, as Senator Byrd and I have discussed 
and as we have discussed at length this morning. That is the 
whole thrust of the Byrd Resolution.
    Senator Kerry. I wanted to have some time to explore that, 
obviously. But I think we can do so at other times.
    I certainly appreciate your efforts on this. I think you 
have been doing an outstanding job in giving meaning to this 
new portfolio and I want to thank you for wrestling with this 
on our behalf. I think you are one of the great voices on it.
    Mr. Wirth. Thank you very much, Senator Kerry.
    Senator Hagel, thank you very much for having us this 
morning. We would, of course, be delighted to answer any 
questions which you might have that might be useful.
    If I might suggest, maybe on some of these issues if there 
are sharpened questions or on the thrust of what Senator 
Sarbanes was asking, we might look at a progression of 
questions and get together to see if we can make sure we all 
understand each other, the answers, and what we know and what 
we don't know.
    This issue, as I have stated, Senator Hagel, is the most 
difficult and long-term probably the most important, next to 
our own obligations, and I think this hearing has been 
extraordinarily useful in helping us to publicly air the issue. 
Now let's take it the next step and see what we can do in terms 
of making sure we understand a lot better the specifics.
    We would look forward to doing that then. At your request 
we would be happy to do so.
    Senator Hagel. We will have ample opportunity, Mr. 
Secretary, to talk about this. I am very appreciative of your 
time. You have put a lot of effort in this and answered our 
questions.
    One other thing. I think we should leave with this thought.
    Senator Kerry, I don't know if you had an opportunity to 
listen to Senator Byrd this morning or Congressman Dingell and 
others who have been exchanging ideas and views with Secretary 
Wirth, but we are all in agreement that, first, this is a tough 
issue. Second, we are in agreement that we must address it. 
Obviously, that is why we are holding this series of hearings; 
to find the best way to do that.
    Mr. Secretary, thank you.
    Mr. Wirth. Thank you very much, Mr. Chairman, Senator 
Sarbanes, Senator Kerry. Thank you.
    Senator Hagel. If the next panel would come forward, we 
will get started.
    Gentlemen, welcome. Let me appropriately introduce you and 
then we will get started.
    First is Mr. Richard L. Trumka, Secretary-Treasurer of the 
AFL-CIO. Mr. Trumka, welcome. It is a pleasure to have you with 
us. We appreciate it very much.
    Also we have Mr. Bryce Neidig, President of the Nebraska 
Farm Bureau Federation from a state I have heard a couple of 
things about, Nebraska.
    It is nice to see you, Mr. Neidig.
    Also we have Mr. Kevin Fay, Executive Director of the 
International Climate Change Partnership, Arlington, Virginia.
    Mr. Fay, I appreciate very much you taking your time today 
to come and exchange views with us on this subject.
    Again, on behalf of the committee, welcome. Mr. Trumka, 
would you like to begin.

 STATEMENT OF RICHARD L. TRUMKA, SECRETARY-TREASURER, AMERICAN 
 FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS, 
                         WASHINGTON, DC

    Mr. Trumka. Thank you, Mr. Chairman, and thank you for the 
opportunity to testify on the ongoing multilateral negotiations 
regarding global climate change. This issue is of great 
importance to the AFL-CIO because the course of these 
negotiations can have profound effects on the job security and 
incomes of American workers and the welfare and lifestyle of 
American families.
    AFL-CIO members and their families are concerned about the 
environment. We share with all Americans a deep desire to leave 
our children and grandchildren a safe and secure environment, 
and we are ready to work with you and the administration to 
insure that these negotiations succeed in meeting these goals.
    The administration is now engaged in an effort to negotiate 
a treaty to mitigate the effects of carbon dioxide emissions on 
the Earth's climate. At the February 1997 Executive Council 
meeting of the AFL-CIO, we issued a statement which points out 
that a treaty will not be effective if it excludes China, 
India, Mexico, and other developing nations.
    Our statement says specifically that the exclusion of new 
commitments by developing nations under the Berlin Mandate will 
create a powerful incentive for trans-national corporations to 
export jobs, capital, and pollution and will do little or 
nothing to stabilize atmospheric concentrations of carbon. Such 
an uneven playing field will cause the loss of high paying U.S. 
jobs in the mining, manufacturing, transport and other sectors.
    Although much remains to be decided before December, Mr. 
Chairman, we are concerned that the United States has already 
agreed to a very dangerous principle that now governs the rest 
of the negotiations. At U.N. talks in Berlin in 1995, the U.S. 
agreed to what has become known as the Berlin Mandate, which 
says that only Annex I countries would have to meet legally 
binding targets for their greenhouse gas emissions. Other 
countries, from impoverished developing nations like those in 
much of Africa, to the fast growing economies of Southeast 
Asia, to China and Mexico would have no binding limits on their 
emissions.
    With rapid industrialization, the countries with no 
requirements will soon be responsible for well over half the 
planet's greenhouse gas emissions, and with no emissions 
reductions to meet, these countries will attract foreign 
businesses like a magnet.
    While no firm decisions have been made regarding domestic 
reduction policies, all of the mechanisms under discussion 
would have the same impact, that is, a sharp rise in energy 
prices resulting in significant economic dislocation. For 
example, a carbon tax or carbon permit price of $100 per ton of 
carbon is equivalent to a price increase of 26 cents per gallon 
of gasoline, $1.50 per thousand cubic feet of natural gas, a 
$52 per ton increase in coal, and 2 cents per kilowatt hour of 
electricity. These are the minimum levels of energy increases, 
price increases, for a policy to stabilize U.S. carbon 
emissions at 1990 levels.
    Several studies have been done to estimate the impact of a 
treaty on the economy. A range of estimates exists, but even 
the most conservative estimate shows a large job loss as a 
result of policies to reduce emissions.
    According to a 1992 study by the U.S. Department of 
Commerce, a carbon tax to help the U.S. achieve emission 
reductions of a scale now being discussed in the U.N. would 
cost some 1.7 million U.S. industrial jobs.
    More recently, the administration has conducted two studies 
estimating the economic impact of meeting emission reduction 
targets. The first was released in June 1996 and the second is 
currently in draft form, dated June 1997.
    The 1997 study makes new assumptions which reduce the 
estimated loss of production or GDP and implicit job losses by 
roughly one-half the expected GDP reductions estimated in the 
analysis a year before. The new assumptions also accelerate the 
economy's bounce-back by several years. In general, under the 
1997 study, estimated GDP losses are assumed to be one-half of 
what they assumed in 1996 and the bounce-back occurs in half 
the time.
    Nevertheless, even with those new assumptions, the 
administration draft study shows that 900,000 jobs could be 
lost as a result of climate change policies. Jobs will be lost 
in nearly every region of the country and across a broad range 
of sectors. The job loss estimate should be regarded as very 
conservative, Mr. Chairman. A much more realistic estimate of 
the impacts of stabilization at 1990 levels would be in the 
order of 1.25 to 1.5 million jobs, with even larger job losses 
to achieve a reduction level below 1990 levels.
    You will recall that the proposal right now from the 
European Community is to reduce below 1990 levels an additional 
15 percent by the year 2010.
    The 1997 administration study does not attempt to measure 
the impact of the job loss to our international competitors who 
are not subject to emission limitations requirements. This is a 
crucial matter for jobs and incomes which the administration 
must address.
    The administration and its consultants expect that natural 
gas will displace coal in increasing quantities. The DRI model 
used by the administration indicates that 57 percent of all 
emission reductions by 2010 and in the stabilization case would 
result from a reduced demand for coal. That would increase to 
65 percent by 2020.
    Energy intensive industries would be most hurt by rising 
energy prices. Chemicals, refining, aluminum, paper, cement, 
and steel are included in the list of industries that would 
suffer the most serious job loss due to energy price increases. 
The jobs in production would not disappear. They would simply 
move overseas.
    The rising energy crisis would place U.S. industry at a 
competitive disadvantage. As energy prices rise to meet more 
stringent targets, jobs will move to countries that are non-
Annex I countries that do not have to meet those targets. 
Carbon dioxide emissions as well as jobs and incomes will move. 
Ironically, in those industries where jobs move, emissions of 
carbon dioxide as well as other air and water pollutants are 
likely to rise since the industries in the U.S. must already 
meet more stringent environmental standards than our 
competitors.
    Both the target concentration level and the timetable for 
meeting these levels are still to be negotiated. These are 
crucial decisions and must be carefully considered. A rush to 
judgment in Kyoto could result in long-term damage to our 
economy yet produce little or no environmental benefit.
    Two basic principles must guide our approach in these 
negotiations. First, all countries of the world must be 
included in emission limitations. Emissions in China alone are 
growing rapidly enough to increase carbon dioxide 
concentrations in the atmosphere. Even if all other countries 
were to reduce their emissions, emissions of China and India 
will ultimately dwarf the emissions of the U.S. as 
industrialization proceeds because of their much larger 
populations.
    Second, emission reductions must not proceed in a manner or 
a timetable that causes severe damage to the U.S. economy. Jobs 
and incomes must be protected and adverse effects on our 
international competitiveness must be avoided.
    The current approach in the U.N. negotiations is fatally 
flawed, Mr. Chairman. It does not meet the requirements of 
equity or environmental effectiveness. It requires a very large 
de facto energy tax, the transfer of a large chunk of our 
industrial base overseas, and at the end of the day does little 
or nothing to improve the prospects for a better climatic 
future.
    Mr. Chairman, the AFL-CIO is ready to work with you and 
your colleagues to develop tools to address climate change in 
ways that are equitable and genuinely deal with the problems. 
Global warming is a global problem and our response must 
involve the entire international community.
    Thank you, Mr. Chairman.
    Senator Hagel. Mr. Trumka, thank you very much.
    We will listen to the remainder of the panel and then come 
back with a round of questions. Thank you. Mr. Neidig.

  STATEMENT OF BRYCE NEIDIG, PRESIDENT, NEBRASKA FARM BUREAU 
                 FEDERATION, LINCOLN, NEBRASKA

    Mr. Neidig. Thank you, Mr. Chairman. My name is Bryce 
Neidig. I am a farmer and President of the Nebraska Farm Bureau 
Federation and a member of the board of directors of the 
American Farm Bureau Federation, which I represent today.
    My family owns and I operate, with my son, a 650 acre corn, 
soybean, and alfalfa farm in northeastern Nebraska, near the 
town of Madison. To give some credibility about my being a 
farmer, I live in the house I was born in, the same house my 
father was born in. My grand kids think I came with the place 
but I didn't. It has been in the family 105 years.
    I am very concerned that the International Agreement on 
Climate Change will hurt my farm operation and others like it 
across the Nation.
    I appreciate this opportunity to discuss a subject that 
practically every farmer is an expert on--the weather. Experts 
or not, they complain about it. It rains too much or to little. 
It's too cold or too hot, and frost threatens the harvest. We 
are interested in the weather because our livelihood depends on 
it.
    Farmers who are aware of the climate change treaty are also 
concerned about controls which may be imposed on the farm to 
reduce greenhouse gas emissions. They are concerned about 
higher costs for fuel, energy, vehicles, and equipment. They 
are concerned about new, burdensome regulations. They are 
concerned about threats to their competitiveness in world 
markets where they now must export about one-third of the crops 
they grow.
    Farmers are aware that in the last decade or so there has 
been considerable discussion by some scientists that greenhouse 
gases, carbon dioxide, methane, and nitrous oxide, are 
contributing to increases in average global temperatures that 
could cause adverse changes in the world's climate. We know 
that there is some data to show that there are increases in 
greenhouse gases, but believe there is still a legitimate 
debate about the magnitude of those changes, their 
significance, and the relative contribution of natural versus 
human causes, including agricultural production.
    Many farmers who have followed this important issue believe 
that the administration is acting hastily and prematurely in 
leading international efforts for immediate, legally binding 
and enforceable caps on greenhouse gas emissions. We don't know 
enough about the problem or even if we have a problem. We don't 
know about agriculture's contribution to the problem or the 
solution. We don't know what practices or programs farmers are 
likely to encounter as a result of an international agreement. 
To put it simply, most farmers familiar with the climate treaty 
are less concerned with the illness than they are with the cure 
that is being prescribed for them.
    The administration's proposal will restrict farming 
practices. Farmers like to think of themselves as good guys. 
But we are being portrayed as villains when it comes to 
greenhouse gases. Our own Environmental Protection Agency 
blames agriculture for about 33 percent of total methane 
emissions and up to 46 percent of the nitrous oxide generated 
from human activity in the United States. Led by our own 
administration, international negotiators are pressing for 
strict, binding limits on these emissions.
    If such limits are adopted, the U.S. would be forced to 
consider drastic policies to meet those legally enforceable 
reductions. New taxes on fuel and fertilizer, forced mileage 
requirements for light trucks and other motor vehicles, 
controls on planting, cultivation, and harvesting practices, 
and limits on the number of livestock per acre have all been 
proposed and may become regulatory policy here in the U.S.
    Farms like mine would not only be severely disrupted but 
could be put out of business.
    Restrictions on planting, cultivation and harvesting would 
interfere with my farm management plans which are designed to 
reduce my production costs, maximize yields and conserve my 
farmland. For example, prescriptive crop practices to reduce 
greenhouse gas emissions may not be compatible with my current 
personal crop rotation practices. My current production 
management programs, which reduce pesticide use through 
intelligence rotation, could also be jeopardized.
    Fuel and energy cost increases resulting from the treaty 
could deal farmers an especially heavy blow. The American 
Petroleum Institute estimates that the climate agreement 
proposal could increase prices for gasoline, diesel fuel and 
electricity by 50 percent or more, depending on the emission 
targets which are prescribed.
    Personally, in the last roughly 5 years in my farm 
operation, we have reduced the use of our fuel consumption by 
about two-thirds. We have gone to almost completely no-till. I 
cannot do that anymore. There is no further way that I can go 
unless I can find some other way to pull a corn planter through 
the field. So we have already done that, basically, in 
agriculture.
    Cost estimates by the administration have been lower, but 
the U.S. Department of Commerce has recently agreed that 
capping carbon dioxide emissions at 1990 levels requires the 
equivalent of a 25 cent per gallon gas tax. Fuel cost 
increases, even at those levels, would be a big hardship on 
U.S. farmers. That is why the Farm Bureau fought hard several 
years ago for defeat of the BTU tax. We are concerned that the 
Climate Change Treaty may provide an opportunity to resurrect 
the BTU tax under a different name but with the same results.
    Fuel and energy are major production costs on my farm. We 
use 2,600 gallons of gasoline yearly--and these are approximate 
figures--as well as 3,800 gallons of diesel fuel, and if you 
have a printed copy of my statement, there was an error in the 
zero. We use approximately 17,000 gallons of propane in an 
average year. That covers irrigation, engines, and drying, crop 
drying. Depending on weather conditions, we will also use up to 
$4,000 in electricity for crop drying in the fall.
    Ours is a medium sized family farm, typical of farms in 
Nebraska and the Midwest. A 50 percent or even 25 cent per 
gallon increase in my fuel costs would be a very significant 
cost of production, which could not be passed on in the 
commodities I produce.
    Critics ignore farmers' positive role in reducing 
greenhouse gas emissions. I have already mentioned my own case 
about going no-till and drastically reducing the amount of 
fossil fuel used. According to some scientists, agricultural 
cropland here in the U.S. may be a net ``sink'' for carbon 
dioxide because of the carbon sequestered by plants through 
photosynthesis. Little recognition is given to advances in 
agricultural practices, conservation and energy efficiency by 
farmers, particularly here in the U.S.
    U.S. farmers have significantly improved their efficiency 
and reduced their use of fuel and fertilizer. They have 
dramatically increased their use of conservation practices.
    Last year, 61 percent of U.S. croplands utilized 
conservation tillage or reduced management practices which 
incorporate plant residue and carbon in the soil, reduce trips 
over the land, and conserve fuel.
    Most importantly, agriculture's critics in the climate 
change debate have focused on agriculture's contribution to 
greenhouse gases and overlooked agriculture's most important 
role--feeding and clothing a growing, hungry world. Little, if 
any, consideration has been given to the climate agreement's 
impact on our ability to meet future world demand for food and 
fiber.
    The administration's proposal commits the U.S. and other 
developed countries to specific, legally binding, enforceable 
emissions reductions forcing higher production costs on U.S. 
farmers. It sets no binding requirements for developing 
countries, some of which are our strongest competitors for 
world markets of agricultural commodities. Some of these 
developing countries already have lower labor and production 
costs and would be given a new, major competitive advantage.
    The proposal makes no sense from an environmental or an 
economic standpoint. By the administration's own projections, 
carbon dioxide emission increases from developing countries 
will far outpace those of the United States or other developed 
nations.
    By forcing compliance of developed countries only, we fail 
to invest our efforts where they will achieve the greatest 
emissions reductions. In the process, we place U.S. farmers at 
a competitive disadvantage and make them easy prey in the new 
world of free trade and market oriented farm programs.
    Mr. Chairman, we especially appreciate the leadership 
provided by Senator Byrd and yourself in introducing last week 
Senate Resolution 98, which now has more than, as you said this 
morning, 60 co-sponsors. This resolution will go a long way in 
helping to assure that agriculture and other economic interests 
are considered in full.
    We hope that it is not overlooked as the administration 
proceeds with the agreement.
    The administration should fully explore methods to reduce 
greenhouse gas emissions with the least possible disruption to 
U.S. agriculture. If controls on agriculture are justified, 
they should be accomplished voluntarily.
    Until Farm Bureau and other agricultural groups formally 
expressed our concerns to the administration, there was no 
effort to seek our involvement and input before international 
negotiations. If agriculture is a major contributor to 
greenhouse gas emissions, as the administration claims, then it 
is appropriate that the administration seek a full and open 
debate with agricultural producers, leaders, and organizations. 
These efforts must include agricultural policymakers within the 
House and Senate Committees on Agriculture, the Congress, and 
USDA.
    The administration must not accept the final agreement 
without a full and open public debate which includes 
agriculture and minimizes the negative impact on agricultural 
producers.
    We thank you for this opportunity to present our concerns.
    Thank you, Senator Hagel.
    [The prepared statement of Mr. Neidig follows:]
                   Prepared Statement of Bryce Neidig
    Thank you. Mr. Chairman, my name is Bruce Neidig. I am a farmer and 
President of the Nebraska Farm Bureau Federation and a member of the 
board of directors of the American Farm Bureau Federation which I 
represent today.
    My family owns and I operate, with my son, a 600-acre corn, soybean 
and alfalfa farm in northeastern Nebraska near the town of Madison. I 
am very concerned that the international agreement on climate change 
will hurt my farm operation and others like it across the nation.
Climate change policy is controversial--drastic action proposed by the 
        administration is not justified
    I appreciate this opportunity to discuss a subject that practically 
every farmer is an expert on the weather. Those farmers that aren't 
experts complain about it. It rains too much or too little, it's too 
cold or too hot or frost threatens the harvest. We're interested in the 
weather because our livelihood depends on it.
    Farmers are interested in climate change for the same reason. We 
are willing to consider scientific evidence that human activities, 
including our own, may lead to increased concentrations of greenhouse 
gases, higher global temperatures and extreme weather events.
    Farmers who are aware of the climate change treaty are also 
concerned about controls which may be imposed on the farm to reduce 
greenhouse gas emissions. They're concerned about higher costs for 
fuel, energy, vehicles and equipment. They're concerned about new, 
burdensome regulations. They're concerned about threats to their 
competitiveness in world markets to where they now must export about 
one third of the crops they grow.
    Some farmers are aware that in the last decade or so, there has 
been considerable discussion by some scientists that greenhouse gases 
(carbon dioxide, methane and nitrous oxide) are contributing to 
increases in average global temperatures that could cause adverse 
changes in the world's climate. We know there is some data to show 
increases in greenhouse gases but believe there is still a legitimate 
debate about the magnitude of those changes, their significance and the 
relative contribution of natural versus human causes, including 
agricultural production.
    Many farmers who have followed this important issue believe that 
the Administration is acting, hastily and prematurely in leading 
international efforts for immediate legally binding and enforceable 
caps on greenhouse gas emissions. We don't know enough about the 
problem or if we have a problem. We don't know about agriculture's 
contribution to the problem or even to the solution. We don't know what 
practices or programs farmers are likely to encounter as a result of an 
international agreement. To put it simply, most farmers familiar with 
the climate treaty are less concerned with the illness than they are 
with the cure that's being prescribed for them.
The administration's proposal will restrict farming practices, disrupt 
        livestock and crop production and increase farm energy costs
    Farmers like to think of themselves as good guys, but we're being 
portrayed as villains when it comes to greenhouse gases. International 
and U.S. regulators tell us we are contributors to human-caused 
greenhouse gas emissions. Cattle and sheep produce methane. Crop 
tillage produces both methane and carbon dioxide. Nitrous oxide comes 
from fertilizer and the burning of crop residue.
    The regulators tell us that we're more than contributors, we're 
major contributors. According to the United Nations Intergovernmental 
Panel on Climate Change, one-fourth of the world's greenhouse gases 
come from agricultural activity. Our own Environmental Protection 
Agency blames agriculture for more than 40 percent of total methane 
emissions and 90 percent of the nitrous oxide generated from human 
activity in the U.S.
    Lead by our own Administration, international negotiators are 
pressing for strict, binding limits on these emissions. If such limits 
are adopted, the U.S. will be forced to consider drastic policies to 
meet those legally enforceable reductions. New taxes on fuel and 
fertilizer, forced mileage requirements for light trucks and other 
motor vehicles, controls on planting, cultivation and harvesting 
practices and limits on the number of livestock per acre have all been 
proposed and may become regulatory policy here in the U.S.
    Farms like mine could be severely disrupted. Restrictions on 
planting, cultivation and harvesting would interfere with my farm 
management plans which are designed to reduce my production costs, 
maximize yields and conserve my farmland. For example, prescriptive 
crop practices to reduce greenhouse gas emissions may not be compatible 
with my current crop rotation practices. My integrated pest management 
programs, which reduce pesticide use through the tillage and crop 
rotation, could also be jeopardized.
    Fuel and energy and cost increases resulting from the treaty could 
deal farmers an especially heavy blow. The American Petroleum Institute 
estimates that the climate agreement could increase prices for 
gasoline, diesel fuel and electricity by 50 per cent or more, depending 
on the emission targets which are prescribed. Cost estimates by the 
Administration have been lower, but the U.S. Commerce Department 
recently agreed that capping carbon dioxide emissions at 1990 levels 
requires the equivalent of a 25 cent gas tax. Fuel cost increases, even 
at these levels, would be a big hardship to U.S. farmers. That's why 
Farm Bureau fought hard several years ago for defeat of the B.T.U. tax. 
We're concerned that the Climate Change Treaty may provide an 
opportunity to resurrect the B.T.U. tax under a different name, but 
with the same results. You might say that its a back-door B.T.U. tax.
    Fuel and energy are major production costs on my farm. We use 2,600 
gallons of gasoline, 3,800 gallons of diesel and 1,700 gallons of 
propane in an average year. Depending on weather conditions, we also 
will use up to $4,000 in electricity for crop drying in the fall. Ours 
is a medium-sized, family farm typical of farms in Nebraska and the 
Midwest. A 50 percent or even 25 cents per gallon increase in my fuel 
cost would be a very significant new cost of production which could not 
be passed on in the commodities I produce.
Agriculture's positive contribution in controlling emissions is not 
        being considered
    Our critics ignore farmers' positive role in reducing greenhouse 
gas emissions. According to some scientists, agricultural cropland here 
in the U.S. may be a net ``sink'' for carbon dioxide because of the 
carbon sequestered by plants through photosynthesis. Little recognition 
is given to advances in agricultural practices, conservation and energy 
efficiency by farmers, particularly here in the U.S.
    U.S. farmers have significantly improved their efficiency and 
reduced their use of fuel and fertilizer. They have dramatically 
increased their use of conservation practices. Last year 61 percent of 
U.S. croplands utilized conservation tillage or residue management 
practices which incorporate plant residue and carbon in the soil, 
reduce trips over the land and conserve fuel.
    Most important, agriculture's critics in the climate change debate 
have focused on agriculture's contribution to greenhouse gases and 
overlooked agriculture's most important role--feeding, and clothing a 
growing, hungry world. Little, if any consideration has been given to 
the climate agreement's impact on our ability to meet future world 
demand for food and fiber.
The administration's proposal would disadvantage U.S. agricultural 
        producers in world trade.
    The Administration proposal commits the U.S. and other developed 
countries to specific, legally binding, and enforceable emission 
reductions, forcing higher production costs on U.S. farmers. It sets no 
binding requirements for developing countries, some of which are our 
strongest competitors for world markets of agricultural commodities. 
Countries exempt from controls include China, South Korea, Chile and 
Argentina. Some of these developing countries already have lower labor 
and production costs and would be given a new, major competitive 
advantage.
    The proposal makes no sense from an environmental or an economic 
standpoint. By the Administration's own projections, carbon dioxide 
emission increases from developing, countries will far out pace those 
of the United States or other developed nations. By forcing compliance 
of developed countries only, we fail to invest our efforts where they 
will achieve the greatest emissions reductions. In the process, we 
place U.S. farmers at a competitive disadvantage and make them easy 
prey in the new world of free trade and market-oriented farm programs.
Agricultural's concerns have been strongly expressed to the 
        administration, with negligible results
    Last November Farm Bureau and 17 other national farm organizations 
expressed strong concerns to President Clinton relating to the climate 
change agreement and its impact on agriculture. Although we have 
received assurances from the Administration that the agreement will 
provide maximum flexibility and opportunity for U.S. farmers, the 
Administration's response does not reduce our concern.
    We are greatly appreciative of the efforts of the Senate 
Agriculture and Natural Resources Committee in reinforcing our 
concerns. This March, Chairman Lugar and a bipartisan group of 13 
members of his committee requested an analysis by the Administration of 
the following: the potential effect of climate change on agriculture; 
estimated emissions and sequestration of greenhouse gasses by U.S. 
agriculture; actions or controls likely to be implemented; and the 
resulting economic impact on U.S. farmers and ranchers.
    Although the Administration has not yet provided this information 
to us, it is essential that it become available soon, in advance of 
August treaty negotiations in Bonn and the final agreement scheduled 
this December for Kyoto.
    Mr. Chairman, we especially appreciate the leadership provided by 
Senator Byrd and yourself in introducing last week Senate Resolution 
98, which now has more than 50 co-sponsors. This resolution will go a 
long way in helping to assure that agriculture and other economic 
interests are considered in full. We hope that it is not overlooked as 
the Administration proceeds with the agreement.
    In addition to information and analysis requested by the Senate 
Agriculture Committee and S.R. 98, Farm Bureau supports the following 
administrative or legislative action relating to the climate agreement. 
Also supporting these actions are 17 other farm organizations which 
cosigned this request to President Clinton and the Administration.
The administration should withdraw support for legally binding and 
        enforceable caps on greenhouse gases
    The Administration should fully explore methods to reduce 
greenhouse gas emissions with the least possible disruption to U.S. 
agriculture. If controls on agriculture are justified, they should be 
accomplished voluntarily.
There must be a full and informed public debate which involves 
        agriculture and agricultural policy makers
    Until Farm Bureau and other agricultural groups formally expressed 
our concerns to the administration, there was no effort to seek our 
involvement and input before international negotiations. If agriculture 
is a major contributor to greenhouse gas emissions, as the 
Administration claims, then it is appropriate that the Administration 
seek a full and open debate with agricultural producers, leaders and 
organizations. These efforts must include agricultural policy makers 
within House and Senate committees on agriculture, the Congress and 
USDA.
The final climate change agreement scheduled for completion this 
        December in Kyoto, Japan should be delayed
    The Administration must not accept a final agreement without a full 
and open public debate which includes agriculture and minimizes the 
negative impact on agricultural producers.
    Thank you for this opportunity to present agriculture's concerns 
with the climate chance agreement.

    [See appendix for additional material submitted by Mr. 
Neidig.]
    Senator Hagel. Mr. Neidig, thank you very much. Mr. Fay.

 STATEMENT OF KEVIN J. FAY, EXECUTIVE DIRECTOR, INTERNATIONAL 
        CLIMATE CHANGE PARTNERSHIP, ARLINGTON, VIRGINIA

    Mr. Fay. Thank you, Mr. Chairman.
    My name is Kevin Fay. I serve as the Executive Director of 
the International Climate Change Partnership. We are a 
coalition of U.S. industry representatives and associations as 
well as international associations interested in the policy 
development process with respect to global climate change. We 
appreciate the opportunity to be here this morning.
    ICCP continues to recognize the climate change issue as an 
important matter with which government should be concerned. 
However, it is a very long-term issue and extraordinarily 
complex, both in its underlying science and its entanglement 
with the very foundations of the global economic structure.
    We have just recently communicated our views on the issues 
in the Kyoto negotiations to the administration. I am attaching 
this correspondence to my testimony and ask that it be included 
in the record.
    We have also communicated to the President on the issue of 
the administration's as yet unreleased economic analysis, 
expressing our frustration at their lack of communication on 
the matters of greatest concern to the private sector, namely, 
the potential economic impacts of a climate change agreement 
and the current thinking of future implementation scenarios. 
This letter is also attached and we ask that it be included for 
the record.
    Our views have been based on the premise that the only 
agreement that is acceptable is one that is comprehensive and 
can work with flexibility, maintain national sovereignty, 
ensure participation by all countries, maintain a competitive, 
level playing field, and is guided by effective science and 
includes a long-term objective that will guide future policy-
makers as well as future negotiators.
    This agreement must continue to balance our need for 
economic growth and to attain the desired environmental 
progress.
    You will note that in both letters, we urge the President 
and the State Department to use the opportunities of the 
upcoming G-8 meeting and the United Nations General Assembly 
Special Session on the Environment to reiterate to our 
negotiating partners that the U.S. policy framework enunciated 
last July is the only framework that can provide a climate 
change agreement that is both environmentally beneficial and 
economically feasible.
    Since prior to the first meeting of the parties in Berlin, 
we have consistently argued that the time is not yet right for 
a climate change agreement. Unfortunately, the parties 
established an artificial deadline under the Berlin Mandate to 
reach an agreement at COP-3, now scheduled to be held in 
December of this year at Kyoto.
    In our view, the administration did make progress in its 
own deliberations and offered a thoughtful policy framework at 
COP-2, which we have heard about here today. This policy 
outline includes a comprehensive approach, identification of a 
long-term objective, identification of the developing country 
role under the treaty, implementation flexibility through 
emissions trading, banking, and joint implementation; and 
avoidance of a laundry list of so-called ``policies and 
measures.''
    The U.S. framework also included a call for a binding 
commitment which the administration has subsequently defined as 
an emissions budget period of undetermined length to achieve 
reductions of an undetermined size. While most of the attention 
has been focused on this part of the discussions, we continue 
to believe that it is not the only key to a successful treaty 
agreement in Kyoto or after Kyoto.
    We should point out at this time, however, that we have 
been provided with no analysis to justify any particular target 
or timetable that might be advocated.
    Our primary concern has been that the result of the 
negotiations would focus on only one or two of these key 
issues, some of which we have outlined in our letter, and that 
the rest would be left until later. This would be unacceptable 
to us. The worst result would be for the administration to 
agree to some target and not achieve the entire policy 
framework it has advocated.
    We have heard testimony today on the Byrd-Hagel Resolution, 
and we commend the Senators, including you, Mr. Chairman, for 
raising the important issue of requiring an agreement that 
includes developing country commitments. We believe very 
strongly in this principle. We have concerns, however, that 
just as some have focused only on identifying a target or 
timetable as an acceptable Kyoto outcome, others may focus on 
only one or another of the remainder of these key issues we 
have identified.
    An agreement on a target and timetable in Kyoto and nothing 
else would be unacceptable to the ICCP. An agreement in Kyoto 
on a target and timetable, including a developing country 
schedule but with none of the flexibility or other provisions 
as articulated last year by the administration, would be just 
as unacceptable.
    To date, we have been disappointed in the progress on most 
of these fronts. We are pessimistic on the ability to 
successfully resolve them between now and Kyoto absent strong 
signals by the White House to reinvigorate the climate change 
negotiations.
    ICCP is not and never has been interested in an agreement 
at the Kyoto meeting just for the sake of reaching an 
agreement. This view will not change.
    With respect to the economic issues and the impacts of a 
climate change agreement on the U.S. economy, jobs, and the 
environment, we remain very concerned. It is difficult to 
address this issue in any effective way given the lack of 
dialog on these topics and the lack of information being 
provided by the administration.
    We do know that the economic analysis that has been 
performed not only by the administration but by several others, 
tells us several important things--that there are costs 
involved in reducing greenhouse gas emissions; that the costs 
are likely to be reduced if the flexibility provisions that 
have been proposed are incorporated; that you cannot achieve 
any reasonable goals, either environmentally or economically, 
without developing country participation; and, last, that the 
costs are less if you avoid premature capital retirement or 
turnover and provide industry the opportunity to manage our way 
into the technological innovation that will be necessary to 
accomplish whatever long-term goals established by the parties 
to the convention.
    It is difficult to know how the costs compare to the 
benefits because we also have yet to see any analysis that 
includes the benefits of mitigating climate change or 
facilitating adaptation strategies.
    In order for there to be an effective treaty, we believe 
that the parties must first get the treaty structure correct. 
We have a long way to go before that will happen.
    Our companies have determined that the current state of 
scientific understanding requires a prudent, long-term approach 
to address this issue. This view is equally applicable to the 
negotiations themselves.
    We cannot support a treaty at any cost, nor can we support 
a treaty that is incomplete. In your monitoring of the progress 
of the negotiations and your consideration of its outcome, we 
urge you to use our list of key issues as a checklist of the 
administration's effort in this regard.
    We appreciate the opportunity to appear before you today 
and look forward to answering your questions.
    Thank you.
    [The prepared statement and attachments of Mr. Fay follow:]
                   Prepared Statement of Kevin J. Fay
    Good Morning, Mr. Chairman and members of the Committee. My name is 
Kevin Fay; and I serve as the Executive Director of the International 
Climate Change Partnership (ICCP), a coalition of U.S. industry 
representatives and associations, as well as international 
associations, interested in the policy development process with respect 
to global climate change. We appreciate the opportunity to appear 
before the Subcommittee today on the subject of a global climate change 
convention.
    ICCP was organized in 1991 to provide a forum to address the issue 
of global climate change and to be a constructive participant in the 
policy debate. Six months before the Third Conference of Parties 
meeting in Kyoto, the issue has certainly raised the interest of many 
of us in the private sector and the Congress.
    ICCP continues to recognize the climate change issue as an 
important matter with which governments should be concerned. However, 
it is a very long-term issue and extraordinarily complex in both its 
underlying science and its entanglement with the very foundations of 
the global economic structure.
    We have just recently communicated our views on the key issues in 
the Kyoto negotiations to the Administration. I am attaching this 
correspondence to my testimony and ask that it be included in the 
record. We have also communicated to the President on the issue of the 
Administration's as yet unreleased economic analysis, expressing our 
frustration at their lack of communication on the matters of greatest 
concern to the private sector--namely the potential economic impacts of 
a climate change agreement and the current thinking of future 
implementation scenarios. This letter is also attached.
    Our views have been based on the premise that the only agreement 
that is acceptable is one that is comprehensive and can work with 
flexibility, maintain national sovereignty, ensure participation by all 
countries, maintain a competitive level playing field, and is guided by 
effective science and includes a long-term objective that will guide 
future policymakers and future negotiators.
    You will note that in both letters, we urge the President and the 
State Department to use the opportunities of the upcoming G-8 meeting 
and the United Nations General Assembly special session on the 
environment to reiterate to our negotiating partners that the U.S. 
policy framework enunciated last July is the only framework that can 
provide a climate change agreement that is both environmentally 
beneficial and economically feasible.
    Since prior to the first meeting of the parties in Berlin, we have 
consistently argued that the time is not yet right for a climate change 
agreement. Unfortunately, the parties established an artificial 
deadline under the Berlin mandate to reach an agreement at COP-3, now 
scheduled to be held in December of this year.
    In our view the Administration made progress in its own 
deliberations and offered a thoughtful policy framework at COP-2 which 
we have heard about here today. This policy outline includes a 
comprehensive approach; identification of a long-term objective; 
identification of a developing country role under the treaty; 
implementation flexibility through emissions trading, banking, and 
joint implementation; and avoidance of a laundry list of so-called 
``policies & measures.''
    The U.S. framework also included a call for a binding continent, 
which the Administration has subsequently defined as an emissions 
budget period of undetermined length to achieve reductions of an 
undetermined size. While most of the attention has been focused on this 
part of the discussions, we continue to believe that it is not the only 
key to a successful treaty agreement in Kyoto or beyond Kyoto.I11We 
should point out at this time, however, that we have been provided with 
no analysis to justify any particular target or timetable that might be 
advocated.
    Our primary concern has been that the result of the negotiations 
would focus on only one or two of the key issues, some of which we have 
outlined in our letter, and that the rest would be left until later. 
This would be unacceptable to us. This worst result would be for the 
Administration to agree to some target and not achieve the entire 
policy framework it has advocated.
    We have heard testimony today on the Byrd-Hagel Resolution, and we 
commend the Senators for raising the important issue of requiring an 
agreement that includes developing country commitments. We believe very 
strongly in this principle. We have concerns, however, that just as 
some have focused only on identifying a target or timetable as an 
acceptable Kyoto outcome, others may focus on only one or another of 
the remainder of these key issues we have identified.
    An agreement on a target and timetable in Kyoto, and nothing else, 
would be unacceptable to the ICCP. An agreement in Kyoto on a target 
and timetable, including a developing country schedule, but with none 
of the flexibility or other provisions as articulated last year by the 
Administration, would be just as unacceptable.
    To date, we have been disappointed in the progress on most of these 
fronts and we are pessimistic on the ability to achieve them between 
now and Kyoto absent strong signals by the White House to reinvigorate 
the negotiations. ICCP is not and never has been interested in an 
agreement at the Kyoto meeting just for the sake of reaching an 
agreement. This view will not change.
    With respect to the economic issues and the impacts of a climate 
change agreement on the U.S. economy, jobs, and the environment we 
remain very concerned. It is difficult to address this issue in any 
effective way given the lack of dialogue on these topics and the lack 
of information being provided by the Administration. We know that the 
economic analysis that has been performed tells us several important 
things:

   that there are costs involved in reducing greenhouse gas 
        emissions;
   the costs are likely to be reduced if flexibility provisions 
        are incorporated;
   that you cannot achieve any reasonable goals either 
        environmentally or economically without developing country 
        participation; and
   the costs are less if you avoid premature capital retirement 
        or turnover, and provide industry the opportunity to manage 
        their way into the technological innovation that will be 
        necessary to accomplish whatever long-term goal is established 
        by the parties to the convention.

    It is difficult to know how the costs compare to the benefits 
because we have yet to see any analysis that includes the benefits of 
mitigating climate change or facilitating adaptation strategies.
    In order for there to be an effective treaty, we believe that the 
parties must first get the treaty structure correct. We have a long way 
to go before that will happen.
    Our companies have determined that the current state of scientific 
understanding requires a prudent long-term approach to address this 
issue. This view is equally applicable to the negotiations themselves.
    We appreciate the opportunity to appear before you today, and we 
look forward to answering your questions.
                               __________
                  International Climate Change Partnership,
                                                      June 6, 1997.
President William Clinton
The White House,
Washington, D.C. 20500

    Dear Mr. President: On behalf of the International Climate Change 
Partnership, I am writing to express our concern for the status of the 
economic analysis for purposes of the international negotiations on 
climate change and the apparent lack of progress in making the economic 
issues an integral part of these negotiations. The ICCP is a coalition 
of companies and industries around the world committed to responsible 
participation in the climate change policy process.

    ICCP continues to recognize the climate change issue as an 
important issue with which governments should be concerned. However, it 
is a very long-term issue and extraordinarily complex in both its 
underlying science and in its entanglement with the very foundations of 
the global economic structure. ICCP commended the U.S. position 
enunciated in its statement in July of last year as a reasonable 
framework, and was particularly supportive of its efforts to give the 
negotiations greater focus on the long-term character of the issue and 
its economic implications.

    It is disturbing to us that, for nearly one year, there has been 
little public discussion of the economic impacts of the range of 
proposed climate change mitigation strategies by any of the parties, 
including the United States.

    The Administration had promised the results of its economic 
analysis to the Congress, its negotiating partners, the private sector 
and the nongovernmental organizations. While we applaud the recognition 
of the need to peer review this work, the slow pace at which this 
activity is occurring raises concerns that it is either not being 
seriously pursued, or that the results are not being shared. Neither of 
these reasons, if true, bodes well for constructive private sector 
support of the Administration's efforts or for any result produced from 
the Third Conference of Parties meeting to be held later this year in 
Kyoto.

    This matter is further complicated by the recent resignation of 
Under Secretary of Commerce Ehrlich, who was coordinating the 
analytical effort. His departure suggests a possible further loss of 
momentum on this important effort at a critical time.

    Those who may be able to provide constructive input into the 
analysis and assessment being pursued by the Administration wonder what 
must be done to understand how specific industry sectors are being 
examined and what steps are being contemplated in order to pursue your 
climate protection goals. At a minimum, the Administration should be 
able to immediately publish the policy assumptions being used for 
individual sectors.

    In addition, aside from frequent references to implementation of 
flexible, market-based approaches, there has been little discussion of 
what may be suggested as implementation steps for a Kyoto agreement. 
Failure to discuss some of these issues in advance will likely make it 
difficult to build support for ratification of the international 
agreement and for development of implementing legislation.

    We respectfully urge you, the Administration, to provide an outline 
of the economic information and policy considerations, as well as a 
meaningful time frame for the release of this information. Finally, we 
understand that you are preparing to attend the meetings of the G-7 and 
the United Nations General Assembly Special Session on the Environment. 
We urge you to reiterate the United States' support for these key 
economic issues as critical elements of any future agreement on climate 
change. It is only with these key policy provisions that we will have a 
climate change agreement that is both environmentally beneficial and 
economically feasible.

            Sincerely,
                                              Kevin J. Fay,
                                                Executive Director.

                               __________

                  International Climate Change Partnership,
                                                      June 6, 1997.
The Honorable Timothy Wirth
Under Secretary of State for Global Affairs,
Department of State,
Washington, DC 20520.

    Dear Mr. Wirth: You have requested our views on specific issues 
under consideration as part of the negotiations on implementation of 
the Berlin Mandate for a possible protocol or other legal instrument to 
the Framework Convention on Climate Change. We are pleased to provide 
these comments on specific issues of concern to the members of the 
International Climate Change Partnership (ICCP) with respect to the 
treaty negotiations. We are also writing, however, to express our 
concern with the current lack of focus to the negotiations or linkage 
of these issues with the important relationship between the 
international treaty and domestic implementation schemes.

    ICCP continues to recognize the climate change issue as an 
important matter with which governments should be concerned. However, 
it is a very long-term issue and extraordinarily complex in both its 
underlying science and its inextricable entanglement with the very 
foundations of the global economic structure. We are concerned that 
this complexity is exposing an overly ambitious timeframe for current 
negotiations and that the cohesive activity necessary to ensure a 
viable foundation for future action under this important treaty simply 
has not come to be. It is equally disturbing that there has been little 
public discussion of the economic impacts of the range of climate 
change mitigation by any of the parties, including the United States.

    ICCP commended the U.S. position enunciated in its statement in 
July of last year as a reasonable framework, and was particularly 
supportive of its efforts to force into the negotiations greater focus 
on the long-term character of the issue and its economic implications. 
However, we have made clear that our support is for the entire 
framework, and not for individual components. Some have misconstrued 
this position as support for early targets and timetables. It would be 
incorrect to read our position as such. While ICCP members have 
recognized the possibility that negotiators would agree on a mid-term 
emissions target, we could not specifically support such a target given 
the current lack of understanding of the implications of such a target 
or how it would be implemented.

    In our view, the issue of a binding target is not the most critical 
element of the negotiation. We view it more important to provide 
definition to the treaty structure through a long-term objective and a 
mechanism to ensure that all parties, developed and developing, have 
clearly defined roles before we enter into a binding commitment period. 
It is also important that the parties are able to achieve these goals 
with flexibility through emissions trading, banking, and true joint 
implementation. We appreciate that the U.S. has recognized this need 
for flexibility.

    It is of great concern to us that little progress appears to have 
been made on many of these issues concerning flexibility and the role 
of developing countries. While the U.S. has elaborated its views on 
these positions in subsequent statements and its protocol draft, we 
have detected little movement by the other parties on these issues. 
Since we are not privy to your bilateral discussions or the behind the 
scenes meetings, it is difficult for us to determine the current status 
of these topics.

    It is not acceptable to us for the negotiations to conclude in 
December with an agreement on a binding commitment towards a mid-term 
target with all details on other key provisions to be negotiated later.

    As you recall, we have consistently expressed our view that 1997 is 
too soon for a credible technical assessment process which would 
support an agreement by the parties on these issues. The apparent lack 
of progress to date, the dearth of information available to us 
regarding how these issues may be resolved, and the failure to 
thoroughly discuss the economic implications for an agreement, have 
only served to confirm this view.

    We have pledged to work responsibly with the United States and 
other parties on the development of an effective framework to address 
the climate change issue consistent with the need for all nations to 
sustain economic growth. We remain committed to this principle. It is 
not clear, however, that these issues can be resolved satisfactorily by 
the Kyoto meeting. ICCP will, of course, reserve any judgment on the 
results of Kyoto for the implementation process.

    We urge the United States to remain focused on and committed to 
delivering concrete results on all the points outlined in the statement 
delivered last July and elaborated on in its subsequent submittals. 
Further, we believe that the U.S. should indicate its commitment to its 
proposed climate change policy structure at the upcoming meetings of 
the G-7 and the United Nations General Assembly Special Session on the 
Environment.

    Concurrently, we believe the economic impacts of a possible 
agreement should be communicated with industry and other policymakers 
so we can have an effective dialogue. Failure to discuss some of these 
issues in advance will make it extremely difficult to build support for 
ratification and implementation of the international agreement.

    We look forward to working with you and appreciate the opportunity 
to discuss the specific views on the attached position paper in the 
very near future.

            Sincerely,
                                              Kevin J. Fay,
                                                Executive Director.

Enclosure
cc:  The Honorable Madeleine Albright
    Secretary, Department of State

    The Honorable William Daley
    Secretary, Department of Commerce

    The Honorable Federico Pena,
    Secretary, Department of Energy

    Honorable Rodney Slater,
    Secretary, Department of Transportation

    The Honorable Carol Browner
    Administrator, Environmental Protection Agency
    The Honorable Frank Murkowski
    The Honorable Dale Bumpers
    The Honorable John Chafee
    The Honorable Max Baucus
    The Honorable Thomas Bliley
    The Honorable John Dingell
    The Honorable Dan Shaefer
    The Honorable Ralph Hall
                               __________
                International Climate Change Partnership
                                Views on
         Key Issues in the Climate Change Protocol Negotiations
                        (In Alphabetical Order)
Developing Country Role
    The United States has outlined a specific proposal for dealing with 
the developing country role as part of the Kyoto agreement, including 
definition of obligations under Article 4.1 of the Framework 
Convention, establishment of an Annex B of countries which would 
voluntarily adopt emissions budgets, and a date certain by which all 
parties would have emissions budgets.

    As stated by Bert Bolin, Chairman of the Intergovernmental Panel on 
Climate Change (IPCC) at the March 1997 meeting of the Subsidiary Body 
on Science and Technological Advice (SBSTA) in Bonn, ``[I]t is obvious 
from this graph that no reasonable future reductions by Annex I 
countries would stabilize global emissions.'' Therefore, it is 
imperative that developing countries be part of this agreement. 
Furthermore, as stated in the Administration's recent economic work, a 
significant percentage of infrastructure and industry investment by 
developed countries is occurring in developing countries. Finally, 
because of the strong linkages between population growth and greenhouse 
gas emissions, it is important that we recognize that seven of the 
current non-Annex I countries represent two-thirds of the world's 
population.

    The Administration has been forthright in its insistence that the 
developing country role be defined. ICCP recognizes the potential 
limits of the current Berlin Mandate with respect to new commitments 
for non-Annex I Parties. It is clear, however, that the Berlin Mandate 
contemplates definition and elaboration of Article 4.1 commitments for 
all Parties, including the developing countries.

    Additionally, it is imperative that additional developing country 
participation, including emission budgets, must be defined prior to the 
start of the first binding budget period for the current Annex I 
parties. It is only through such definition that governments and the 
private sector can ensure that investment flows are not distorted.

Entry into Force
    ICCP has noted that six countries, including India and China, 
currently account for 55% of greenhouse gas emissions. In order for the 
treaty to enter into force, it is imperative that a significant 
percentage of greenhouse gas emissions be represented by ratifying 
countries. In addition, a significant percentage of Annex I countries 
and developing countries should ratify the treaty before it enters into 
force.

    We also believe that it is inappropriate for a regional economic 
organization to be allowed to represent both itself and the voting 
rights of its individual members. The EU has argued that it should be 
allowed to bubble its emissions and is proposing to allocate emissions 
internally. It is unfair that the EU be granted this concession to 
bubble its emissions when it declines to support similar flexibility 
for other Parties. Therefore, the EU should have to decide to either 
bubble and count as one vote, or to not bubble and to be counted 
individually.

Greenhouse Gas Comprehensive Approach
    The protocol negotiations should continue to focus on a 
comprehensive approach at the international level. Recent proposals 
from the European Union suggested a protocol on only three gases--
carbon dioxide, methane, and nitrous oxide--with the notation that 
fluorocarbon compounds should be covered by policies and measures and 
added to the basket in the year 2000. ICCP strongly opposes the EU 
approach. The gases that can be measured should be covered 
simultaneously in a comprehensive manner. The key to a comprehensive 
approach is for Parties to focus on achieving the most efficient 
emission reductions possible; and therefore, it is unproductive to 
segregate gases from coverage until a later date or to treat gases 
differently in an international agreement

Long-Term Objective
    ICCP has urged the negotiators to provide for a long-term focus or 
objective. We believe such an objective provides clarity to 
negotiators, as well as to those charged with implementation of 
commitments. It is our understanding that the United States has 
performed some analysis of this issue, and that such analysis could be 
useful to the negotiators currently. Furthermore, we applaud the 
article in the U.S. protocol proposals which contemplates a long-term 
objective.

    This objective will be an important guide to future decision 
making, including private sector investment planning. We note that 
several participants, including the EU, and certain environmental 
organizations have suggested certain objectives characterized as 
atmospheric concentrations of greenhouse gases, and that the IPCC 
documents present their analysis according to atmospheric loading, of 
greenhouse gases measured in parts per million (ppm) of CO2 
equivalent.

    ICCP has not advocated a greenhouse gas concentration as the 
appropriate measure for the long term objective. A long-term objective 
could be defined as a combination of adaptation, impacts, and 
concentration measures.

    Recent analysis of the economics of climate change controls have 
indicated that the long-term objective is not as relevant as the path 
charted for the emission reduction. In our view, it is impossible to 
develop a meaningful path without knowing the point of departure and 
the intended goal.

    We recognize that the current state of science does not provide a 
precise ``correct'' answer. Science does provide a basis for making an 
informed political judgment on the objective, and scientific assessment 
through the IPCC and elsewhere is critical to future reassessment of 
any potential long-term objective.

Policies and Measures
    It is imperative that each nation maintains maximum national 
flexibility with respect to implementation of its climate commitments. 
It is neither appropriate nor productive for the negotiators to 
determine the manner in which each country should achieve its 
commitments. ICCP is opposed to any listing of specific annexes of 
policies and measures in any manner, i.e., mandatory, regional 
coordination, voluntary, or exemplary.

Target/Budget/Accountability Period
    There have been several proposals for specific point targets and/or 
budget periods as part of the protocol proposals that are currently 
before the Parties. ICCP has not endorsed the notion of a binding 
``target.'' We do, however, recognize that all of the government 
proposals to be considered in Kyoto do contemplate such a step as a 
starting point.

    The lesson from the non-binding commitment of the 1992 FCCC 
agreement is that, despite the best of intentions, a specific point 
target is very difficult to administer due to fluctuations in economic 
conditions, weather conditions, etc. Therefore, we believe it is 
imperative that the long-term objectives be utilized to examine a 
reasonable path that minimizes short-term economic disruption and 
stimulates the longer-term technological innovation necessary to 
significantly reduce worldwide greenhouse gas emissions.

    The U.S. has indicated a preference for an emissions budget period 
and a binding commitment to achieve that budget. In our view, the 
practical timetable for ratification and implementation of a Kyoto 
climate agreement, including subsequent definition of a developing 
country role, suggests that meaningful program implementation steps 
could not be up and running with confidence any time soon after a Kyoto 
agreement. There has been a great deal of focus on the beginning, of 
such a so-called budget period.

    In our view, the beginning of the budget period is not as important 
as the end of the budget period, i.e., the point at which the principle 
of ``binding commitment'' actually has the potential to impose penalty 
or sanction. In light of the uncertainties stated above, ratification, 
implementation, developing country role, and some level of experience 
with the implementation process, we believe that it would be 
inappropriate to end the first binding budget period before the year 
2020. This time frame will allow industry to develop its programs, and 
gain confidence in their performance.

    ICCP also believes this time frame is consistent with its previous 
position that policies at the outset of this effort must take into 
account a reasonable period for capital stock turnover. This will 
provide a period for industry to ``ramp up'' its climate change 
responses.

    If the budget period is to be adopted, we believe that it should be 
long enough to encompass weather and economic cycles, but not so long 
as to present an impossible horizon to provide both industry and 
policymakers with some certainty. Therefore, it appears that a 10-year 
budget period is better than a 3 or 5-year period.

Technology Assessment
    Although not specifically included as part of the current protocol 
proposals, ICCP continues to believe that the FCCC must be grounded in 
sound scientific and technological assessment processes. This function, 
as currently served primarily through the Intergovernmental Panel on 
Climate Change (IPCC), is inadequate.

    The IPCC is currently considering restructuring proposals including 
the adoption of working group outlines that incorporate an effective 
role for private sector expert participation. We encourage support for 
these proposals.

    Finally, it is also important that we de-politicize the IPCC 
process to the maximum extent possible. Its credibility can be 
sustained only if it is truly seen to be the work of scientific and 
technical experts, and not subject to the whims of the diplomatic and 
political process or other special interests.

Trading, Banking, and Joint Implementation (JI)
    Most available economic analysis continues to indicate that 
flexibility through emissions trading, banking of emission credits, and 
joint implementation policies can help to maximize greenhouse gas 
emission reductions most cost-effectively. ICCP is fully supportive of 
such mechanisms as part of any agreement in Kyoto and beyond.

    We believe it to be imperative that such principles be included in 
the first agreement and not be left to some future negotiations. We 
also believe it is important that these provisions not be relegated to 
some pilot project with final decisions to be made at some future date.

    Finally, it appears that flexibility is a positive inducement to 
ensure maximum compliance. It also would allow us to avoid the use of 
trade restrictions or trade sanctions as an enforcement mechanism in 
the treaty.
                               __________
 ICCP Urges Administration To Insist on Full Climate Policy Framework 
                    and Engage in Economic Dialogue
June 19, 1997, Arlington, Virginia.--The International Climate Change 
Partnership (ICCP) today urged the Clinton Administration to toughen 
its support for its climate policy framework and to release its long-
promised economic and policy analysis. In testimony before the Senate 
Foreign Relations Subcommittee on International Economic Policy, Export 
and Trade Promotion, ICCP Executive Director Kevin Fay requested the 
that Senators urge the President to use the opportunities of the 
upcoming G-8 meeting and the United Nations General Assembly special 
session on the environment to reiterate support for the US climate 
policy framework as ``the only framework that can provide a climate 
change agreement that is both environmentally beneficial and 
economically feasible.''

    ICCP urged the Senators to consider a list of key issues in the 
negotiation and the full outline of the Administration's proposals. 
These include:

   utilizing a comprehensive approach;
   establishment of a long-term objective;
   identification of a role for all parties, developed and 
        developing;
   utilization of market-oriented measures such as emissions 
        trading, banking, borrowing and joint implementation;
   maintaining national sovereignty and avoiding a laundry list 
        of so-called ``policies and measures'' such as taxes.

    ``Our primary concern has been that the result of the negotiations 
would focus on only one or two of the key issues, such as a target,'' 
said Fay, ``and that the rest would be left until later. This would be 
unacceptable to us. This worst result would be for the Administration 
to agree to some target and not achieve the entire policy framework it 
has advocated.'' He urged the Senators to use the list of key issues as 
a checklist during consideration of any treaty agreement that may be 
presented to the Senate for ratification.

    Fay also expressed doubt about the ability to complete the climate 
negotiations by the end of this year given the lack of progress to date 
and the failure of the Clinton Administration to engage in the economic 
and domestic implementation dialogue it has promised for more than a 
year. ``ICCP is not and never has been interested in an agreement at 
the Kyoto meeting just for the sake of reaching an agreement. This view 
will not change.''

    ICCP is a coalition of US businesses and industry associations, as 
well as international associations, interested in the policy 
development process with respect to global climate change.

    Senator Hagel. Mr. Fay, thank you very much. Again, to all 
three of our panelists, we are grateful for your time. You have 
each focused on a particular area that is of immense concern 
and I very much appreciate the courtesy that you have extended 
to this committee by coming forward and talking a little bit 
about this important issue.
    Mr. Trumka, let me begin with you. I would like to focus a 
little bit on some of your testimony.
    I don't know if you were in the room this morning when 
Senator Wirth talked a little bit, at my request, about a 
conversation I had with him a couple of days ago regarding the 
ultimate goal of this treaty: a 70 percent reduction in 
greenhouse gases. That is rather significant.
    Mr. Trumka. Very significant.
    Senator Hagel. Would you give me some analysis of what that 
would do to jobs?
    Mr. Trumka. It would devastate jobs, particularly if the 
timetable were crunched in, as they are currently proposing it.
    Right now, to get to 1990 levels and stretching it out to 
the year 2015 or 2020, you are looking at a job loss of a 
million and a quarter to a million and a half.
    If you magnify that to the level that you are talking about 
and keep the timetable the same, you are going to magnify the 
number of job losses. It would actually be devastating to 
various sectors of the economy.
    When you balance that against what it would do under the 
current structure, it makes absolutely no sense because they 
would shut a power plant down here and build a power plant in 
Mexico. They would shut a factory or a steel mill down here and 
build it somewhere else. We've lost the jobs. They've gained 
the jobs and the environment gained nothing in the process.
    Mr. Chairman, if you limit just stabilizing us, stabilizing 
to the 1990 levels to the Annex I countries, here is all you 
do. The CO2 emissions are scheduled to double, are 
projected to double by the year 2066. If you put the burden on 
us and no one else, you will simply move the timetable back to 
2059. That is a 7 year difference in timing with job loss that 
ends up in the millions.
    Senator Hagel. I want to continue along this line. Your 
testimony also included the comment that for every $100 in a 
carbon tax or an equivalent trading program, we would be 
talking about roughly a 26 cent per gallon increase in 
gasoline.
    Actually, I think those numbers, at least the numbers I 
have seen, are even higher than that. So I think you take a 
pretty conservative baseline, which is good.
    First of all, tell me a little more about the impact, in 
your analysis and the AFL-CIO's analysis, about that would have 
on the economy. Second, do you believe your membership, the 
people of this country, would be willing to do that? It all 
connects back to something we talked very little about this 
morning, though we tried to get there. It is something that Mr. 
Fay talked about: the cost-benefit analysis.
    When you have no numbers, even though Secretary Wirth 
dismissed the models to some extent, I don't know how we get 
anywhere without having some cost-benefit analysis, some ratio, 
some rationale, to accomplish whatever it is we need to 
accomplish.
    Finally, as I said right at the beginning of the hearing 
this morning, there are few people that I know in this body or 
across this country that do not believe we have some problem 
here.
    Mr. Trumka. That's correct.
    Senator Hagel. We have to face this. What we are trying to 
get at, once again, is the identification of the problem and 
its magnitude. Once we identify that, with some basis of 
knowledge and analysis, and cost-benefit analysis is pretty 
important, we develop a common sense policy.
    So with that, would you like to talk a little bit about 
some of those issues, such as the gasoline tax and your 
membership.
    Mr. Trumka. Absolutely, Mr. Chairman.
    First of all, it is hard for me, as a negotiator, having 
negotiated literally hundreds of contracts, to comprehend how 
you can go into a negotiation, make proposals that ultimately 
are binding on you without knowing with some specificity, or at 
least a fairly good understanding, what those proposals are 
going to do. That is really what we have been told so far.
    Every time we have asked for an analysis on what these 
proposals will do in terms of impact on the economy, impact on 
jobs, impact on energy price increases, impact on trade, we are 
told that the models don't exist and we'll get to that.
    I think that is an unhealthy way of negotiating any kind of 
deal and I would not advocate it to any of our membership.
    Our membership looks at those prices. Let's assume for just 
1 second that they could pay the 26 cent increase for gas, or 
they could take a one-third increase in the price of their 
electricity. Are they willing to do that? I think it is highly 
unlikely that they are. But the more realistic thing is what 
does it do long-term to their jobs?
    Those types of price increases can destroy industries. Take 
their jobs away and, whether they were willing to pay them or 
not, they won't be able to pay them.
    There is simply no reason to rush to that right now until 
we have done a very thorough analysis of the impact, and we can 
negotiate with all of our partners for a fair, level playing 
field so that we don't simply displace our jobs by having 
higher energy prices, higher taxes than our competitors and 
still have no gain to the environment.
    I think my membership, the membership of the AFL-CIO, would 
be angered, to say the least, at some of these price increases. 
If you heat your home with gas, for instance, and the tax would 
go up $1.50 per thousand, it is right now at $1.42 per 
thousand, so you are looking at doubling the price of gas. That 
is before you add the increase of what demand will do to a 
price increase.
    If you look at the gasoline tax of 26 cents, the family 
farmers over there cannot take a hit of that magnitude. They 
simply cannot do it and still survive in today's economy.
    I think our people really want a clean environment. They 
want to leave a clean environment to their children. But they 
also want to leave a healthy, vibrant economy, and these are 
not mutually exclusive, Mr. Chairman. If we take our time and 
do it right the first time, we can get both. That's what I 
think my membership would demand and I think has a right to.
    Senator Hagel. Thank you.
    Senator Sarbanes.
    Senator Sarbanes. Thank you, Mr. Chairman.
    The first question I want to put to each member of the 
panel is do you think there is a serious problem that we have 
to deal with with respect to global warming?
    Mr. Neidig. Do I think there is a serious one? I think 
there is a problem. Is it a serious problem? To be very candid 
and frank, no. I don't think it is a serious problem.
    The industry I represent does not think it is a serious 
problem. I don't mean to be flip. I have not been around as 
long as Senator Byrd has. But in my lifetime, in 1936, in the 
State of Nebraska, Northeast Nebraska, we had 30 days when the 
temperature never got below 100 degrees in the summer and 30 
days in the winter when the temperature never got above zero. 
We did not hear a word about global warming.
    The last 4 years I could have used a little of it in the 
spring when I planted my crop. I don't think there is a serious 
problem. I don't think we have proven there is.
    Senator Sarbanes. So you don't think we really need to do 
anything?
    Mr. Neidig. I don't think there is a rush to do that. I 
think we need to be very aware. I think we need to be concerned 
and certainly would be willing to work at these things. But 
there is not a compelling reason to rush pell-mell to this at 
this time.
    Senator Sarbanes. That is a different question.
    Mr. Neidig. Sorry?
    Senator Sarbanes. That is a different point. I wasn't 
exploring whether we should rush pell-mell. I never believe in 
rushing pell-mell into anything because you can always make it 
worse rather than better. The question is whether there is a 
serious problem that we need to address and I take it your 
position is no.
    Mr. Neidig. That's right.
    Senator Sarbanes. Mr. Fay?
    Mr. Fay. I think our companies would agree with the 
consensus of the Senators here that this is a serious problem. 
It needs to be addressed, but it needs to be addressed over a 
long timeframe and not with some emergency short-term action.
    Senator Sarbanes. But we need to try to come to grips with 
it?
    Mr. Fay. Yes.
    Senator Sarbanes. Mr. Trumka.
    Mr. Trumka. Senator Sarbanes, we think that there is a 
problem and if there is even doubt, the consequences could be 
so dire that we think we ought to err on the side of caution 
and assume that that type of problem does exist and attempt to 
address it as best we can--in a fair, equitable, meaningful 
way.
    Senator Sarbanes. Now I was listening to these various 
figures that you were citing and I'm not quite sure where they 
come from in terms of the number of jobs that would be lost and 
the various policies that would be put in place.
    I quoted earlier in the hearing a 1991 study by the 
National Academy of Sciences which concluded with, and let me 
just read what they said: ``The United States could reduce or 
offset its greenhouse gas emissions by between 10 and 40 
percent''--now that is a broad range, I admit. So let's just 
take the lower figure, 10 percent--by between 10 percent ``of 
1990 levels at low cost or at some net savings. The efficiency 
of practically every end use of energy can be improved 
relatively inexpensively.''
    Then, people cite the figure that on a per capita basis we 
use twice as much energy to produce a unit of GDP than does 
Germany or Japan.
    I guess I am interested in to what extent either of you 
agree with that statement or think that there is something in 
it. This assertion is that we could, in fact, do a better job 
without imposing some--and I have taken the low range. I have 
taken the 10 percent figure because I want just to try to see 
if we can be on the same path, if that's possible.
    This assertion is that we, in fact, could do that without a 
major--in fact, they say even at some net savings. They cite 
other countries who seem to have been able to do that.
    Do you take sharp difference with that?
    Mr. Trumka. I think there are ways that we can save 
CO2 gases, become more efficient, do conservation. 
There are a number of ways in which we can do that.
    I don't know that you can achieve the levels that they are 
now talking about through that alone. Clearly, the proposals 
that are being made by the administration do not envision that. 
They envision, as Secretary Wirth told you today, affecting 
through a process energy consumption--not energy conservation 
but energy consumption. One of the things that they tossed 
about is a $100 per ton tax on carbon. I gave you the figures. 
If that proposal is adopted, we are going to have significant 
and major job loss.
    Now there are paths that we could work together on and 
minimize the job loss and we would encourage that. We would 
welcome that idea, to work together, to do that so that, one, 
we do clean up the environment; two, we do not lose our 
international competitiveness; and, three, we don't cause major 
economic dislocation throughout the United States while our 
competitors have none of that.
    Senator Sarbanes. Mr. Fay?
    Mr. Fay. Senator, I think that we have shown that we can do 
some of these things. We are doing them now. We are doing them 
voluntarily under some of the climate change action plans.
    We have been through hours of briefings on the mind numbing 
economic analysis. The fact is the analysis is out there and 
yes, it does show there are costs. It does show there are 
opportunities as well.
    What no one seems to be able to get out on the table is 
what is it that the administration is thinking of once we sign 
on to this binding agreement. That is all we are asking: Tell 
us what you are thinking of. Tell us what your assumptions are 
about our industries in terms of efficiency improvements that 
you think we are going to achieve in order to meet whatever 
goal it is you want.
    So the analysis has been done. They are doing the analysis, 
Senator. They are not talking about it and they are not 
releasing it. All we are saying is we want to have a dialog.
    But yes, there are many things we can do to reduce 
emissions. Whether we do them to 1990 levels by 2010 or some 
other time is still open to debate.
    Senator Sarbanes. Both of you have mentioned this 
competitive factor. To what extent is your concern about where 
the administration is going tied to the fact that they have 
this differentiation between Annex I countries and other 
countries so that some countries would, in effect, be under the 
same mandatory regime we would be under but other countries 
would be outside of that mandatory regime?
    I don't think anyone has really thought that through in 
terms of what the implications of that are, not only 
environmentally, which is, of course, the whole purpose of this 
effort, but also what the economic implications would be.
    How much of your concern is geared to that aspect of this 
negotiating arrangement?
    Mr. Fay. Unfortunately, I think the 1992 treaty already 
began to establish some level of differentiation between Annex 
I countries.
    Senator Sarbanes. Yes, but that was done voluntarily. That 
is a big difference.
    Mr. Fay. I understand that.
    Senator Sarbanes. Or to take that differentiation and 
simply carry it over when you shift from voluntary to 
mandatory, that's, well.
    Mr. Fay. Absolutely.
    We feel that the developing countries must be in this 
treaty. How you get them in is not our area of expertise. But 
they must be in.
    Now are they allowed to grow first? It is not clear to me 
from the chairman's and Mr. Byrd's resolution whether we are 
requiring the exact schedule that Annex I countries would have. 
But yes, they must be in. This is because most of the 
infrastructure investment that is taking place in the world 
today is taking place in developing countries. So we don't know 
what their requirements are. We cannot make effective 
investment decisions.
    So we have to know. What we insisted on in our position 
paper to the administration is if not at Kyoto, you have to 
have this resolved before any binding commitment period begins 
for Annex I countries and you have to insure that, as part of 
the entry into force requirements, that you have those 
countries as parties to this agreement.
    Senator Sarbanes. Within a mandatory regime of some sort.
    Mr. Fay. Right.
    Senator Sarbanes. Mr. Trumka?
    Mr. Trumka. We would agree that we have a significant 
concern about their lack of being included in the mandatory 
regime, as he calls it, because it would create yet another 
gigantic incentive to move jobs offshore to come up with 
compliance.
    We also have two other major concerns. These are: Even if 
both people, even if all of the countries are in in some forum, 
whether it is a lower level, growing to a higher level, as 
their economy grows, or whatever; the other concern is how we 
internally will be required to achieve our reduction levels. 
This is because if it is through a carbon tax, as we just 
talked about, even if our competitors are going to have to do 
something that is fair and equitable in the overall scheme of 
things, we are still disadvantaged.
    The other concern we have is the time period for 
compliance. The more collapsed it is, the more harsh and 
radical the solutions, the more harsh and radical the effect on 
the American economy and the American working force.
    Senator Sarbanes. Thank you.
    Senator Hagel. Mr. Neidig, did you want to respond?
    Mr. Neidig. Senator Sarbanes, you asked the question about 
competitiveness and I mentioned that as far as agriculture as 
well. If I can specify and single out a country, if you will, 
Argentina would be the one. If we, the United States, and I as 
a farmer, were faced with mandatory compliance with energy 
requirements and other things to control greenhouse gas 
emissions, Argentina has indicated they are not going to be 
part of that. They have indicated they would not be. I have 
been to Argentina twice. It has the most productive capability, 
I think, of anywhere in the world and would be major 
competition. Those who think that we can only have it in the 
United States are wrong. That is a real competitor that 
concerns agriculture and should concern agriculture.
    Senator Hagel. Mr. Neidig, if I can stay with you for a 
moment, I have the same general question that I asked Mr. 
Trumka on gasoline tax concerning increasing energy costs, the 
effects it would have on his membership, jobs, and the ripple 
effect. I was talking with Senator Lugar this morning, who is a 
very distinguished member of this panel and also, as you know, 
chairman of the Agriculture Committee. He was telling me that 
he had met recently with some individuals from the United 
Nations and they were talking about projecting out population 
numbers. They were projecting what it was going to take to feed 
the world, with around 9 billion to 10 billion people in 50 
years, and what pressure and burden that was going to put on 
our food producers and our farmers.
    Connecting that to what we have been talking about today is 
a pretty significant challenge.
    Would you develop a little bit for this panel, Mr. Neidig, 
some of the thoughts that you have regarding the numbers that 
have been thrown around here and what that would do to farm 
production and the ability to feed the world?
    Mr. Neidig. Well, as I indicated, it would not only be 
drastic, it could be devastating. It would be devastating.
    As I indicated in some of the figures I had here for my own 
farm, my own operation, which is not large--it is average to 
small--if you add that much cost that we are talking about, 
whatever it be, 25 cents a gallon for gasoline, or a 50 percent 
increase, or a 30 percent increase, whatever, it gets to the 
point where it is absolutely uneconomical for me to continue 
the operation.
    Now this is not necessarily dependent upon size of the 
operation because you just magnify the problem with larger 
operations under those kinds of situations. So we not only 
would reduce our ability to make a living or to be profitable, 
we would reduce our ability to feed the world, if you will, 
because, as you know, American farmers serve and feed many more 
people than just those in this country.
    So we not only would become uncompetitive, we would go out 
of business and thereby exacerbate the problem. It is hard to 
describe, Senator, exactly the fear and the concern that I and 
my people have if we face this kind of mandatory situation that 
is not across the board.
    Even if it were across the board, we are going to 
significantly reduce our ability to produce food and fiber for 
the world.
    Senator Hagel. Thank you.
    Mr. Fay, I would like to get to some of your testimony. I 
have read your letters to the State Department and the White 
House. I compliment you on each. They are well thought out. As 
your testimony I think very poignantly brought out, what we are 
striving for is some kind of policy that is economically sound, 
allows economic growth, and continues a higher standard of 
living for all of our people. This is an argument that gets 
lost in this.
    I hear some of my colleagues talk on one side, in the 
morning, about how we have to give everybody equal opportunity 
and standard of living. Then, in the afternoon, they suggest 
cutting our economic growth back 1 or 2 percent to do this.
    Well, you can't do that. Something has to give here.
    I am interested in your presentation today and the letters 
that you sent to the White House and State Department from the 
standpoint of the common sense economic approach you have 
taken.
    First of all, explain why we have not seen any cost-benefit 
analysis, economic modeling, or anything else to my knowledge 
that would give us some sense of if we doing the right thing, 
while tying where we want to go with this environmental policy 
to sound economic policy.
    Mr. Fay. Well, obviously, I cannot speak for the 
administration on that point. I do know that it has been 
promised for over a year.
    There has been a lot of modeling going on, however, outside 
of the government. Frankly, it is all pretty consistent and it 
all points to the kind of conclusions that I outlined.
    But what is missing is what are you thinking of in terms of 
implementation, the types of things you just asked about in 
terms of imposition of carbon taxes or various policies and 
measures.
    We are not interested in pursuing some laundry list of 
command and control programs or taxes to implement this 
initiative. We have heard a lot about a potential of some kind 
of cap and trade and some kind of emissions trading program. 
But we would like to know, if you are going to institute a 
trading program, how are you going to allocate the rights to 
that and what is the cap going to be.
    I cannot respond to that. We all kind of know generally 
where the economic information is sending us. But we are not 
getting the kind of specifics, we are not getting the kind of 
dialog we have been promised.
    In 1993, the White House promised the ``White House 
effect'' on the greenhouse effect. Well, lately we've felt a 
little bit more like the ``whitewash of the impacts and a 
blackout on information.''
    We need to get that dialog done. If it is not going to get 
done by Kyoto--and I fear that it is too late to have that 
dialog--then no, there should not be an agreement because we 
have a right to know.
    Now they have ideas inside and they keep telling us that 
our information is showing the kind of thing cited by the 
National Academy of Sciences, as Senator Sarbanes referred to, 
that it is modest, that there are things we can do. That is the 
wonder of mind numbing macro economic analysis. But there are 
certainly going to be some people who will suffer, such as Mr. 
Trumka's members, such as the farm community, such as the 
manufacturers that I represent. We want to have that debate. We 
want to have that dialog. We want to have it before they agree 
to the treaty and not after.
    Senator Hagel. Are you familiar with a study that I 
understand was done in November known as the Argonne National 
Laboratory Study?
    Mr. Fay. I am familiar with it.
    Senator Hagel. My understanding is that the name of the 
study was ``The Impacts of Potential Climate Change, 
Commitments on Energy Intensive Industries.''
    Mr. Fay. Yes, sir.
    Senator Hagel. My understanding is also that it was never 
released.
    Do you know anything more about it?
    Mr. Fay. Well, it was never officially released. I guess it 
managed, like drafts of the current economic analysis managed, 
to find its way out there. We have been told that well, it is a 
qualitative study, not a quantitative study, and yes, it does 
point out these objections.
    We sponsored a conference last week where we asked them to 
present somebody, to present their view and what was good or 
bad about the study. The administration declined.
    So again, I know the study is out there. It suggests very 
draconian effects. It suggests that a carbon tax won't succeed 
in achieving the policy objectives they are trying to achieve.
    Then it is suggested by the administration that that is not 
what the study was designed for. But if they are not going to 
tell us what it was designed for or what they view it to do, we 
cannot read their minds.
    Senator Hagel. Mr. Fay, thank you.
    Senator Sarbanes.
    Senator Sarbanes. I think that is a very good point. In 
fact, I think your whole statement was very helpful in terms of 
its analysis.
    I take it your starting point is that we should be striving 
to reach an agreement but we need to be very careful how we do 
it and take into account these various concerns that you raise 
here.
    Is that a fair statement of it?
    Mr. Fay. Yes, sir.
    Senator Sarbanes. I have to tell you that I'm not so sure 
about something. It seems to me there is considerable room here 
to advance with respect to controlling global warming without 
getting yet into the situation of paying significant costs. Now 
at some point you are going to get a tradeoff.
    But if we are using double the energy that our competitors 
are using, the price of gasoline in this country, compared with 
other industrial countries, is far less. What is it that they 
are able to do that enables them to absorb this cost and yet 
remain competitive with us in the marketplace? It is an 
interesting sort of question, it seems to me.
    But there is a lot of conservation that has not yet been 
done, it seems to me.
    What do you understand the framework in which they are 
going to Kyoto as being?
    Mr. Fay. By ``framework,'' do you mean the entire policy 
framework, the numbers?
    Senator Sarbanes. First of all, do you understand that they 
could meet in Kyoto and not reach an agreement? They could 
continue the process of trying to develop an agreement.
    Mr. Fay. That's correct. There is no requirement to reach 
an agreement. They have set themselves a deadline of Kyoto.
    We felt that the technical process to facilitate the 
negotiations was not properly established and that the year 
2000 may have been more appropriate. They set 1997 as their 
deadline.
    Senator Sarbanes. Now do you understand them to be bound by 
the notion that the non-Annex countries are not to be brought 
under a mandatory regime? Is that, in effect, a defining 
criterion of the bargaining process or is that open?
    Mr. Fay. Well, the administration has proposed, actually 
proposed, a developing country role and evolution for those 
countries that some have said violates the premise of the 
Berlin Mandate, that it brings in commitments that they are not 
supposed to have.
    The Berlin Mandate expires at the end of this year. So for 
purposes of what they have outlined in these negotiations, 
technically we have asked for ``what does no new commitments 
mean for developing countries'' because, under Article 4.1 of 
the treaty, it does require that they take policies and 
measures to reduce emissions. We have said at a minimum you 
have to define that now.
    What does that mean? Nobody knows. Nobody knows what that 
means. That's Number 1. Number 2, you have to set a schedule 
for defining what their emissions budget will be before we ever 
enter into a budget period of our own because we have to know 
that.
    Now whether that's feasible, again, those are legal issues 
and diplomatic issues that have not been discussed publicly in 
great detail.
    Senator Sarbanes. How much interaction has the 
International Climate Change Partnership had with the 
administration on this, with respect to these negotiations?
    Mr. Fay. We talk to them frequently. We talk to them as 
often as we can about the policy issues that you see outlined 
in our letter.
    Senator Sarbanes. So you don't have a complaint about the 
extent of consultation? Or do you?
    Mr. Fay. Well, we have plenty of access and consultation. 
But on some of the policy nuances and those issues, the 
consultation is fine. On the details of what are we talking 
about in terms of domestic implementation, or what are the 
impacts, or what is it you think is going to happen to this 
industry, this industry, or this industry, it is pretty 
lacking.
    Senator Sarbanes. Now the Farm Bureau people, have they had 
consultation?
    Mr. Neidig. Yes. But I could reiterate what Mr. Fay said: 
Substantial consultation; details, not much.
    Senator Sarbanes. Mr. Trumka?
    Mr. Trumka. Significant consultation. Answers to specific 
questions have been lacking. This goes over a period of 
probably 3 or 4 years. My own personal experience goes back 
even further.
    When I was President of the United Mine Workers, we were 
promised information on analysis over a 2 year period. We never 
received it. When we talked about specifics, there are no 
specifics.
    I think the danger of all of this is probably what was 
perhaps a strategy, the strategy to adopt the treaty and worry 
about how you comply with it later, and we are very, very 
concerned with that type of strategy.
    Mr. Fay. Senator, if I might add, the chairman raised a 
question at the beginning of this about Mr. Wirth and his 70 
percent reduction goal. That is one of the reasons we have 
encouraged them to tell us where we are going. What is your 
long-term objective?
    The original treaty has this vague language about 
stabilizing at a level to prevent dangerous anthropogenic 
modification of the climate. The science does not provide us 
with a precise answer to that. But if it means that what they 
are really thinking is 70 percent reductions, then we are 
talking about a marathon, not a sprint. If they mean that but 
are not telling us, then we are going to burn ourselves out in 
the first mile.
    So we have to know if they think they have enough 
scientific data to tell us what we should be doing 20 years 
from now. We think they have, then, enough information to tell 
us where they think they want to be 100 years from now because 
the technological innovation that is going to be required to 
achieve whatever that is not out there today.
    All we have said is just tell us where we are going.
    Senator Sarbanes. Did you think that the goal that was set 
in 1992 was a realistic one?
    Mr. Fay. The 1990 levels by the year 2000?
    Senator Sarbanes. Uh-huh.
    Mr. Fay. I don't know that I have a basis for addressing 
that. I think if that were the goal adopted in Kyoto, 1990 
levels by 2010 or something like that, which often has been 
mentioned, I think it is going to be very difficult. It will be 
difficult both procedurally, just getting ratification and 
implementation in this country. Whether we can achieve it or 
how easy it is, I don't know. I don't think any of us knows.
    Senator Sarbanes. That's why you want to see the specifics 
of the game plan to do it, is that correct?
    Mr. Fay. Right.
    Now we do recognize, I should add, we do recognize, 
Secretary Wirth did talk about the fact that it is a 
negotiation. You don't expect a negotiator to give out a bottom 
line during the negotiations.
    I will say that I have been to the negotiations. We 
participate as observers in the negotiating sessions. We are 
carving out from the active negotiators the conservative 
position, the United States is. We are the only country that is 
talking about a developing country role. We are the only 
country that is talking about flexibility through emissions 
trading.
    We are the only country that tabled a proposal to establish 
a long-term objective, though some have now talked about long-
term objective.
    So the outline was a good start. But the progress or the 
willingness of our negotiating partners, whether it is the 
developing countries or the European Union, or Australia or 
Japan, has been slow in coming.
    Part of this is perhaps they have not listened to our 
framework enough. Perhaps they are not sure we are serious 
about it.
    We think the United States has the strongest economy in the 
world and should stand up and negotiate from a position of 
strength and a right policy; but negotiate from a position of 
strength and don't be afraid to walk away from a bad agreement.
    Senator Sarbanes. Well, now, what is the European Union 
position, as you perceive it?
    Mr. Fay. They want a number. They want a number and they 
have a laundry list of so-called policies and measures that 
reads like a tired old list of regulatory programs that we 
would just as soon not repeat, whether it is CAFE standards, 
energy efficiency standards, chemical bans, carbon taxes. To 
our credit, the U.S. is also one of the few governments that is 
insisting now that that is unacceptable. But that is what the 
European Union wants.
    Senator Sarbanes. This is an interesting perspective which 
probably has not been brought out this morning. That is, it is 
your perception that, compared with other parties that are at 
this negotiating table, there is more, I don't know whether the 
word is ``rationality'' or ``prudence,'' perhaps, in the 
American position that in a lot of the other significant 
countries' positions.
    Mr. Fay. A year ago this time there was no discussion of 
long-term objectives. There was very little support or no 
discussion of developing country role. There was only 
discussion of short-term, very short-term, targets and 
timetables.
    The U.S. is the one who said they are all very impractical, 
not doable. So, yes. I mean, the U.S. has done the most 
scientific work on the issue and has done more economic 
analysis, I think, than anyone else in the negotiations. But 
that still does not mean you just agree to something, even if 
it is a bad deal.
    Senator Hagel. Mr. Trumka, did you have a comment?
    Mr. Trumka. The proposal by the European Union, Senator, is 
an additional 15 percent below 1990 levels by the year 2010. 
You asked the question whether the framework was such that the 
developing countries are now locked out of it.
    Well, whether we think they are I think is probably less 
important than what they think. They think that they are. They 
think that they have done everything they have to, according to 
the Berlin Mandate, and the Berlin Mandate sets the framework 
for these negotiations. That is why it is so important for us 
to change that notion.
    This is because he is right. We are the only ones out there 
saying that.
    Now the administration can talk very loudly about how they 
want to include Third World countries. They are not going to 
succeed in Kyoto in doing that. They are the only ones out 
there saying that. If we agree to that type of treaty, I agree 
with you, Mr. Chairman, that signing a treaty and then 
renouncing it when it goes sour for us does not really increase 
our level of esteem around the world.
    This is a subject that has such wide ranging impacts both 
on the environmental side and on the economic side and for the 
development of this country that we need not set an artificial 
deadline of Kyoto and say it must be done by then without any 
clue of how we will achieve what we have agreed to.
    That is a prescription for a disaster. We will then be 
stampeded into bad decisions rather than some of the decisions 
that Senator Sarbanes talked about, where we can really sit and 
counsel together and really work toward a real lowering of 
carbon dioxide gases in the atmosphere by everyone while we do 
not pay all of the economic prices with jobs and the economy 
here at home.
    Senator Sarbanes. Thank you.
    Senator Hagel. Gentlemen, thank you. You have offered great 
insight into this issue. We will be talking with you again, I'm 
sure.
    We will keep the official record open till close of 
business on Friday for our colleagues or others who want to 
submit questions for the record.
    Mr. Trumka. Thank you, Mr. Chairman.
    Mr. Fay. Thank you.
    Senator Hagel. We are adjourned.
    [Whereupon, at 12:52 p.m., the subcommittee adjourned, to 
reconvene at 9:32 a.m., June 26, 1997.]



   ALL MEMBERS GLOBAL CLIMATE NEGOTIATIONS: ECONOMIC AND SCIENTIFIC 
                             CONSIDERATIONS

                              ----------                              


                        THURSDAY, JUNE 26, 1997

                           U.S. Senate,    
     Subcommittee on International Economic
                Policy, Export and Trade Promotion,
                     of the Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:32 a.m. in 
Room SD-419, Dirksen Senate Office Building, Hon. Chuck Hagel 
[chairman of the subcommittee], presiding.
    Present: Senators Hagel, Thomas, and Sarbanes.
    Also present: Senator Enzi.
    Senator Hagel. The subcommittee will come to order. This 
morning, the subcommittee meets to consider for the second time 
the current international negotiations underway intended to 
curb global greenhouse gas emissions. As world leaders began to 
focus on this issue last week at the G-8 Summit and this week 
at the United Nations, I want again to stress the importance of 
our efforts in the U.S. Senate to be very actively involved in 
this issue.
    As I mentioned last week, these hearings are not about 
motives or blame, personalities, or politics. These hearings 
are about finding the truth and the facts.
    This hearing will focus on the economics and science that 
form the basis of these negotiations and discussions. I look 
forward to a fair and informative exchange on the merits of the 
issue.
    I want to thank our distinguished panelists for their time, 
their testimony, and their courtesies. Welcome.
    Before I ask each of you to respond, let me lay out some of 
the facts of life that we are dealing with this morning. The 
Senate just went into session at 9:30. We are dealing with the 
Tax Reconciliation bill today. That means we will have a number 
of votes this morning.
    To the best of my knowledge, as of 9:30, what we will try 
to do is get in at least a half hour of testimony. Then, when 
the first vote is recorded, we will recess very briefly to 
allow the other Members who are here and myself to vote. We 
will then come back. That should take about 10 minutes. We will 
pick up from there and finish that testimony. There will 
probably be one more vote, for which we will do the same thing. 
Then I think we will have some daylight for the rest of the 
hearing. That will be the schedule as of now.
    Sometimes, as you know, when you have a number of Members 
present, we just hand off the gavel and let someone else 
preside. But I don't want to do that because I would miss 
someone's testimony. It is one of the prerogatives of the chair 
to do it your way. It may be wrong, but it is your way.
    So I will run the subcommittee hearing this morning in that 
way. Before I ask for your testimony this morning, let me 
introduce my friend and colleague from the State of Wyoming, 
Senator Mike Enzi, who is not a member of this committee but is 
very involved, engaged, and interested in this subject matter.
    Senator Enzi, welcome.
    Senator Enzi. Thank you, Mr. Chairman.
    Senator Hagel. Do you have a statement? Would you like to 
make any comments?
    Senator Enzi. I would like to do so. I really do 
appropriate your inviting me to be a part of this. This is a 
very crucial issue to the United States and particularly to 
Wyoming. Wyoming is the Nation's largest producer of coal. This 
is a bipartisan issue, of course, because Wyoming and West 
Virginia are large producers of coal. So I share Senator Byrd's 
interest in the attempts to see that we do not incrementally 
kill our Nation's energy producing capability.
    I believe the theme of these hearings, which are going to 
concentrate on economic and scientific considerations in the 
global warming debate, go straight to the heart of the issue. 
Even though there is a disturbing lack of scientific consensus 
on this issue, the hype threatens to carry the day and stands 
to have a devastating effect on our economy. Some of the 
studies I have seen indicate it will be about $350 billion per 
year.
    Many, when they hear these numbers, perceive them with 
certain hysteria. They might say well, come on now, there's no 
way the Government should risk that kind of economic carnage 
unless the science is pretty persuasive. Well, I am still 
waiting to see that persuasive science.
    In fact, the newest sciences indicate exactly the opposite. 
We can also look at past examples of what we have done to 
ourselves. One of them is with our national forests. We had 
environmental predictions that were backed on the body of 
dubious science that showed that the spotted owl was headed for 
certain extinction. They said the logging industry in the 
Pacific Northwest had to be halted. We did do that. An entire 
industry of workers was thrown out of work.
    Our national forests were left unmanaged. They are a big 
tinderbox. They are going up from lightning strikes. There is 
no economic advantage out of the forests. At the same time, 
this timid little owl is being found building nests in 
billboards.
    While we do that, what we are doing is sending our economy 
to other countries where we are devastating their forests. We 
have sent them to the Siberian forests, where they are tearing 
down 10 million acres of forest a year with no environmental 
protection.
    So in supposing to save the spotted owl, we have wiped out 
the Siberian tiger--or we will. That is the kind of action that 
we often take in the United States.
    I have this rule of legislative action, which is that if it 
is worth reacting to, it is worth over-reacting to. I see where 
we do that time after time and send our economy to other 
countries.
    That is what the proposed treaties want to do now. They 
want to send the economy to those areas of the world that are 
underdeveloped without putting them under the same kind of 
rules as the developed countries. We cannot take that kind of 
economic hit. We just transfer dollars and jobs.
    I am anxious to hear the testimony today to see if it 
changes any of my views on the economy and the science. I 
really do appropriate the opportunity to be a part of this 
hearing.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Enzi follows:]
                Prepared Statement of Senator Mike Enzi
    Thank you, Mr. Chairman. I am very grateful to have been invited to 
participate in these hearings this morning. This is a very bipartisan 
issue. Wyoming and West Virginia are the first and second largest coal 
producing states in the nation. Consequently, I share Senator Byrd's 
interest in the attempts to--as I see it--incrementally kill our 
nation's energy producing and utilizing--industries.
    I believe that the theme of these hearings, which concentrate on 
the economic and scientific considerations of the global warming 
debate, goes straight to the heart of this issue. Even though there is 
a disturbing lack of scientific consensus on this issue, the hype 
threatens to carry the day, and in so doing, stands to have a 
devastating effect on our economy to the tune--some studies claim--of 
350 billion dollars per year. Now, many citizens might hear those 
numbers and perceive in them a certain hysteria.
    They might say, ``well come on now, there is no way our government 
would risk that kind of economic carnage unless the science was pretty 
persuasive.'' To those people I would just say two words: National 
Forests. I cannot think of a more illustrative example of dire 
environmental predictions, backed by a body of dubious science, made 
real in the most unexpected ways by the sheer demagogic momentum of 
their proponents. In an effort to save the spotted owl from certain 
extinction, they said, the logging industry in the Pacific Northwest 
must be halted. And halted it was. An entire industry's worth of 
Americans--over twenty thousand of them in five states--were thrown out 
of work. Meanwhile, our national forests were left unmanaged and are 
now overgrown fire bombs awaiting the lightening strike that will 
detonate them, while the timid and ecologically fragile spotted owl, 
never in imminent danger in the first place, is occasionally seen 
building nests in bill board signs. And if that was not bad enough, 
consider what is happening in Siberia. So productive was the carefully 
managed forests of the Pacific Northwest, that for every one hundred 
thousand acres of those forests taken out of production, one and a half 
million acres of Siberian wilderness must be cut down to fill the gap. 
And indeed, many of the surviving saw mills in those states are 
importing Siberian timber just to keep their heads above water. In fact 
the Russians are cutting down ten million acres per year of Siberian 
Wilderness. Does anyone really think they observe the same stringent 
environmental standards that we observed? In an effort to save the 
spotted Owl, the government and the environmental activist community 
have probably signed the death warrant for the Siberian Tiger. I relate 
this sad tale only to illustrate that--no indeed--the power of sound 
science is never a guaranteed trump to skillful spin and demagoguery. I 
am very concerned that we will wind up exporting jobs, damaging our 
economy and encouraging the environmental degradation of other nations 
if we fail to demand that a high scientific standard rule this debate. 
We have done it before. It looks like we are determined to do it again.
    This is also an issue of common fairness. Some of the terms of the 
International Treaty on Global Climate Change would hobble our economy 
while allowing the economies of other nations to steam happily along 
for years, barely burdened at all by their own, often lax, 
environmental standards. How is that fair?
    I am a big believer in the axiom that the worst thing in the world 
for the environment is poverty. I think that a visit to any third world 
country will confirm this. And it is precisely this conviction that 
strikes so much fear into my heart whenever I hear someone predict that 
unless we subject our economy to those of the developing world in this 
misguided attempt to satisfy a scientific consensus that does not 
exist, we will soon find ourselves face to face with an environmental 
apocalypse. I do not believe it and until I see the scientific 
community agree on a body of quality science, I will not. So I look 
forward to your testimony gentlemen, and to asking you questions. My 
comments notwithstanding, I assure you I am here to learn.
    Thank you Mr. Chairman

    Senator Hagel. Senator Enzi, thank you. We are grateful 
that you are here and participating.
    Let me now introduce our first panel of witnesses. We have 
Mr. William J. Cunningham, Jr., Legislative Representative of 
the AFL-CIO. Welcome, sir. Also we have Dr. W. David 
Montgomery, Vice President, Charles River Associates. Dr. 
Montgomery, welcome. We have Dr. Robert Repetto, Vice President 
and Senior Economist, World Resources Institute.
    We, again, are grateful that you would take the time to 
come here this morning and share with us your views on this 
issue.
    Let me ask Mr. Cunningham to begin the testimony. Mr. 
Cunningham.

     STATEMENT OF WILLIAM J. CUNNINGHAM, JR., LEGISLATIVE 
           REPRESENTATIVE, AFL-CIO, WASHINGTON, D.C.

    Mr. Cunningham. Thank you, Mr. Chairman for this 
opportunity to testify on behalf of the AFL-CIO on the 
potential economic impact of a United Nations' global climate 
treaty.
    The AFL-CIO has repeatedly stressed that environmental 
protection and job creation can go hand in hand and we 
recognize that sound environmental policy can create jobs as 
well as improve the environment. The AFL-CIO supports the 
administration in its efforts to enforce the Nation's 
environmental laws and to insure adequate funding for research, 
enforcement and cleanup as sound economic as well as good 
environmental policy.
    We are, however, deeply concerned with the ongoing efforts 
to negotiate a treaty to mitigate the effects of carbon dioxide 
emissions on the Earth's climate. In particular, we are 
concerned that the so-called Berlin Mandate requirements will 
have an adverse impact on American economy but little or no 
effect on the problem of greenhouse gas emissions. We are 
further concerned that the permit trading of energy tax regimes 
now under consideration by the administration will worsen the 
adjustment problems.
    At the February 1997 Executive Council meeting, the AFL-CIO 
issued a statement elaborating on those concerns.
    The Executive Council statement says: ``Carbon taxes or 
equivalent carbon emission trading programs will raise 
significantly electricity and other energy prices to consumers. 
These taxes are highly regressive and will be most harmful to 
citizens who live on fixed incomes or work at poverty level 
wages.
    ``As corporations shut down domestic factories, mines, and 
mills as a result of higher energy costs, they will have 
additional incentives beyond the search for cheap labor and 
anti-labor regulatory regimes to locate new capacity off-shore, 
in countries with no carbon reduction commitments. Carbon 
emissions, therefore, will be transferred to the developing 
world along with the jobs, thus providing no real benefit to 
the environment.''
    As the administration considers its objectives for the 
upcoming Kyoto negotiations, we urge that the Berlin decision 
to confine mandatory emissions limitations to Annex I countries 
be reconsidered.
    Carbon dioxide emissions are growing three to four times 
faster in the developing countries and these countries, with no 
requirements, will soon be responsible for well over half the 
planet's greenhouse gas emissions. Exclusion of developing 
countries means that greenhouse gas emissions will continue to 
grow at a rapid pace and the harm that increased concentrations 
do will only be delayed rather than avoided. In fact, all else 
being equal, stabilization of carbon dioxide at 1990 levels in 
Annex I countries will delay the doubling of carbon dioxide in 
the atmosphere by only 7 years.
    Several studies have been done to estimate the impact of an 
emission reduction regime on our economy. A range of estimates 
exists, but even the most conservative estimate shows large job 
losses.
    According to the 1992 study by the U.S. Department of 
Commerce, the carbon tax that would help the U.S. achieve 
emission reductions of a scale now being discussed at the U.N. 
would cost some 1.7 million U.S. industrial jobs.
    The Urban Institute estimated that a carbon tax of $15 per 
ton would reduce total nonagricultural employment by up to 
410,000 jobs. Economists estimate that a carbon tax well over 
$100 per ton would be needed to meet the requirements of the 
Berlin Mandate.
    CONSAD Research calculated that a total of 1.4 million 
American jobs could be considered severely at risk under a 
carbon tax of $24 a ton. Primary metals, oil and gas 
production, electric and gas utilities, and railroads would 
have the most jobs at risk. Again, this is a much smaller tax 
than would be necessary to meet the requirements now being 
considered by the United Nations.
    CONSAD Research also showed substantial production cost 
increases for energy intensive industries. For example, a 
carbon tax of $100 per ton raises the cost of producing 
aluminum by about 20 percent and the cost of cement by 41 
percent.
    Recently, the administration conducted two studies 
estimating the economic impact of meeting emission reduction 
targets. The first was released in June, 1996, and the second 
is currently in draft form, dated June 1997.
    The 1997 study makes new assumptions which reduce the 
estimate of lost production and implicit job losses by roughly 
one-half the GDP reductions estimated in the 1996 analysis. The 
new assumptions also accelerate the economy's recovery by 
several years. In general, estimated GDP losses are now smaller 
and recovery occurs sooner. Nonetheless, the administration 
draft study shows that 900,000 jobs could be lost as a result 
of climate change policies. The job loss estimate should be 
considered as very conservative. A more realistic estimate of 
the impacts of stabilization at 1990 levels may be on the order 
of 1.25 to 1.5 million jobs, but even larger job losses to 
achieve a reduction below 1990 levels.
    The 1997 administration study does not attempt to measure 
the impact of the job loss to international competitors who are 
not subject to emission limitation requirements. This is a 
critical matter for jobs and incomes which the administration 
must address.
    The administration and its consultants expect that natural 
gas will displace coal in increasing quantities. The DRI model 
used by the administration indicates that 57 percent of all 
emission reductions by 2010 in the stabilization case would 
result from reduced demand for coal, increasing to 65 percent 
by 2020.
    A serious consequence of the loss in jobs in the coal 
industry will be reduction of the fuel diversity in the U.S. 
Less diversity in fuel use means the economy will be more 
vulnerable to price and supply fluctuations of imported oil and 
natural gas.
    Both the target concentration level and the timetable for 
the treaty are still to be negotiated. These are crucial 
decisions that must be carefully considered because they will 
have an impact on jobs and incomes. An examination of a range 
of targets shows that there is time to put together a sound 
treaty with carefully considered goals and timetables. 
Negotiations should continue beyond the December Kyoto meeting 
if that is necessary to arrive at an effective treaty with a 
minimum of dislocation and cost to the economy.
    A target of 550 parts per million is twice the 
preindustrial level and is often cited by scientists as a 
desirable goal. To stabilize concentration of carbon dioxide in 
the atmosphere at 550 parts per million, total world emissions 
of carbon could increase from current levels of some 6 billion 
tons per year to a peak of 9 to 11 billion tons by the years 
2033 to 2063. Major, near-term reductions of U.S. emissions 
would not be required to meet such a target.
    A target of 650 parts per million, which is well within the 
range of concentration levels considered appropriate as a long-
term target, would allow global carbon emissions to grow to 11 
to 13 billion tons by the years 2040 to 2075, reducing rapidly 
thereafter.
    These timetables are considerably longer than the short-
term carbon reduction proposals for industrial nations now 
being debated before the United Nations. Obviously, setting 
aggressive emission reduction goals for industrial nations 
could prove to be premature and wasteful if other nations do 
not make similar commitments.
    In its discussion of reducing emissions, the administration 
does not set a goal in terms of stabilizing carbon dioxide 
concentrations at a given level. Signatories to the Rio Treaty 
have not even begun to debate the appropriate target 
concentration level. Yet such a goal is a key to a lasting 
solution to the problem that we face and establishing such a 
goal must logically precede a decision as to what kind of 
emission requirements to place on any country.
    If the administration is serious about stabilizing carbon 
dioxide concentrations in the atmosphere, obligations must be 
placed on all nations of the world to reduce or limit their 
rates of growth of emissions. These reductions and limitations 
should take into account the economic growth needs of 
developing nations. Although this is a difficult task, it is 
the only effective means of accomplishing climate change goals.
    Thank you.
    Senator Hagel. Mr. Cunningham, thank you.
    We have been joined by my friend and colleague, the Ranking 
Minority Member of the subcommittee, Senator Sarbanes from 
Maryland.
    Senator Sarbanes, would you like to make a statement?
    Senator Sarbanes. No, I have no statement, Mr. Chairman. I 
know that we have a vote problem on the floor and I think it is 
important to try to get the testimony of these witnesses.
    Senator Hagel. Thank you. Dr. Montgomery.

 STATEMENT OF DR. W. DAVID MONTGOMERY, VICE PRESIDENT, CHARLES 
                RIVER ASSOCIATES, WASHINGTON, DC

    Dr. Montgomery. Thank you, Mr. Chairman and Senator 
Sarbanes. It is an honor to appear before you today and I 
appreciate your invitation.
    For the record, my name is David Montgomery. I am Vice 
President of Charles River Associates and head of the CRA 
environment practice.
    I have a prepared statement which I have submitted for the 
record and I will try to summarize and hit on the high points 
of that to try to keep us moving along before the debate.
    Just to mention a bit of background, the conclusions that I 
will be presenting today come from work that we have been doing 
at Charles River Associates for the past several years where we 
have developed a set of integrated economic models that deal 
both with international trade and with national economic 
impacts of carbon limits. I will draw on the results of several 
of our studies to try to cover the range of economic impacts 
that I think are of interest to the committee.
    I would also be happy to provide copies of our more 
detailed studies dealing with these issues for the record. I 
have some of those here with me.
    As you are aware and as Mr. Cunningham mentioned, the 
current negotiating process is working under a series of 
guidelines or ground rules set by the Berlin Mandate, which 
essentially say that the agreement to be brought to the meeting 
in Kyoto in December should deal with near-term targets and 
timetables for emission reductions that would only involve the 
industrial countries and that would exempt the developing 
countries from any additional commitments.
    There have been a number of proposals along those lines. 
The most ambitious was one from the Alliance of Small Island 
States to have the industrial countries reduce their emissions 
to 20 percent below 1990 levels by the year 2005 and then keep 
them there from there on.
    The European Union has made a somewhat more modest proposal 
of a limit of 85 percent of 1990 levels in the year 2010. They 
ask that a bubble be provided, essentially for the European 
Community, that the European Community be allowed to work out 
its own set of arrangements for meeting that goal while the 
rest of the world, each country, was subject to a uniform 
target.
    The United States position is not yet explicit, but one 
possibility that seems potentially consistent with things the 
administration has been working on would be to cap emissions 
from industrial countries at 1990 levels from 2010 onwards. 
That is probably the least binding of the targets that seem to 
be underway in the negotiations.
    I will actually concentrate on that one because that 
proposal by itself would have serious economic consequences for 
the United States and any of the others would have potentially 
similar but larger consequences of the same kind.
    So we can add to most of the things that I say, and if one 
of the more severe proposals is adopted, it will be worse in 
the same direction.
    Any of these proposals would have serious consequences for 
the U.S. economy as a whole. They would affect the trade 
position of the United States and they would reduce the 
international competitiveness of energy intensive industries.
    I have not mentioned this much in my prepared statement 
because I have taken it as a given, but let me mention that, of 
course, their most severe impacts would be on the energy 
producing industries themselves. That is something that we need 
to keep in mind when thinking about all of these consequences.
    The effects on U.S. international trade are due in large 
part to the provision in the Berlin Mandate that developing 
countries need not agree to any limits on their carbon 
emissions. Just to cite some of the kinds of economic impacts 
that are at issue, if any of these proposals is adopted in 
Kyoto, they would lead to increases in energy prices and costs 
for U.S. industry and households; they would lead to reductions 
in U.S. GDP from levels it would otherwise reach; they would 
increase the costs of U.S. industries relative to their 
international competitors; they would cause losses in U.S. 
exports and losses in output and jobs in specific energy 
producing and energy intensive industries.
    I thought what I would do in the remaining time that you 
have allotted to me is just go through these kinds of impacts. 
There are, basically, 10 points that I will try to hit and I 
will try to hit each of them briefly. Then I will make myself 
available for your questions.
    The first point is that even the goal of holding emissions 
at 1990 levels through 2010 will require a substantial 
reduction of carbon dioxide emissions from levels they would 
otherwise reach. The U.S. Energy Information Administration 
forecasts that carbon dioxide emissions will be 20 to 25 
percent above 1990 levels by the year 2010. That means it will 
take a 25 percent reduction in emissions from what they would 
otherwise reach in order to meet these targets.
    This is going to require quite substantial policies. The 
administration has indicated a preference for a cap in trade 
system like that which was set up for sulfur emissions under 
the Clean Air Act. Another alternative is a carbon tax. We can 
discuss differences between them at some point. But they will 
have similar implications for the cost of energy and the prices 
that consumers and businesses face.
    Our studies indicate that the price of an emission permit 
that is sufficient to meet this cap of holding emissions to 
1990 levels would have to reach $150 to $200 per ton of carbon 
to introduce sufficient fuel switching and energy conservation 
to reduce emissions by the 25 percent that is required. This is 
equivalent to about a 50 cent per gallon tax on gasoline, fuel 
oil, and other petroleum products using industry. It would be 
an increase of 50 percent or more in the price of natural gas 
and electricity to households and businesses. And--I am always 
surprised when I do this calculation but I checked it again--it 
would increase the price of coal by a factor of about 4 at the 
mine mouth.
    The result of these higher costs of energy would first be a 
loss of aggregate output in the economy. Since this topic may 
come up later, like all other economic modelers, we assumed 
that the revenues from taxes and permits are recycled in the 
economy. It is not the collection of revenues that causes 
damage to the economy. It is the change in patterns of energy 
use and patterns of production and trade patterns that add up 
to that loss in GDP.
    We estimate that, again, for the limit of just holding 
emissions at 1990 levels, the cost would be on the order of 1 
percent of GDP in the year 2010, rising to about 3 percent in 
later years. I think those are substantial and significant 
economic impacts.
    Countries that do not adopt emission limits, the developing 
countries that are left out of the process right now, would not 
incur these costs. These disparities in energy costs will give 
some developing countries a competitive advantage over the 
United States.
    I have given in my prepared testimony examples of some of 
the countries that might gain such advantages. Jamaica, because 
it is an oil importing country, will benefit from lower world 
oil prices. It produces bauxite, which is a highly energy 
intensive product which competes with the U.S. aluminum 
industry.
    India, another oil importing country, also has the 
industrial infrastructure to take advantage of lower costs and 
compete in a variety of manufactured products.
    China, the world's most energy intensive economy, would 
probably gain significantly in its export markets because it 
would no longer face such a disadvantage in energy costs if the 
industrial countries imposed these costs on their manufactured 
goods and exports.
    Industries that are most likely to be affected by carbon 
limits are, first of all, the energy producing industries. The 
kinds of reductions in coal production Mr. Cunningham was 
talking about sound reasonable to me. They not only mean 
cutting off growth in coal. They mean substantially lower 
levels of output for the coal industry in 2010 and beyond than 
it has today.
    But there are other energy intensive industries that are 
likely to be substantially affected. I have put in my prepared 
testimony a chart which shows the cost increases that we would 
expect for the top 25 non-energy industries, that is, 25 out of 
about 100 industries the way we put them together, due to a 
$100 a ton carbon tax. It shows, for example, that the aluminum 
industry would face cost increases of about 12 percent.
    Now we have looked at the implications of these kinds of 
cost increases in a couple of our economic models. One is a 
broad model that looks at patterns of international trade and 
it suggests that, in general, for the non-ferrous metals 
industry, we would expect to see losses in output--this is not 
just exports, but losses in total output--of 2 percent to maybe 
10 percent, depending on the region and the strength of the 
emission limit that we are looking at, and corresponding 
increases in output for the non-ferrous metals industries in 
China, in India, and in the rest of the world.
    So we definitely reach the conclusion that there will be 
shifts in output and that carbon limits in the industrial 
countries not applied to the developing countries will produce 
a significant shift in the production of some energy intensive 
goods away from countries like the United States and toward 
developing countries that would not be subject to these 
emission limits.
    Now this shift of energy intensive industries to developing 
countries not subject to emission limits also frustrates the 
environmental objectives of the United Nations treaty because, 
as those countries increase the output of their energy 
intensive industries and increase their use of energy, they 
will increase their carbon emissions. This is known as the 
phenomenon of leakage.
    Different studies with different models have seen leakage 
anywhere from 10 percent to 70 percent of the emission 
reductions that would be recurring in the industrial countries. 
At the high end of the range, that says for every 3 tons of 
emission reduction in the U.S., we would only reduce global 
carbon emissions by 1 ton. That reduces immensely the cost 
effectiveness of any policy. It increases in direct proportion 
what it costs to meet any goal for protecting the global 
climate, which, of course, depends on what every country's 
emission reductions are.
    Let me conclude by pointing out--and this, again, follows 
on a point Mr. Cunningham made--that the economic costs to the 
U.S. economy from these near-term emission limits are neither 
necessary nor sufficient for achieving the goals that are 
expressed in the Framework Convention on Climate Change.
    Climate change depends on the concentrations of greenhouse 
gases in the atmosphere. There are many different time paths 
for emissions by which we could achieve any target for 
concentrations of greenhouse gases. Choosing one of those time 
paths which delays emission reductions until technologies can 
be developed to make those emission reductions cheaper and to 
allow normal turnover of the capital stock and avoid stranding 
assets throughout the economy can reduce costs by about 30 
percent.
    Bringing the developing countries into the process so that 
emission reductions occur where they are cheapest, like in 
China, with its immensely inefficient coal fired power plants 
they will be building over the next century, can reduce costs 
further.
    We conclude that appropriate timing of emission reductions, 
which really means delay of the emission reductions well beyond 
any of the targets and timetables that are being looked at in 
the Berlin process and including developing countries can 
reduce the costs by 90 percent and leave us at the same point 
or even better in terms of the objectives of the Framework 
Convention.
    Thank you.
    [The prepared statement of Dr. Montgomery follows:]
               Prepared Statement of W. David Montgomery
    Mr. Chairman and members of the Subcommittee, I am honored to 
appear before you to discuss the potential economic impact of a United 
Nations' global climate treaty. For the record, my name is David 
Montgomery and I am Vice President of Charles River Associates (CRA) 
and head of the CRA environment practice. I have been involved in the 
analysis of economic impacts of climate policies since the late 1980s, 
when as Assistant Director for Natural Resources and Commerce, I 
directed the Congressional Budget Office study of carbon taxes. I was a 
principal lead author of the Second Assessment Report of the 
Intergovernmental Panel on Climate Change (IPCC), with responsibility 
for sections on the economic impacts of limiting carbon emissions. 
Under my direction, we have conducted a series of studies on economic 
impacts of climate chance policies at CRA, with support from the 
Electric Power Research Institute, the American Petroleum Institute, 
the American Automobile Manufacturers Association, and other clients.
    In particular, my colleagues and I have developed a set of 
integrated economic models that deal with international trade and 
national economic impacts of such limits. I will draw on the results 
from several of our studies to cover the range of economic impacts that 
I believe should be of interest to the subcommittee. We are continuing 
to investigate these issues, and expect to be completing new estimates 
of economic and trade impacts shortly. I would be happy to provide 
copies of our more detailed studies dealing with these issues for the 
record.
    As you are aware, international negotiations are now in progress 
leading up to a meeting in Kyoto, Japan in December. These negotiations 
are taking place under a set of ground rules known as the ``Berlin 
Mandate,'' referring to the location of the First Conference of the 
Parties to the Framework Convention on Climate Change (COP-1). 
Negotiations under the Berlin Mandate are intended to produce a 
``protocol, or other legally binding agreement'' incorporating 
quantitative objectives for limiting and reducing Greenhouse gas 
emissions, for the years 2005 to 2015, and excluding any additional 
commitments on the part of developing countries.
    A number of proposals for such emission limits have been 
introduced. Three of the most important are from the Alliance of Small 
Island States, the European Union, and the United States.

          AOSIS: limit greenhouse gas emissions from industrial 
        countries to 80% of 1990 levels from 2005 onwards.
          European Union: limit emissions from industrial countries to 
        85% of 1990 levels in 2010, with a ``bubble'' for the European 
        countries.
          United States: support for ``hard targets in the medium 
        term,'' without committing to specific targets or timetables. 
        One possibility is capping emissions from industrial countries 
        at 100% of 1990 levels from 2010 onwards.

    Any of these proposals, if adopted, would have serious consequences 
for the United States economy as a whole, affect the trade position of 
the United States, and reduce the international competitiveness of 
energy-intensive industries. The consequences for U.S. international 
trade are due in large part to the provision in the ``Berlin Mandate'' 
that developing countries need not agree to any limits on their carbon 
emissions.
    The important economic impacts of proposals that could be adopted 
in Kyoto include increases in energy prices and costs for U.S. industry 
and households, reductions in GDP, increases in costs of U.S. 
industries relative to their international competitors, losses in U.S. 
exports, and losses in output and jobs in specific energy producing and 
energy-intensive industries. I will use results from Charles River 
Associates' study of a proposal to cap emissions at 1990 levels from 
2010 onward to illustrate the potential impacts of an agreement in 
Kyoto. Any of the other proposals would have similar, but larger, 
impacts.
    The remainder of my testimony is organized to answer the following 
questions:

   How large a reduction in carbon dioxide emissions could be 
        required?
   How high will the required carbon tax or price of emission 
        permits be?
   How much will energy prices increase?
   What losses in GDP are likely?
   How great a disparity in energy costs between the United 
        States and its international competitors will be created?
   How will the U.S. terms of trade with other countries be 
        affected?
   How will U.S. exports be affected?
   How will output of specific energy intensive industries be 
        affected?
   How does increasing production of energy-intensive goods in 
        developing countries affect progress toward global climate 
        policy objectives?

    Holding emissions at 1990 levels from 2010 onwards will require 
significant efforts, because in the absence of limits on emissions, 
economic growth will cause rising demand for energy services. Even 
assuming that there will be substantial future improvements in energy 
efficiency, the U.S. Energy Information Administration projects that 
carbon emissions are likely to grow to more than 20% above 1990 levels 
by 2010. Thus it would be necessary to reduce emissions by 25% or more 
below the levels they would otherwise reach to meet the 1990 target, 
and further to comply with more ambitious proposals.
    The Administration has indicated that its preferred method of 
implementing an emission limit is through a ``cap and trade'' system, 
similar to that pioneered in the sulfur emission trading program 
created by the Clean Air Act Amendments. The price of a carbon emission 
permit would be set in the emission trading market, and would equal the 
marginal cost of reducing emissions to the required level. Taken from 
another perspective, the price of an emission permit would equal the 
carbon tax required to reduce emissions to the level of the cap. Our 
studies estimate that the price of emission permits would have to reach 
$150 - $200 per ton to induce sufficient fuel switching and energy 
conservation to reduce emissions by 25% in 2010. This is the cost of 
the most expensive measures required to meet the target - such as 
building new natural gas combined cycle units to replace coal in 
existing electric utility power plants, or increasing the cost of new 
cars to achieve large increases in fuel economy.
    This cost would be reflected in the market prices of different 
forms of energy. A cost of $200 per ton of carbon is equivalent to 
approximately a 50 cent per gallon tax on gasoline, fuel oil, and other 
petroleum products used in industry, and an increase of 50% or more in 
the price of natural gas and electricity to industry and households.
    The result of these higher costs of energy would first be a loss in 
aggregate output in the economy. It is important to emphasize that this 
loss comes about not because of revenue that would be collected by the 
Treasury. Like all other economic models, we assume the revenues from 
taxes or permits are recycled in the economy. The economic cost of 
emission limits comes from the costs that must be incurred to reduce 
energy use and switch fuels in order to meet the limits. This is true 
whether carbon taxes or tradable permits are used. We estimate that 
holding carbon emissions to 1990 levels from 2010 onward would cause 
GDP losses on the order of 1% of GDP in 2010, rising in later years as 
greater efforts are necessary to hold to the cap with rising energy 
demand.
    Countries that do not adopt emission limits will not incur these 
costs. Indeed, energy importing developing countries will benefit from 
lower energy costs than they would face in the absence of emission 
limits, because the drop in fossil fuel demand in industrial countries 
will put downward pressure on the prices of oil and coal imported by 
developing countries. These disparities in energy costs will give some 
developing countries a competitive advantage over the United States. 
The countries in the best position to exploit this benefit are the more 
advanced developing countries like Korea, that import most of their oil 
supplies - thus benefiting from lower world oil prices - and have the 
industrial infrastructure in place to take advantage of their lower 
costs and increase their share of world markets.
    Differences in energy costs will affect the terms of trade between 
the U.S. and regions of the world not included in the negotiations for 
emission limits. Terms of trade measure the price received for exports 
divided by the price paid for imports. When the terms of trade rise, it 
means that export prices have risen relative to the cost of imports. 
The result is that U.S. exports are less competitive on international 
markets, and imports are more competitive in U.S. markets. We estimate 
that limiting U.S. emissions to 1990 levels would cause the cost of 
U.S. exports to rise, relative to the cost of imports, by about 1%.
    Overall, U.S. exports are likely to fall, and exports from non-
participating countries are likely to rise as a result of the costs 
imposed on the U.S. by carbon limits. Figure 1 displays our estimates 
of changes in exports from the United States and selected developing 
countries, due to adoption of carbon limits in the U.S. and other 
industrial countries.



    Jamaica's exports are likely to increase because Jamaica imports 
oil, whose cost will fall, and exports bauxite, a very energy intensive 
material. Indonesia is in a position to use its domestic oil and gas 
production to support increases in its exports of non-energy goods, and 
China is a very energy-intensive economy whose products will become 
more competitive when energy costs increase in the industrial 
countries. India is an oil importing country with the industrial base 
to take advantage of lower energy costs.
    The industries whose competitiveness is most likely to be affected 
by carbon limits are energy intensive industries. Figure 2 gives an 
indication of which industries are most likely to be affected. It shows 
the increase in cost likely to be caused by a $100 permit price or tax 
on carbon. Both direct costs due to higher energy costs in the industry 
itself, and indirect cost increases due to changes in the costs of 
materials purchased by the industry, are included. The industries 
particularly at risk include cement, pulp and paper, copper, iron and 
steel, and aluminum.




    How large a loss in output will be caused by such cost increases 
depends on several factors: how sensitive demand for the products of 
the industry is to their price, what kinds of substitutes are 
available, and in particular whether competitors producing the same 
goods in other countries are subject to the same emission limits.
    Figure 3 contains results from our most comprehensive dynamic model 
of international trade that incorporates 9 world regions, 6 non-energy 
industries, and a detailed representation of energy production and use. 
These results give an example of how emission limits applying to just 
the industrial countries could affect output of the nonferrous metals 
industries, which include several of the industries with the largest 
likely cost increases in Figure 2. Output of these industries in the 
United States and all other OECD countries would fall, while output in 
developing countries such as China not subject to emission limits would 
rise.
    Employment in affected industries will be also be reduced by the 
reduction in their output, compared to levels projected in the absence 
of emission limits. Energy industries, of course, will shrink most, 
with coal likely to suffer the largest losses.




    In another recent study, we examined three energy-intensive 
industries in more detail: aluminum, copper, and pulp and paper. In all 
three cases we concluded that increased energy costs due to emission 
limits could have significant effects on output of these industries in 
the United States between 2010 and 2030, ranging from about 5% for the 
copper industry to over a 50% loss in output for the aluminum industry. 
We made these estimates by comparing the cost of expanding capacity in 
countries not subject to emission limits to the costs of continuing 
operations in the United States. We concluded that because of their 
advantages in energy cost, many of the countries that are exempt from 
carbon limits under current proposals could expand output and capacity 
at a cost less than the cost of continued operations in the United 
States, and at significantly less than the cost of adding new capacity 
in the United States.
    The shift of energy-intensive industries to developing countries 
not subject to emission limits also frustrates the environmental 
objectives of the United Nations treaty. Since the developing countries 
will be producing more energy-intensive goods, and using more energy, 
than they would in the absence of emission limits on the industrial 
countries, carbon emissions from developing countries will rise. This 
increase in emissions from exempt countries is known as ``carbon 
leakage.'' In another recent study my colleagues estimate that carbon 
leakage could be about 12% -- for every 8 tons of emissions reduced by 
the United States, global emissions would fall by only 7 tons because 
there would be I ton of increased emissions from developing countries. 
Other studies have found even higher leakage, some implying that two-
thirds of the emission reductions from the industrial countries would 
be offset by increases in the developing world. (see T. F. Rutherford 
in An Economic Perspective on Climate Change Policies, American Council 
for Capital Formation, 1995). The phenomenon of leakage follows solely 
from the failure to include developing countries in the process of 
limiting emissions, and significantly increases the cost of reaching 
any goal for global emissions.
    Finally, I would like to put these economic impacts in a broader 
perspective. Near term limits on emissions from the industrial 
countries are neither necessary nor sufficient to address global 
climate change. These are the issues of ``where and when'' flexibility. 
As the Framework Convention on Climate Change itself recognizes, it is 
the concentration of greenhouse gases in the atmosphere that matters 
for climate change. There are many different time profiles of emissions 
that can produce the 
same effect on ultimate concentrations of greenhouse gases (the 
definitive study on this subject is by Wigley, Richels and Edmonds in 
Nature, March 1996.) Delaying emission reductions to allow time to 
develop new technologies that will provide substitutes for fossil fuels 
at lower cost than any available today, and to deploy those 
technologies as the capital stock turns over naturally, can reduce 
economic impacts dramatically.
    Costs can also be reduced by bringing developing countries into the 
process. As Figure 4 illustrates, the developing countries will be 
responsible for the vast majority of the world's carbon emissions over 
the next century. Even eliminating carbon emissions from the industrial 
countries would not be sufficient to keep carbon concentrations in the 
atmosphere from rising. Moreover, countries like China could reduce 
emissions from planned coal-fired power plants far more cheaply than 
the United States can squeeze further improvements out of its already 
efficient systems.




    Figure 5 illustrates the cost savings that are possible. These 
results were developed as part of an IPCC exercise examining where and 
when flexibility. The first bar represents the costs of meeting the 
AOSIS targets as a reference. Each other bar shows global costs of 
achieving the same total reduction in emissions that would be achieved 
under AOSIS in the 2000-2050 time period. The second bar assumes that 
the industrial countries are still solely responsible for emission 
reductions, but are allowed to choose the timing of emission reduction 
flexibly. The third bar assumes no flexibility in timing, but that the 
burden of achieving the emission reductions required by AOSIS is spread 
across all countries, including developing countries. The fourth bar 
includes both flexible timing and inclusion of developing countries in 
emission reduction. These results show that it is possible to reduce 
costs by 90% by allowing time to develop lower cost technologies and to 
bring developing countries fully into the process of reducing 
emissions. All this is possible while achieving the same results for 
protection of the global climate.



    To recap my testimony, let me make a series of points.

   The proposals now under consideration in negotiations on the 
        United Nations climate treaty could have significant economic 
        impacts on the United States.
   They would increase energy costs in the United States 
        relative to competing countries that are not being asked to 
        make commitments to reduce carbon emissions.
   These cost increases are likely to reduce U.S. exports and 
        confer trade advantages on industries in the same developing 
        countries.
   Energy-producing and energy-intensive industries are likely 
        to suffer losses in output and employment if any of these 
        proposals are adopted.
   Failure to include developing countries in any agreement to 
        limit emissions results in carbon leakage that significantly 
        increases the cost of achieving the goals of climate policy.
   Substituting investment in science and technology for near 
        term emission limits, and including developing countries in 
        commitments to limit emissions, can reduce costs by as much as 
        90% while achieving the same or better effects on 
        concentrations of greenhouse gases in the atmosphere.

    Senator Hagel. Dr. Montgomery, we thank you very much.
    Senator, we have a vote right now. I think this will be a 
good time to recess until we return.
    The subcommittee will stand in recess and we will be coming 
straight back.
    [Recess]
    Senator Hagel. The subcommittee will come to order.
    We have been joined by my colleague from Wyoming, Senator 
Craig Thomas, who is a member of the full Foreign Relations 
Committee as well as this subcommittee and who also serves as 
chairman of the Asian Subcommittee. I would ask Senator Thomas 
for any comments or remarks.
    Senator Thomas. Thank you, Mr. Chairman. I have a couple 
some remarks to make.
    As I stated last week, I am opposed to any efforts that 
would set legally binding targets and timetables on developed 
countries to reduce greenhouse emissions, while at the same 
time exempting developing countries. I do not believe this 
process is based on good policy judgments, or sound science.
    Restricting economic growth in this country while allowing 
developing nations, such as China, Mexico, South Korea, Brazil, 
and India the unlimited use of fossil fuels will insure nothing 
less than worsening the problem we claim we want to fix.
    I am pleased that 64 Members of the Senate have co-
sponsored the resolution introduced by Senators Byrd and Hagel, 
which represents this same point of view.
    Hopefully, we will get the attention of the administration 
and they will refrain from signing any binding agreement for 
industrialized countries in Kyoto this December. Rushing into 
this agreement will, I believe, hurt America's economic 
competitiveness for questionable benefits.
    I am also concerned that the U.S. will see a shift of jobs 
from our soil to overseas. We should constantly work to reduce 
air pollution. But we should continue to do that around the 
world, and everyone must participate.
    However, this must be done in a manner that does not 
threaten our jobs or international competitiveness.
    I appreciate the efforts of the chairman and this 
subcommittee to continue to work on this. I shall continue to 
work on it as well. I hope we can slow the administration, stop 
the administration, from committing to any binding agreements.
    Mr. Chairman, I am pleased to be here and glad you are 
having this hearing.
    Senator Hagel. Senator Thomas, thank you.
    Now I would like to introduce our fourth panelist, Jerry 
Jasinowski, who is President of the National Association of 
Manufacturers.
    Jerry, we are pleased to have you. I understand you have a 
date with Carol Browner at 11:30. We would be very pleased to 
receive your remarks and then in whatever time you have 
remaining, Senator Sarbanes and the rest of us might ask a 
question or two.
    Senator Sarbanes. Has Dr. Repetto given his testimony?
    Senator Hagel. He will be next, after Mr. Jasinowski.

  STATEMENT OF HON. JERRY J. JASINOWSKI, PRESIDENT, NATIONAL 
         ASSOCIATION OF MANUFACTURERS, WASHINGTON, D.C.

    Mr. Jasinowski. Thank you very much, Mr. Chairman. I would 
want to say good morning to Senator Thomas and Senator Sarbanes 
and to thank the committee for its leadership on this very 
important issue.
    I have a longer statement I would like submitted for the 
record and would like to make several points briefly in summary 
about the economic impact and why this is an unworkable treaty.
    As you know, I am President of the National Association of 
Manufacturers. We have 14,000 companies, 10,000 of which are 
small, all across the country, covering all the industries that 
would be impacted by this treaty and representing 18 million 
workers.
    As a result, we have a very big stake in this, Mr. 
Chairman, and I would say that, first, we feel that the global 
climate issue is a very important one and that we ought to 
continue to make progress in understanding it and make progress 
in even reducing emissions through means of greater energy 
efficiency, exporting technology that reduce pollution abroad, 
and studying this problem so that we understand the real 
science.
    Manufacturers have been responsible for about two-thirds of 
the investment in pollution control over the last 2 decades, 
and we have a terrific record in the United States of having 
made progress on air quality. We want to continue to do that.
    Our record certainly is as good or better than that of the 
Europeans, notwithstanding some of the comments in the press 
recently by the Europeans.
    Our problem with this proposal, Mr. Chairman, is that it 
calls for a legally binding international agreement on only 
industrialized countries, not the developing countries, which 
will make it unworkable since we won't be able to reduce 
emissions properly, and it also will put us at a considerable 
trade and competitive disadvantage, which will cause the loss 
of jobs in this country and severely damage several industries. 
This, in turn, will affect workers and have an enormous effect 
on the economy as a whole.
    Let me say before I go into the details of the economic 
impact that I would want to subscribe to pretty much everything 
that David Montgomery said. As I carefully listened to what he 
said, the range of economic estimates that he made for every 
aspect of a proposal to cap the 1990 emissions by 2010 reflects 
pretty much what we know from the studies that we have looked 
at as well as a great deal of information from these real live 
manufacturers who are out there analyzing and trying to 
understand what this treaty means.
    I think that the estimates are pretty much congruent with 
Mr. Cunningham's proposals and analyses as well. But let me go 
through and repeat these in terms of six major reasons why we 
are opposed to a legally binding treaty--not opposed to moving 
forward with dealing with this important global issue.
    I might say before doing that that we support Senate 
Resolution 98, which you have shown great leadership in 
sponsoring as well.
    Turning to the enormous negative impact associated with 
this on the economy as a whole and repeating some of what David 
Montgomery said, if you look at this overall, what you see from 
DRI studies, his analyses, comments and analyses from Professor 
Nordhaus, the Australian studies, basically you see a 1 to 2 
percent reduction in GDP growth, which would give you roughly a 
$100 billion plus increase in costs associated with moving or 
capping the 1990 emissions.
    It could be as high as $200 billion, but let's take the 
most conservative estimates.
    From this, you see from our members and the Argonne Lab 
analyses that we are looking at a 5 to 10 percent increase in 
the cost of most of the industries affected. Mr. Montgomery's 
chart does an excellent job of telling you precisely what 
industries these are. But we are talking about steel, 
petroleum, paper, coal, chemicals, transportation, aluminum, 
utilities, and all the related industries. So we are talking 
about an extraordinary expanse of American industry that would 
have a 5 to 10 percent increase in their costs.
    Now, Mr. Chairman, as you know, in today's global economy 
you cannot raise prices. The average price increase for 
manufacturing over the last 5 years has been 1 to 2 percent. It 
is impossible--it is impossible--to pass on a 10 percent 
increase in this global economy. So what happens? The next 
thing is that you lose out on your global competitiveness. You 
are not able, of course, to export. Once that happens, you look 
at it and say look, I cannot produce in the United States the 
way I could before. Unfortunately, Mr. Chairman--this is not 
suggested as any kind of threat; it is the reality--firms will 
move abroad. This absurd design of the treaty that leaves out 
developing countries means that we are going to move to 
developing countries in order to produce cement, or chemicals, 
or these other matters. This is going to mean an extraordinary 
loss of jobs, which is a very large part of the reason that the 
NAM and the AFL-CIO both oppose this binding, legal agreement 
at this time.
    So if you look at the macro effects, they are enormous in 
terms of GNP, trade competitiveness, the cost of industries, 
the specific industry affected, and in jobs.
    As you go down that ladder, it also gets very damaging with 
respect to consumers and workers.
    Now the job estimates are hard to come by altogether. In my 
own testimony, in the written part, I would like to correct a 
statement at the beginning, where it says millions of jobs 
lost. My estimate is that we are talking about something 
between 1 million and several hundred thousand. Some suggest, 
and I know the AFL-CIO think, that it could be even higher. I 
don't know that it ever got into the millions.
    What was the highest estimate that you had?
    Mr. Cunningham. We estimated at 1.25 to 1.5 million. That 
is based upon the administration's study for stabilization at 
1990 levels.
    Mr. Jasinowski. I could go to 1.2 million. I just did not 
want to suggest that it is millions and millions. We are 
talking that it could be that, but we are talking, 
conservatively, about something in the range of a million to 
several hundred thousand associated with these GNP losses.
    The numbers are hard to believe, as Mr. Montgomery said--a 
50 percent increase in gasoline, a four-fold increase in coal, 
fuel oil increases of 60 to 70 percent. These are at, again, 
the minimum proposal that is being discussed in this treaty 
negotiation.
    So what you have here as a result of these extraordinary 
economic impacts is this. I really should have mentioned 
agriculture, where you see, and I am sure you are aware in your 
own State, everything from fuel oil to fertilizer, to 
pesticides, are going to increase in costs. Our ability to 
compete in terms of the farm industry is going to be damaged.
    As a result, what we see are small business, energy 
intensive industry, manufacturing, utilities, agriculture, 
labor unions, and I think increasingly mayors and Governors 
saying why are we in a situation where we are pursuing an 
extreme set of proposals in terms of its economic impact and at 
the same time, to go to my next point, leaving out the 
developing countries.
    In my statement I say not only do you harm the United 
States economically because what you do is put them at a trade 
disadvantage and you shift production abroad, but what you have 
because of leakage and what you have because you are leaving 
out these developing countries is that you don't achieve your 
goal.
    I mean, it is a little bit absurd, when we are looking 
forward over the next decade or so, where the developing 
countries will contribute three-quarters of the greenhouse gas 
emissions, and where China's emissions are going to double, 
that we would, in fact, consider a proposal where we would 
shoot ourselves in the foot economically, give a competitive 
advantage to the developing countries that we are struggling to 
compete with, and we support open trade, and we support fair 
competition, and we fought along many of you for China MFN. Why 
would we, in fact, give ourselves a competitive disadvantage 
and then not achieve our environmental goal because of leakage 
and the fact that these people do not have to comply with the 
treaty?
    It is, I think, even for serious analysts, absurd to really 
think that this kind of proposal makes sense for the American 
people.
    If you go on and look at other aspects of the economic 
impact, besides the ones that I mentioned, you begin to ask 
yourself this question: If the economic impact is so large and 
if by leaving out the developing countries the treaty becomes 
so unworkable, what about the rest of the proposals with 
respect to the treaty in terms of a mechanism that will achieve 
the results?
    There I think what is striking is the extent to which we do 
not really know what the administration proposal is.
    Now I know that there is some inconsistency in what I am 
saying. On the one hand, I am outraged by what are, I think, 
some extraordinarily ambitious environmental goals and their 
negative impact. On the other hand, we don't know what the 
administration is proposing.
    I must say in my 15 years of public policy experience that 
I have never seen a case where we had something this important. 
Some people suggest that it has the largest potential economic 
impact on the United States of anything--the tax bill, the 
regulatory bill that we heard announced yesterday--and yet we 
have very few facts from the administration as to what our 
proposal is. We are supposed to go to Kyoto in 6 months and 
decide this legally binding treaty.
    We don't know what the economic impact is. We don't know 
what the goals are. We don't know what mechanism it will be. Is 
it a carbon tax? Is it a trading system? How do we do it? Then, 
beyond that, what is the enforcement mechanism that would 
achieve this?
    People talk, and I certainly am sympathetic to trading 
mechanisms because they use price signals. But can you imagine 
a trading regime on a worldwide basis even being able to track 
emissions well enough to know who can trade what? I think it is 
very close to impossible.
    So what you have, I think, is a lack of specifics as to 
what we are asking the Senate and this committee to go forward 
with. It seems to me this cries out for a much larger national 
debate before we go forward with this treaty.
    So in conclusion, Mr. Chairman, we think that we ought not 
to go forward with the legally binding treaty at this time 
because we don't have enough information on the science, which 
I have not gone into but you have taken great testimony on it 
and it is not convincing. The adverse economic impacts are 
huge. We ought not to go forward as long as the developing 
countries are not full participants.
    Now I have debated the environmentalists on this issue many 
times and all of them who are thoughtful analysts agree that 
this will not work unless the developing countries are 
included.
    Bill Nordhaus, who is a leading economist who supports 
moving forward, says it won't work unless you've got the 
developing countries.
    So let's not kid ourselves. Let's take time to do the 
analyses and have the national debate that this important issue 
requires.
    Thank you, Mr. Chairman.
    [See appendix for longer statement submitted by Mr. 
Jasinowski.]
    [The prepared statement of Mr. Jasinowski follows:]
                 Prepared Statement of Jerry Jasinowski
    Senator Hagel, and others: Good morning. My name is Jerry 
Jasinowski. I am President of the National Association of 
Manufacturers, the nation's oldest and largest broad-based industrial 
trade association. Its 14,000 member companies and subsidiaries, 
including approximately 10,000 small manufacturers, are in every state 
and produce about 85 percent of U.S. manufactured goods. The NAM's 
member companies and affiliated associations represent every industrial 
sector and employ more than 18 million people. The NAM's mission is to 
enhance the competitiveness of manufacturers and improve living 
standards for working Americans by shaping a legislative and regulatory 
environment conducive to U.S. economic growth, and to increase 
understanding among policymakers, the media and the general public 
about the importance of manufacturing to America's economic strength.
    The National Association of Manufacturers opposes a legally binding 
international agreement on climate change that requires industrialized 
nations to reduce level of greenhouse gas emissions, to the exclusion 
of developing nations. Such an agreement would hurt America's 
manufacturers, workers and families, with little or no environmental 
benefit, since new restrictive energy policies in the U.S. simply would 
force the flight of U.S. investment to developing countries. Millions 
of Americans would lose their jobs, and American manufacturers could 
take a severe hit in the world marketplace. With no consensus in the 
scientific community to support the theory of enhanced global warming, 
it makes no sense for the U.S. to participate in an international 
political compromise that would employ drastic measures without 
reaching its goal.
    I commend the Chairman for his leadership in holding this hearing 
today to help get more input on this important issue. We support Senate 
Resolution 98, sponsored by 64 senators, which Senator Byrd and Hagel 
introduced recently. We appreciate your leadership on this critical 
issue that will affect all Americans.
    On behalf of the NAM, let me suggest six areas that animate our 
opposition to adoption of a binding treaty this year:

1. First, Adoption of Legally Binding Emission Reduction Commitments 
Will Profoundly Impact the U.S. Economy.

    If legally binding caps are placed on greenhouse gas emissions in 
developed countries and not on developing countries as well, the United 
States will experience a slowdown in economic growth, a reduction in 
manufacturing productivity and competitiveness, a flight of domestic 
industry to locate abroad, and a loss of jobs. These are indisputable 
facts supported by a number of studies.
    According to William Nordhaus of Yale University, ``the magnitude 
of the global investments necessary to make a significant dent in the 
problem (would be) probably hundreds of billions of dollars a year.''
    A report prepared by DRI/McGraw Hill estimated a decline in the GDP 
of 2-3 percent ($140-200 billion) if carbon emissions are stabilized at 
1990 levels by the year 2010. A recent study by the Pacific Northwest 
Laboratory found that stabilizing greenhouse gas emissions will result 
in a 1-2% reduction in GDP.
    We have learned from our members that some industries are at 
particular risk: primary aluminum, primary ferrous metals, iron ore 
mining, pulp and paper mills, chemical and fertilizer mineral mining, 
industrial chemicals, and transportation industries. Production costs 
could increase substantially; for example, 15% for blast furnaces and 
steel mills, 9% for primary aluminum, chemical and fertilizer mineral 
industries, and 6-8% for paper and pulp mills.
    A draft report not yet published by the Department of Energy's 
Argonne Lab evaluated the impacts of reducing greenhouse emissions to 
1990 levels by the year 2010. One scenario estimates the price of 
electricity would increase by 50 percent, the price of coal would more 
than double, the price of natural gas and fuel oil would increase by 
70-80 percent. As a result, the U.S. trade competitiveness in six 
energy-intensive industries would significantly decline, and those 
industries would relocate production capacity abroad to developing 
countries with no emission caps. These industries include: iron and 
steel, petroleum, paper and allied products, aluminum, chemical and 
cement industries.

2. Proposed Commitments Would Also Result in Substantial Costs to 
Americans, Including Higher Energy Costs and Job Loss.

    A carbon tax set high enough to achieve the proposed reduction 
goals would cause gasoline, fuel oil, and electricity, prices to rise 
by 50 percent. A recent Data Research International study concluded 
that to merely stabilize emission to 1990 levels by 2010 would require 
a tax of as much as $200 per ton of carbon. That is the equivalent of 
$23 tax per barrel of oil. The impact on a family is estimated as high 
as $5,000 per year for a family of four.
    Impacts would be severe on agriculture. Crop production products, 
diesel fuel, feed and seed, electricity, and fuels, would affect food 
pricing and availability.
    The AFL-CIO's Executive Council adopted a resolution in February 
1997 condemning the exclusion of developing countries from efforts to 
negotiate legally binding carbon restrictions because it will ``create 
a powerful incentive for transnational corporations to export jobs, 
capital and pollution, and create an uneven playing field that will 
cause the loss of high-paying U.S. jobs in the mining, manufacturing, 
transport and other sectors.''
    Job losses will result from economic slowdown and rising 
unemployment. Estimates range from the DRI study's one million jobs 
lost to Charles River Associates study showing at least 250,000 
American jobs. DOE's Argonne lab estimated job losses of 23,000 for 
aluminum smelters, the chemical industry could experience job losses by 
as much as 75,000, in the cement industry by as many as 5,800.

3. By Exempting Developing Countries from the Treaty, the Proposed 
Commitments Will Negatively Impact U.S. Trade Competitiveness Without 
any Net Environmental Benefit.

    Greenhouse gas emissions in developing countries are rapidly 
increasing and are expected to surpass emissions of the United States 
and other OECD countries as early as 2015. Developing nations are 
expected to contribute 76 percent of total greenhouse gas emissions 
within the next fifty years. Developing countries are expected to be 
responsible for as much as 85 percent of the projected increase in 
carbon dioxide emissions.
    The majority of greenhouse gas emissions in the next century will 
come from China, India, Brazil, Indonesia, Singapore and others as a 
result of their projected population surges and economic growth. By 
2015, developing countries' emissions will have increased by more than 
141% over 1990 levels while the OECD countries' emissions will increase 
only 30%.
    A recently-released study from the Australian Bureau of Agriculture 
and Resource Economics stated that by the early part of the 21st 
century, China's emissions alone will be nearly double the amount 
emitted by the U.S. and triple that of the European Union.
    Developing countries will experience a surge in economic growth as 
industry shifts their production capacity abroad to areas with no 
greenhouse gas emission caps (and probably little to no environmental 
pollution control requirements). Industries leading the exodus from the 
U.S. are those that are most energy-intensive, as discussed earlier.

4. The U.S. Should Not Agree to New Commitments Without a Full Debate 
of the Economic Realities and Public Debate on Whether the Costs to the 
American Economy are Justified.

    The Administration's proposal has been inadequately developed and 
disclosed and this raises serious questions about its workability. The 
Administration's analysis of economic impacts of global climate change 
proposals has not been complete .
    What are the goals? What measures will have to be taken to reach 
those goals? How will it be enforced? These are all crucial questions 
that need to be answered as part of the Treaty negotiations.
    The Administration has given indications that it favors an 
international permit trading scheme as the implementing mechanism to 
meet a binding emissions target. EPA has been evaluating a wide number 
of implementation options. While details are still lacking, the primary 
focus has been on an emissions trading system or some form of carbon 
tax.
    A carbon dioxide trading program would be unworkable since it could 
potentially involve millions of emitters with wide variations in 
categories of sources. A carbon dioxide trading program would have to 
be administered world-wide. The initial allocation of emission permits 
would be extremely controversial and hard fought politically. Once 
assigned, how would such a system be monitored and enforced? Who would 
implement this program and how would it work?
    A carbon tax would be a blind stab in the dark, set at a 
politically acceptable (rather than scientifically defined) level with 
only the vaguest idea of whether or not it would achieve a politically 
determined level of emissions reductions.

5. Progress is Being Made to Reduce Carbon Dioxide Emissions.

    Progress is being made toward the goal established in May 1992 to 
limit greenhouse gas emissions to 1990 levels by the year 2000. Between 
1950 and 1985, carbon dioxide emissions per unit of GDP fell 1.3 
percent a year as a result of more energy-efficient technologies and 
lifestyles in our country.
    Refinements in manufacturing processes are reducing the units of 
energy needed to produce a given product; the discovery of new, lighter 
materials, insulating products, adhesives, and coatings is contributing 
to the process.
    America's manufacturers are improving energy efficiency, reducing 
emissions, accelerating commercialization of new technologies, and 
assisting governments and industries in less advanced countries.
    Individual companies, such as British Petroleum, have begun to 
develop their own carbon dioxide emission reduction plans. They include 
developing a better understanding of how emissions of carbon dioxide 
can be monitored and controlled.
    Pollution prevention and reduction efforts have resulted in more 
complete use of current inputs to the manufacturing process. The drive 
for profits and greater productivity is inseparable from the trend 
toward cleaner and more energy-efficient manufacturing techniques.
    Many NAM members are helping develop and commercialize new 
technologies to reduce greenhouse gas emissions. For example, 
electrification of machines and processes that were once powered by 
free-standing internal combustion engines; development of fuel cell 
technologies and photovoltaic cells; and innovations in lightweight 
materials. They are helping to transfer this promising new technology 
to developing countries as well.
    The Federal Government should expand its programs to promote the 
export of energy-efficient technologies as well as environmental 
pollution control and monitoring technologies.

6. Given the State of the Science, the U.S. Should Not Compromise its 
Economy and American Jobs.

    We don't have strong evidence on how much, how fast, or in which 
direction global climate change is going. So how can we set mandates on 
greenhouse gas reductions?
    The science of predicting man's influence on global temperatures is 
inexact. The argument for man-induced climate change rests on estimates 
generated by mathematical, computer-driven simulations. These models 
must be revised and updated based on new data.
    The Intergovernmental Panel on Climate Change (IPCC), a joint 
effort of the United Nations and the World Meteorological Organization, 
bases its global climate change assumptions on a General Circulation 
Model, which attempts to replicate complex climate processes. As a 
result to changes in the model and its underlying assumptions, the IPCC 
has revised its estimates of global temperature change downward by 
about 30% in its Second Assessment published in 1995, as revised from 
its original estimates presented in 1990.
    However, global temperature changes have also been measured by 
satellite, weather balloons, and land-based systems. Each method 
predicts different forecasts for global climate, some even showing 
cooling trends.
    There are other variables involved in creating global climate 
conditions. A study was published last year by the Lawrence Livermore 
Laboratory that showed global climate was affected by both warming from 
greenhouse gases and cooling from sulfates. In 1995, the IPCC agreed 
that increases in sulfate aerosols are partially counteracting warming 
due to increases in greenhouse gases.

Conclusion.

    In conclusion, we urge the Senate not to ratify any treaty that 
imposes limits or reductions in greenhouse gas emissions unless the 
science supporting global climate change is more convincing, the 
adverse economic impacts better understood, the developing countries 
are full participants, and an enforcement regime is understood. In 
short, there must be much more complete debate before the Senate is 
asked to ratify a binding treaty.

    Senator Hagel. Thank you very much, Mr. Jasinowski. Dr. 
Repetto.

  STATEMENT OF DR. ROBERT REPETTO, VICE PRESIDENT AND SENIOR 
      ECONOMIST, WORLD RESOURCES INSTITUTE, WASHINGTON, DC

    Dr. Repetto. Thank you, sir.
    My testimony today will address the two issues that we have 
been discussing, that is, the economic impacts in the United 
States of limiting CO2 emissions----
    Senator Sarbanes. Dr. Repetto, if you would pull the 
microphone closer to you, it would be helpful.
    Dr. Repetto. Yes, sir. Thanks very much.
    Senator Sarbanes. You really need to speak right into it in 
order for it to work.
    Dr. Repetto. Thank you, sir.
    Second is the relationship between the U.S. and the 
developing countries in limiting global emissions.
    I am going to provide the highlights of two reports that 
WRI, World Resources Institute, has just released, which I 
would like to submit for the record, sir.
    Senator Hagel. Yes.
    [The material was received and has been retained in 
committee files.]
    Dr. Repetto. It undoubtedly, as my predecessors said, is 
extremely important to analyze and understand the economic 
impacts of limiting CO2 emissions. The 
administration has analyzed the issue. They are apparently 
about to release a report on it. There is a large number of 
predictions and forecasts circulating outside Government. We 
just heard some of them.
    All of these forecasts and predictions are necessarily 
based on macroeconomic models that simulate the economic 
impacts of limiting fossil energy use.
    Many of these models are highly complicated. They are hard 
to understand. But, nonetheless, they are gross simplifications 
of how the economy actually works.
    They are essentially a set of assumptions, and the 
predictions that come out of them are 100 percent determined by 
the assumptions that are built into them.
    What we have done to try to understand this issue is we 
have collected essentially all of the credible economic models 
that are available, that are being used, have been used to 
analyze this issue--16 models. It includes the three that the 
administration has used. It includes those developed by the 
OECD, by some of the national laboratories, by academic 
economists at Harvard, Stanford, and elsewhere, models 
developed by consulting firms, like Charles River Associates, 
DRI.
    We have built a data base of 162 different model 
simulations of what would be the impact of enacting policies to 
limit CO2 emissions. Those predictions are presented 
graphically in Exhibit 1, in the back of my written testimony, 
Mr. Chairman.
    As you can see, being the work of economists, the 
predictions are all over the map. But this is not simply noise. 
What we have found is that 83 percent of the difference among 
these predictions is attributable to six basic assumptions 
built into the models.
    So, in other words, if you understand these 6 basic 
assumptions, you've got 83 percent of the difference among all 
of these economic predictions of the impact of limiting 
CO2 emissions, achieving any limitation targets. 
This is pretty remarkable, in fact, because it implies that the 
hundreds of other coefficients, parameters, and other 
assumptions built into the models collectively result in the 
remaining 17 percent of the differences.
    Now what are these basic assumptions?
    First, about the nature of economic behavior, will firms 
and consumers in the long run respond efficiently to changes in 
energy prices to take advantage of opportunities to limit cost 
increases and so on? Models that assume that firms and 
consumers reallocate their resources efficiently in the long 
run predict much smaller impacts from limiting CO2 
emissions.
    Second, will some backstop, nonfossil energy sources, such 
as hydroelectricity, nuclear power, solar and wind energy be 
available at stable prices as fossil fuel costs rise? If that 
is true, it will limit the increase in energy prices. Models 
that ignore the existence of nonfossil alternative energy 
sources predict much higher cost of stabilizing CO2 
emissions in the long run.
    Third, will nations cooperate to take advantage of low cost 
opportunities to reduce emissions by undertaking joint 
implementation or by trading CO2 emissions permits 
internationally?
    Models that assume that the United States must meet its 
reduction target in isolation predict much higher costs because 
there are potential gains from trade for taking advantage of 
low cost emissions reductions opportunities elsewhere.
    Fourth, will the policy instrument used to reduce 
CO2 emissions generate revenues that will be used, 
can be used, to cut other business taxes? For example, would 
business income or payroll taxes be cut and the revenues be 
made up by auctioning off carbon permits or through some tax or 
fee mechanism? Models that ignore the possibility of reducing 
other burdensome taxes through these revenues predict much more 
adverse economic impacts.
    Fifth, will reducing fossil fuel consumption avoid damages 
from a change in climate? Most of the models used to analyze 
this climate policy have no climate in them so that there are 
no potential costs to the economy, no droughts, no floods from 
climate change.
    Models that try to build in the costs of a change in 
climate predict, on balance, a less unfavorable economic 
impact.
    Finally, will reducing fossil fuel and particularly coal 
use reduce damages from conventional air pollution? Will the 
switch to cleaner fuels reduce health damages, health 
expenditures, and so on? Models that try to build in the 
reduced damages from lower pollution, again on balance, predict 
less unfavorable economic impacts.
    Now what we have done is shown the result of moving from a 
set of unfavorable assumptions on these six points to a more 
optimistic set. Exhibit 2 indicates--and I want to emphasize 
that these results are not based on our model or some ``green'' 
model; it is based on the models that are out there, other 
people's models. It simply derives from them a consensus set of 
predictions based on the underlying assumptions.
    Under the worst case assumptions, achieving the target that 
Mr. Montgomery spoke about, that is, stabilizing emissions at 
1990 levels and holding them there, would result in a loss in 
GDP of about 2.4 percent, compared to business as usual 
projections by the year 2020.
    This is not by any means an insubstantial loss. It implies 
that by 2020, the economy would be approximately 70 percent 
larger than today's rather than 74 percent larger than today's.
    The remainder of that exhibit shows the effects of altering 
those assumptions within these 16 models. Assuming that firms 
and households react efficiently cuts the loss to about 1 
percent of GDP. Assuming that joint implementation 
opportunities would be available cuts it again to about 0.5 
percent of GDP.
    Assuming that there will be noncarbon alternative energy 
sources available at competitive prices cuts the losses to a 
very small figure.
    Assuming that the policy instrument used will generate 
revenues that are then used to cut burdensome business taxes 
means that, in fact, the economy would be somewhat larger in 
2020 than it would be today. Building in the reduced 
environmental damages implies that the net economic benefits 
would be larger still.
    So these are the results of this body of analysis of 16 
models, 162. It shows a range of going from worst case to best 
case assumptions. Of course, one need not assume either the 
worst case or the best set. One can form a judgment as to what 
other realistic assumptions about how the economy will work, 
what energy sources will be available, what policy approaches 
are feasible and so on, and then derive a corresponding 
judgment about what the economic impacts will be.
    Of course, three of these key assumptions are policy 
variables. One, will we be able to practice joint 
implementations? Mr. Jasinowski says that to do that will take 
an awful lot of institutional work to create a framework. But 
all analyses show that the potential gains are very, very 
large.
    For example, it could limit the increase, the necessary 
increase, in the price of carbon fuels, reduce that increase by 
more than 50 percent if we can do joint implementation.
    Second, if revenues are raised out of this policy that are 
then used to cut other burdensome taxes, say by auctioning off 
rather than grandfathering or giving away carbon permits, that 
would have substantial economic benefits.
    Third, the Federal Government can, in cooperation with 
industry, pursue research and development programs to make 
nonfossil energy sources more widely available at lower prices. 
These are policy measures that can be used to mitigate the cost 
increase.
    Now let me just turn briefly to the question of 
international competitiveness.
    It is absolutely true that, unless the developing countries 
and the transitional countries participate, it is going to be 
impossible to stabilize CO2 concentrations. This is 
a global issue.
    There are two underlying concerns. One, which has been 
discussed extensively, is about the competitiveness if the U.S. 
and other advanced countries go first.
    I think this competitive issue is exaggerated. There is 
scant empirical evidence that having low energy prices confers 
an international trading advantage.
    There are many countries in the world that have maintained 
low energy prices, such as the former Soviet Union, Russia, 
China, Mexico, Venezuela and others. These countries have not 
been highly competitive in industry, industrial trade. As a 
matter of fact, having low energy prices has contributed to 
economic crises and collapse in many of those countries because 
they have contributed to highly inefficient deficit running 
enterprises and overall fiscal deficits.
    Consequently, since 1990, what has been happening around 
the world is that many of these countries unilaterally, for 
their own self interest and economic motives, have been raising 
energy prices.
    In the former Soviet Union, in India, in China and in other 
countries, between 1990 and 1995, fossil fuel subsidies have 
been reduced by from 45 percent. Many of these countries have 
already begun restructuring energy markets, privatizing energy 
industries, inviting participation from private, independent 
power producers, other private energy companies, with the 
result that there has been increased investment in high 
efficiency cogeneration facilities and combined cycle gas fired 
power plants because they are more efficient and cheaper.
    Countries have been doing that unilaterally throughout the 
developing world for their own economic reasons. U.S. companies 
have been participating in that business.
    They have been promoting energy efficiency and renewable 
energy. Mexico, for example, has developed energy efficiency 
standards for appliances, buildings, electric motors and 
industrial boilers. India provides depreciation, immediate 
depreciation, write-off, and customs exemption for wind 
turbines and so on.
    There is no reason why these countries will not continue to 
do that because it is in their own interest whether they accept 
binding commitments to limit CO2 emissions or not.
    I think that those past and continuing policy changes to 
raise energy prices, to raise energy efficiency, and to reduce 
CO2 emissions in our major and other large 
developing, emerging market countries should not be overlooked 
in this discussion.
    Thank you very much, sir.
    [The prepared statement of Dr. Repetto follows:]
                  Prepared Statement of Robert Repetto
    This testimony addresses two issues: the impacts on the U.S. 
economy of limiting carbon dioxide emissions, and the respective roles 
of the U.S. and less developed countries in limiting global emissions. 
What follows provides -- very briefly -- the findings of two new WRI 
research reports, The Costs of Climate Protection: A Guide for the 
Perplexed, by Duncan Austin and myself, and Developing Countries 
Already Taking Action to Slow Climate Change?, by Walter Reid and Jose 
Goldemberg. Copies of those reports have been made available to the 
Subcommittee.

I. Macroeconomic Impacts of Limiting C02 Emissions

     As the United States approaches the Kyoto negotiations in December 
under the Framework Convention on Climate Change, the economic impacts 
of limiting greenhouse gas emissions are coming under increasing 
scrutiny. The Clinton Administration has analyzed this issue in an 
InterAgency Taskforce report. Widely divergent predictions about the 
costs of stabilizing or reducing greenhouse gas emissions are 
circulating outside government.
    All such predictions are based on macroeconomic models that 
simulate the economic impacts of policies that raise energy costs. 
These models are complicated and hard to understand, but nonetheless 
are gross simplifications of the real world; what modellers leave out 
influences their predictions as strongly as what they put in. The 
predicted economic impact of policies adopted to reduce carbon dioxide 
emissions depends totally on the assumptions built into the forecasting 
models.
    Fortunately, one doesn't have to be an econometrician to understand 
the key assumptions and how they affect the predicted costs. WRI 
examined 162 different simulations using sixteen widely used economic 
models, including all three that the InterAgency Taskforce used to 
analyze its climate policy options. (Exhibit I) Though the predictions 
varied substantially, we found that, across all sixteen models, only 
six basic assumptions account for eighty percent of the differences in 
the models' predictions. These six basic assumptions determine whether 
the predicted economic impacts of controlling carbon emissions are 
large or small, positive or negative. This is remarkable. It implies 
that the hundreds of other assumptions on which the models are based 
collectively account for only the remaining twenty percent of the 
difference in their predictions.
    Reasonable people can readily form their own judgments about these 
key assumptions. The most important ones are these:

    1. Will firms and consumers reallocate their expenditures 
efficiently in the long-run as energy prices increase to take advantage 
of cost-savings opportunities? Models that assume that firms and 
consumers reallocate their resources efficiently in the long-run 
predict much smaller economic impacts from limiting CO2 
emissions.
    2. Will some ``backstop'' non-fossil energy source, such 
hydroelectricity, nuclear power, solar and wind energy, be available at 
a stable competitive price as fossil fuel costs rise? Models that 
ignore the existence of non-fossil alternative energy sources predict 
much higher costs of stabilizing carbon dioxide emissions.
    3. Will nations cooperate to take advantage of low-cost 
opportunities to reduce emissions by undertaking ``joint 
implementation'' of abatement commitments or by ``trading'' 
CO2 emissions, permits internationally? Models that assume 
that the United States must meet its reduction target in isolation 
predict a much higher cost.
    4. Will revenues from energy taxes or from auctioning off permits 
to emit carbon dioxide be used to cut income, profits or payroll taxes? 
Models that ignore the possibility of using energy tax revenues to cut 
other burdensome taxes predict more adverse economic impacts.
    5. Will reducing fossil fuel consumption avoid damages from a 
changing climate? Models that incorporate the predicted impacts of a 
changing climate on the economy tend to predict, on balance, a lower 
net cost of controlling emissions.
    6. Will reducing fossil fuel -- and especially coal -- consumption 
affect damages from the conventional air pollutants? Models that ignore 
health and environmental damages from rising fuel combustion predict 
higher net costs from controlling them.

    As Exhibit II indicates, people who assume that the unfavorable 
assumptions on all these points are most realistic should expect -- 
based on simulations from all sixteen models -- that stabilizing carbon 
dioxide emissions at 1990 levels by 2010 and holding them steady 
thereafter would result in economic losses of about 2.4 percent in GDP 
in the year 2020. That would be about one-year's growth in gross 
domestic product. Were these impacts to occur, the economy in 2020 
would be about 70 percent larger than today's, rather than 74 percent 
larger under a ``business-as-usual'' scenario.
    Exhibit II also shows the implications of changing those 
unfavorable assumptions one-by-one. For example, people who think that 
the firms and households will reallocate their expenditures efficiently 
over the long-run to minimize the effects of higher energy prices 
should expect much smaller impacts -- about 1 percent of GDP in 2020 
rather than 2.4 percent. If, in addition, the availability of non-
carbon energy sources and the possibility that nations will agree on 
joint implementation are accepted as reasonable long-run assumptions, 
then people should expect that meeting this stabilization target would 
have negligible impacts on the economy twenty-three years down the 
road. Those who also accept the assumption that revenues from energy 
taxes or similar policies will be recycled to the economy through other 
tax cuts should expect a small positive impact on the economy. And, 
finally, if they believe that,avoiding climate change and air pollution 
will avert health and other economic damages, people should conclude 
from these models that the overall economic impacts of stabilizing 
carbon emissions will be even more favorable. The underlying 
assumptions strongly affect the predicted impacts.
    Of course, people need not accept all the best-case or all the 
worst-case assumptions. The chart indicates the effect of each key 
assumption singly on the predicted economic impacts of stabilizing 
emissions.
    Three of these assumptions are policy decisions:

   The United States can, and should, negotiate vigorously with 
        other nations to achieve international cooperation in 
        stabilizing carbon emissions through a system of joint 
        implementation. All nations can potentially gain.
   The federal government can choose the policy instruments 
        with which to limit carbon dioxide emissions. It can, and 
        should, restructure the tax system to lower income, profits, or 
        payroll taxes, making up the revenues through energy taxes or 
        revenues from auctioning off carbon emissions permits.
   The federal government, in cooperation with industry can, 
        and should, vigorously pursue research and development programs 
        to make renewable, non-fossil energy sources more widely 
        available at lower prices.

Through such measures the government can make sure that climate 
protection will not adversely affect the economy.

II. International Competitiveness

    The Framework Convention and the Berlin Mandate negotiated in 1995 
agreed that developing and developed countries should have 
differentiated responsibilities, in view of the preponderance of 
developed country emissions and the lower incomes per capita emissions 
of developing countries. Nonetheless, a resolution recently circulated 
in the Senate states that the United States should not accept binding 
commitments to reduce emissions unless developing countries do 
likewise.
    There are two underlying concerns. First, that any reductions 
achieved by the United States and other developed countries would be 
soon swallowed up by increased emissions from large, rapidly developing 
countries such as China. Second, that measures adopted only by the 
United States and other developed countries would put industries in 
these countries at a competitive disadvantage.
    The second concern is exaggerated. There is scant evidence that 
lower energy prices or weaker environmental standards give countries a 
competitive advantage in trade or investment. Countries that have had 
low energy prices -- including the FSU, Mexico, Venezuela, India, and 
China -- have not been particularly competitive in energy-intensive 
industrial sectors. Low energy prices lead mainly to energy 
inefficiency; weak environmental standards result in high environmental 
damages.
    The first concern is more realistic. Annual emissions from 
developing countries will exceed those of OECD countries by 2020, given 
current trends. Stabilizing greenhouse gas concentrations requires 
global cooperation.
    However, it's important to realize that without any international 
commitments developing countries have already taken significant steps 
to curtail carbon dioxide emissions, purely on ``no regrets'' economic 
grounds. They have:

   reduced energy subsidies: Between 1990 and 1995 fourteen 
        developing countries whose combined emissions match those of 
        the United States reduced fossil fuel subsidies by 45 percent. 
        China reduced coal subsidies from 37 to 29 percent and oil 
        subsidies from 55 to 2 percent. The World Bank estimates 
        substantial savings in CO2 emissions as a result.
   restructured energy markets: Many developing countries have 
        privatized energy industries or invited participation from 
        private independent power producers and other private energy 
        companies. The result has been increased investment in high 
        efficiency cogeneration facilities and combined cycle gasfired 
        power plants, meeting energy needs with lower emissions.
   promoted energy efficiency and renewable energy: Mexico, for 
        example, has developed energy efficiency standards for 
        appliances, buildings, electric motors and industrial boilers. 
        India provides immediate write-off and customs exemptions for 
        wind turbines. Brazil has a large-scale ethanol program for 
        automotive fuels.

    Such programs as these have reduced developing countries emissions 
substantially relative to their business-as-usual trend. The importance 
of these ``no regrets'' policy changes should not be overlooked.



    Senator Hagel. Dr. Repetto, thank you very much.
    I think it is fair to say that we have had a fairly 
significant range of ideas presented this morning. What I would 
like to do, since I do not have the expertise of the four 
panelists, is ask the panelists to respond to each other, at 
least during my round of questioning.
    I was particularly intrigued, Dr. Repetto, with your point 
that you believe the competitiveness issue is exaggerated. I 
would like to start there, as it really does cut to some of the 
previous testimony. I would like to ask all three panelists to 
respond to that, starting with you, Mr. Jasinowski.
    Mr. Jasinowski. Thank you very much, Mr. Chairman.
    First of all, I would congratulate Mr. Repetto on a fine 
piece of work because it sets out a framework which allows 
experts and nonexperts to debate this issue. I would want first 
to emphasize the extent to which I agree with his framework and 
agree with many of his conclusions, some of which show very, 
very serious, adverse economic effects, and certainly which 
make the point that you cannot do this without having the 
developing countries involved. It would be impossible, in his 
words.
    I was intrigued with the energy point and competitiveness. 
I would not only disagree, I would say that his problem is that 
he is looking at this through macroeconomic lenses and does not 
really understand the way American competitiveness now works. I 
think a lot of people don't.
    As I said, manufacturers can only increase prices now about 
1 percent. I talk to them every day. They think reducing costs 
in every way is absolutely essential. Since they cannot raise 
prices, they have to raise productivity in order to maintain 
market share.
    So the notion that this would not affect their 
competitiveness from an American point of view is just not the 
way any single businessman I know, would think of it. His 
citation of Mexico and the Soviet Union as being examples of 
energy competitiveness not making any difference is really 
overlooking the extraordinary reasons why those countries are 
not competitive that have nothing to do with energy pricing.
    So there are countries in which I think his generality 
would hold. But it does not hold for the American economy, 
which has become competitive again. We are now back, able to 
compete around the world. But we can only raise prices 1 
percent, Mr. Chairman. Therefore, every single cost that you 
can cut you must cut and every company I know, from the 14,000 
companies, are trying to reduce energy costs. To have this kind 
of energy cost increase piled on top is going to have all the 
effects that Mr. Montgomery and I have suggested.
    Senator Hagel. Dr. Montgomery.
    Senator Sarbanes. Mr. Chairman, Mr. Jasinowski, I take it, 
has an appointment at 11. Is that correct?
    Senator Hagel. At 11:30.
    Would you like to ask him a question before he leaves?
    Senator Sarbanes. I wonder, since there is a vote on, 
whether we could do that. Obviously, when we leave for the 
vote, we will have to excuse him because we could not really 
hold him. He would miss his other appointment.
    Senator Hagel. Why don't you go ahead and ask a question.
    Senator Sarbanes. I wonder if we could sort of inquire of 
him.
    Senator Hagel. Absolutely.
    Senator Sarbanes. I had just a couple of questions.
    First of all, is it your view that there is an issue with 
respect to global warming that needs to be dealt with? Or could 
we simply say look, there is no problem, so let's just put this 
thing off to one side and there is really nothing to deal with? 
Or is there something to deal with?
    Mr. Jasinowski. No, no. I think there is a problem and I 
think most of my members do, too, Senator Sarbanes, in the 
sense that we have increasing population, increasing emissions 
occurring in the world, and there are reasonable speculations 
that that can have significant environmental harm.
    Therefore, for those reasons, we need to pursue it. Beyond 
that, there is the question of energy efficiency which both 
relates to and contributes to that and is important for 
competitiveness reasons. We need to improve our energy 
efficiency.
    So we think there is a serious set of issues here. We want 
to be a part of it. We just need to get the facts more clearly 
in mind on everything from the science to the economic impacts.
    Senator Sarbanes. OK. I think it is important. I think this 
framework of analysis, as you pointed out, is very important. I 
was struck that Mr. Montgomery said coal prices would go up 4 
times where you said 2 times. So there is a wide kind of 
disparity here.
    Mr. Jasinowski. Yes, there is a wide variation.
    Senator Sarbanes. The other question I wanted to put is 
this. European countries have made the argument that the United 
States uses 2 to 3 times as much energy per capita even than 
they do. Many of them, of course, are the most highly 
industrialized and modern economies in the world. In fact, 
Chirac took the U.S. to task, I think, at the summit in Denver 
on this very issue.
    I am just curious. Why is this the case and what is our 
response when they say we are highly competitive and we use a 
half or a third per capita energy in terms of the emission 
problem?
    Mr. Jasinowski. I think you have asked the most important 
question in a global political sense on this whole issue, 
Senator Sarbanes. Let me just make the case on the other side 
from the Europeans. They have obviously made the case for 
themselves.
    I think you've got two or three things here that they don't 
talk about that are really involved. In fact, the American 
economy now has a competitive advantage in industry relative to 
a number of Europeans. If we want to trade that away by raising 
energy prices enormously in order to deal with these vague 
scientific notions under global warming now, we can do that. 
That is what they want, in fact.
    They know we've got a competitive advantage and they are 
not slow. This is a very good way for them to knock that out of 
the box. That is point number one.
    Second, if you look at France, they've got 50 percent of 
their energy in nuclear. That is great for them. We don't and 
you know the reasons why as well as I do.
    So it is easy for the French to say hey, no problem for us. 
The Europeans have a way of saying one thing and making it 
fairly easy on themselves. This takes me to my third point.
    This notion of a European bubble is a very fascinating 
notion, so that they can kind of get by without more severe 
country limitations. I think it is another reason why they are 
for it.
    Finally, and the most important reason is, as you know, 
Isabel, my wife, is French. We spend a lot of time in France. 
The French have a different way of implementing these things 
than do the Americans. They will be all for it and they will 
implement it in the French way, as do the Europeans.
    In the United States, you are in court the next day with 
somebody suing you because you did not do what the treaty or 
the U.S. Senate told us to do. So if we implement a treaty in 
this country, we implement it. They won't implement it the same 
way in Europe.
    Senator Sarbanes. Thank you.
    Senator Hagel. We will leave in a minute or two and they 
are holding the vote, so it is all right. Let me just stay with 
you for a moment, Mr. Jasinowski.
    In your testimony, you talked about the framework needed to 
achieve this. Let's say that all the facts are there, the 
science is there, and the economics are there. Would you 
further develop the question that you brought out in your 
testimony? How in the world would this work?
    Mr. Jasinowski. I wish that I could develop it. But I have 
to say that I don't know how. I have read widely what proposals 
are made.
    I think that if you just look at the enforcement question, 
it is very hard to know who would enforce this. Is it enforced, 
as some people have said, by the World Bank? Some people have 
said it's by various European organizations. I don't know how 
even to enforce it.
    I don't honestly know what would be an appropriate goal. I 
have looked at the science and you get everything from the 
increases by the computer models to decreases by satellite and 
other information. The computer models themselves have been 
revised down by 30 percent over the last several years.
    Now all that this tells me is that we have a situation 
where we don't have enough facts to make a decision. I do think 
that we really should debate this and get more facts.
    I don't see why this cannot be postponed for several years. 
That is what I think we should do. I know there is a rush 
toward judgment. But let me tell you that the people who are 
rushing toward judgment in the rest of the world want to do it 
to put America at a competitive disadvantage.
    Senator Hagel. Would any of the other panelists like to 
pick up on the question I asked Mr. Jasinowski?
    Dr. Repetto?
    Dr. Repetto. Yes, sir. Just on the enforcement issue, the 
experience in this country with the trading, the pollution 
trading, has been moving toward reduction first, credit second. 
It's make the reduction and then you have a credit which you 
can sell.
    There are enforcement problems. But certainly that would be 
the way to move toward solving it. All right, you've put in the 
new plant, or the energy efficiency, or whatever, and then you 
have some credit which you can then transact.
    Senator Hagel. Thank you.
    Senator Sarbanes, I understand we have about 7 minutes. I 
think we will stand in recess. We will vote twice and then 
return.
    Mr. Jasinowski, I understand you have a prior engagement. 
Our best to the EPA Administrator.
    Mr. Jasinowski. Thank you.
    Senator Hagel. Thank you very much, Jerry.
    [Recess]
    Senator Hagel. The subcommittee will come to order.
    Once again, we appreciate your tolerance of our schedule. I 
think we are in some clear water now for the next 3 or 4 hours. 
I'm not sure we'll ask you to stay that long, unless Senator 
Sarbanes has volumes of questions. What we will do, if it is OK 
with the panel, is have Senator Sarbanes and I take another 
round of questions. Then we will ask the second panel to come 
forward. Thank you.
    I would like to pick up a little bit on where we left off 
when Senator Sarbanes and I went to vote. I would like to go to 
your testimony, Dr. Montgomery.
    I was intrigued with your graphs on pages 4 and 5 of your 
testimony. I would like you to develop those points a little 
more, especially in light of Dr. Repetto's testimony. It seems 
to me, as we work our way through this, that the connection of 
international competition does matter, the cost of energy does 
matter, and productivity is directly related to the cost of 
energy. There is the leakage issue that you talked about and to 
which Mr. Jasinowski referred. This is where I would like to 
begin.
    Could you more fully develop your point, Dr. Montgomery? I 
would ask the other panelists to respond as well. Thank you.
    Dr. Montgomery. Yes, sir. Thank you.
    Beginning with the broader issue of how important are these 
trade and cost advantages that developing countries will 
achieve, I think that I would endorse in large part what Mr. 
Jasinowski said, that it is not at the macro level that we need 
to look at the issue, it is at the level of the individual 
industries that will be affected.
    The issue is not that somehow the developing countries are 
going to gain tremendous overall benefits for their economies 
from the OECD limiting emissions. In fact, I think that it is 
probably, on balance, for many of the developing countries 
going to be harmful to their economies as well. This is because 
the markets for their imports are here in the OECD. We produce 
a lot of the goods that they, in turn, import. If we have lower 
rates of economic growth, we are going to buy less of their 
imports and we are going to charge more for the goods we ship 
to them.
    So, in general, the developing countries' economies I think 
may suffer as well.
    The issue on competitiveness comes up when we look at 
specific industries because there are specific industries in 
the United States that are likely to suffer in competition with 
those industries in other developing countries that gain cost 
advantages.
    In many ways what it is expanding those energy intensive 
industries in competition with the U.S. is kind of the best 
effort that the developing countries can make in order to avoid 
some of the harm that they are likely to see in general because 
of shrinking markets here in the OECD. So that is the first 
point, I think, that I do not want to disagree, that it is not 
overall the status of the developing countries that is 
important, it is their ability to compete in specific 
industries, that the U.S. is largely facing harm from the 
climate, from the emission limitations because directly of how 
much it will cost us to produce goods for our own use, and 
that, since we will have to spend more on energy, more on 
energy conservation, we will be using more of our resources for 
those purposes and have less resources available to produce 
goods and services for our own citizens.
    In addition, there are important trade effects for specific 
industries and specific countries. This is what I tried to show 
in these two figures, that we will see U.S. exports decline in 
the aggregate because U.S. goods will cost more than those of 
other countries and that there are other specific countries--
here I took India, Jamaica, China, and Indonesia--that are able 
to take advantage of lower costs in order to expand their own 
exports.
    In the case of India, I think it is because that is a 
country that is an oil importer. It is also a country with many 
manufacturing industries and the infrastructure to compete with 
the U.S.
    I think I would take a somewhat different perspective than 
Dr. Repetto on countries like China. What China would get from 
being a nonparticipant in the Climate Change Treaty is a real 
cost advantage over the OECD.
    Now I agree that there are many cases in which the 
developing countries have harmed their economies by subsidizing 
energy use and using resources in efficiently. But they would 
gain real cost advantages over the U.S., not artificial ones 
supported by their own internal subsidies, and those real cost 
advantages I think are what we see translating into significant 
impacts on trade and particular industries.
    The second chart I think shows which of the specific 
industries we would see being affected by these cost 
advantages. This is because the impact is very concentrated in 
the U.S. economy. There are a number of industries that are 
really at serious risk, and these are the ones that we 
characterized here--cement, aluminum, metals, mining, the paper 
industry, quarrying. These are industries that are likely to be 
seriously affected because they, in particular, will face very 
large cost disadvantages to their competitors.
    Senator Hagel. Dr. Repetto, would you like to quickly 
respond to that?
    Dr. Repetto. Yes, please, sir.
    I think we have to remember that trade is based on 
comparative advantage. General price increases will be offset 
over the long run by exchange rate adjustments. So I do agree 
that, if we want to think about competitiveness effects, we 
have to think about them in the context of particular 
industries.
    Some industries will have a competitive disadvantage, some 
will have a competitive advantage.
    Now China is a good example. If you examine the trade and 
investment flows going into and out of China, it is absolutely 
clear that their comparative advantage is in relatively labor 
intensive industries, not in relatively energy intensive or 
capital intensive industries. This is reflected in their actual 
trade and investment flows.
    Their labor cost advantage dominates, absolutely dominates, 
any potential difference in energy cost. In fact, the heavy 
industries, like cement and paper, are hopelessly inefficient 
in China.
    I think it is just totally unrealistic to expect that that 
pattern of comparative advantage in a country like China or 
India would be overturned or drastically modified by any 
relative adjustments in energy costs in the long run.
    Senator Hagel. Dr. Repetto, thank you.
    Senator Sarbanes.
    Senator Sarbanes. Thank you, Mr. Chairman.
    Mr. Cunningham, I would first like to put the question to 
you that I put to Mr. Jasinowski. Do you think there is a 
problem that we have to try to deal with with respect to global 
warming?
    Mr. Cunningham. Yes, Senator. We have not criticized the 
need for a treaty. We have said that in the area of 
environmental improvement worldwide, many of these issues 
require global solutions--forestry, ocean dumping--and that 
includes climate change. The only way to deal with a problem 
like that is to deal with it worldwide through a treaty 
process.
    Our criticisms have been at the kind of treaty, at the 
nature of the treaty that the administration appears to be 
locked into; that they have not set concentration levels; they 
have not done it logically to set concentration levels as a 
target; and then, to work backward, to see how each country 
should fit into those, what the obligations of each country 
should be.
    Senator Sarbanes. I understand that. I just wanted to make 
sure I understood the basic starting point.
    So you don't take the position that there is really no 
problem here and we should not be spending any time looking at 
it, is that correct?
    Mr. Cunningham. No, Senator. That is not our position.
    Senator Sarbanes. Mr. Montgomery, would you respond to that 
same question?
    Dr. Montgomery. No. I think that the climate change issue 
is a serious one which is important to address. In fact, one of 
the reasons I ended my testimony the way I did is to try to 
focus on the fact that I think it is possible to separate, 
looking at the economic issues of what is the best way to get 
to a particular concentration of greenhouse gases from the 
issue of how should we balance the costs and benefits to the 
world of climate change in order to choose a concentration 
target. I think that is a very serious issue that actually has 
not yet really been addressed in the negotiating process and 
that we need to look at both sides of that, both the costs and 
benefits of doing something in the long run.
    Senator Sarbanes. Have you all had a chance to read this 
study of Dr. Repetto's?
    Mr. Cunningham. Yes.
    Dr. Montgomery. No.
    Senator Sarbanes. You have not had a chance?
    Dr. Montgomery. No, I haven't, but I am catching up rapidly 
this morning.
    Senator Sarbanes. And you have, Mr. Cunningham?
    Mr. Cunningham. Yes.
    Senator Sarbanes. Well, it strikes me as a very useful 
analytical tool and I wondered whether you agree with that. 
When you start making judgments about the assumptions and so 
forth, obviously people can differ. But one of the things I am 
concerned about is getting an analytical framework here where 
everyone is operating on the same playing field, as it were, 
and where we can try to identify the facts to the extent we 
can.
    I was struck in that you testified, for instance, that the 
price of coal would go up fourfold and Mr. Jasinowski said it 
would double. Well, that is a fairly significant difference as 
one tries to evaluate these things, although doubling is in and 
of itself very substantial, obviously. But it seems to me that 
is an important difference.
    What is your view of this analytical framework? Do you 
think it is useful to work with?
    Mr. Cunningham. The models that we relied on, the ones that 
we interpret as being most useful, are models like the DRI 
model that the administration uses, the WEFA model, and others, 
which look at adjustment problems in the economy when some kind 
of shock hits the economy or some policy measure is introduced 
like the ones that the administration is considering, the ones 
that raise energy prices.
    The models we find not useful are models that presuppose 
some sort of instantaneous change in people's behavior and the 
remolding of capital into different kinds of capital, 
instantaneous adjustment of people from the suburbs and 
remodeling their houses into apartment buildings in the city. 
These kinds of instantaneous adjustments do not take place in 
the real world. So we look at those models that are based upon 
the past kinds of adjustments that people have had to make in 
similar kinds of situations and think that those are the ones 
that are most realistic to use.
    Senator Sarbanes. Mr. Repetto, I take it that you looked at 
all models, is that right, and constructed this analytical 
framework to try to, in effect, put all of the models to use, 
or I guess 16 of them.
    Dr. Repetto. Certainly a large number, almost all of them 
or virtually all of them.
    Senator Sarbanes. So the models that Mr. Cunningham says he 
thinks are the most realistic are encompassed within your 
analysis? Is that correct?
    Dr. Repetto. Yes, sir.
    Senator Sarbanes. Did you want to add to that, Dr. 
Montgomery?
    Dr. Montgomery. Yes, Senator, if you would not mind.
    I have, I think, had an opportunity to look through it and 
having heard Dr. Repetto's testimony, I would like to respond 
to some of that.
    I also wanted to congratulate him on his work. I think this 
is a very helpful sorting out of the issues and I do appreciate 
being included in the comparison. I think that these are key 
points that need to be looked at in comparing the models.
    Given that, though, I do disagree on some of the details, 
in particular on, I think, points 1, 4, 5, and 6. Rather than 
launch into a long exposition on each of those, let me just 
summarize.
    Senator Sarbanes. I wasn't suggesting that because the 
analytical framework may be useful that this meant that anyone 
who acceded to that view was signing off on all of the details 
of it. Obviously, you can differ. I would assume that Dr. 
Repetto might make some evaluations with which you would differ 
and so forth.
    But we have to get into some kind of mode of thinking here 
that enables people to have rational and reasoned exchanges 
about this issue, so that we can come in from way out at the 
edges and can kind of focus, to the extent we can, on having a 
common ground on facts and analysis. Then we may differ on 
evaluations.
    I mean, some people will be more willing to impose costs, 
others less. Some will value one aspect of this problem 
differently than another.
    But it seems to me we need to try to focus in on a way of 
thinking that is helpful to us.
    Dr. Montgomery. Yes, I agree. The only thing I would add to 
that is I do find it helpful in many cases. I was concerned 
about looking at the three green bars at the end of Dr. 
Repetto's testimony indicating potential economic benefits from 
limiting emissions.
    That is where I am convinced that applying basic economic 
principles will tell us that some of these results just cannot 
be right. So, in one sense I appreciate Dr. Repetto setting out 
the issues this way. But it is because I think that if we were 
to focus on the issue of double dividend and tax recycling, I 
could convince you that applying basic economic principles says 
that the models at the green end just are not treating that 
right. Therefore, it is a good thing to do to characterize what 
are the assumptions behind these models because then it will 
help us after we have had a chance to talk about the specific 
issues to have a better appreciation of which of those general 
results we agree with.
    For the most part, all we hear is that a study said that 
the climate treaty is going to decrease GDP by 2 percent and we 
don't hear the assumptions that are behind it. I think it is 
very important that we look at those.
    Senator Sarbanes. Thank you, Mr. Chairman. My time is up.
    Senator Hagel. Speaking of models and studies, we talked 
last week during our hearing about the lack of any economic 
model from the administration, even though it has said it would 
come forward with one. Maybe one of you would like to enlighten 
this panel as to why that has not happened. I understand it is 
more than a year old.
    But there is one model, one study, and some evidence, I 
understand, that was developed over the last half year. It was 
brought up this morning. I asked some questions about it last 
week. It is the Argonne National Lab study.
    I will start with you, Mr. Cunningham. I did not have a 
chance to ask Mr. Jasinowski about it, but he referred to it in 
his testimony in a knowing way. I am anxious to know what is 
out there and why the administration has not released it.
    Have you seen it? What do you know about it? Any of the 
other panelists can also respond.
    Mr. Cunningham. The Argonne studies were conducted in early 
and mid-1996. I participated in two peer review workshops for 
that study and I sat in on the third one.
    Each of the six studies had a peer review workshop and 
those studies were presented.
    The studies included six industries. They were chemicals, 
refining, cement, paper, steel, and aluminum. We were told at 
that time that the studies would be released in July or August 
of last year.
    I called many times after that time period to find out when 
the studies would be released and finally gave up when I 
realized that they, apparently, just were not going to be 
released.
    Senator Hagel. Why was that. Was it obviously not favorable 
to the administration's position?
    Mr. Cunningham. I never got an explanation for why the 
studies were not released. Now and then I hear a rumor that 
they will be released and I call around to see if that rumor is 
true. Apparently they are still being held up for some reason. 
But I think you might have to ask the administration as to what 
the particular reasons are.
    Senator Hagel. So you cannot shed any enlightened 
commentary on either what was inside or outside or on what we 
found or did not find?
    Mr. Cunningham. Well, I know that each of the studies 
showed a consistent pattern which probably the administration 
does not view favorably. That pattern is that if you raise 
energy prices significantly in the United States relative to 
those prices in other countries as the treaty, in its current 
mode, might do, the industries would begin moving out of the 
country and the plants and jobs as well as the pollution and 
emissions would also move out of the country. So you would have 
a job loss and damage to these industries without doing very 
much or anything at all about the emissions problem.
    In fact, pollution from these industries could increase 
because the requirements in the countries they are moving to, 
the environmental requirements, are less stringent than those 
in the United States.
    But I think they were a very valuable set of studies. They 
were very descriptive and I think that they would make a 
valuable contribution to the dialog that is going on.
    Senator Hagel. Well, we would all like to see them. Thank 
you.
    Dr. Repetto, do you know about this study? Have you seen 
it?
    Dr. Repetto. I think I can perhaps comment on the first 
part of your question, about what has happened to the 
administration's analysis. My understanding is that they used 
three models, all three of which were also included in this 
overview. I understand that their results are undergoing some 
peer review from people inside and outside the administration. 
How they are going to incorporate those review comments and 
then release the results, I am not sure what that timetable is. 
But I think that is what is happening now.
    Senator Hagel. Dr. Montgomery?
    Dr. Montgomery. I have nothing enlightened to say about 
what is happening within the administration. But from what I 
have seen of the reports and from what Mr. Cunningham 
mentioned, I would say they certainly seem to be reaching 
conclusions that are very much along the lines of the studies 
that we have done.
    As I mentioned, we have done some detailed work in fairly 
complex analysis of the aluminum and pulp and paper industries 
worldwide. Certainly we would confirm those conclusions, that 
with the kind of cost differences that would exist between the 
U.S. and other countries, you could build new aluminum plants 
in developing countries for less than the cost of operating 
aluminum plants in the United States. It's similar things for 
the other industries that we looked at.
    They did choose the energy intensive industries, and I 
would say that our results certainly seem to confirm what I 
have heard is in the Argonne reports.
    Senator Hagel. Thank you.
    Senator Sarbanes.
    Senator Sarbanes. Mr. Cunningham, you said you were on the 
peer review for these Argonne studies?
    Mr. Cunningham. Yes, Senator, for two of the studies.
    Senator Sarbanes. Mr. Jasinowski in his statement says one 
scenario, and then he writes out an estimate of energy price 
increases. You should recall that.
    I take it there were other scenarios with different 
estimates, is that right?
    Mr. Cunningham. In the study, which included the six 
industries, they made an estimation of fuel price increases 
that probably were based about on a $100 a ton increase, what a 
$100 a ton increase in the carbon tax or a permit trading 
system that did that same thing might do to the jobs and 
production in that industry.
    Senator Sarbanes. How much would that raise the price of 
coal?
    Mr. Cunningham. I think the threefold or fourfold increase 
that Dr. Montgomery put forth was the right number for that. 
Coal does vary a little bit in carbon content. But it is a 
number that I also have to sit down and recalculate several 
times to convince myself that it is really true. It has an 
enormous impact on the coal price compared to natural gas 
prices, for example.
    Dr. Montgomery. Could I throw in a specific number here? A 
$100 a ton carbon tax is $55 a ton of coal. Translating that 
into proportions depends on what you assign to the price of 
coal, which has varied a lot and varies across different kinds 
of coal. But the $55 a ton of coal is a direct translation from 
the tax to the carbon content of coal.
    Senator Sarbanes. Now on this chart here that you have in 
your statement, direct and indirect cost increases for the top 
25 nonenergy industries, this is both the direct and the 
indirect cost increases, is that correct?
    Dr. Montgomery. That's correct. For a typical industry, 
maybe half of that cost increase would come from the fuels that 
they use within that industry and the other half would come 
from higher costs in producing the materials that they had 
purchased for that industry. It varies between industries.
    Senator Sarbanes. So for the five industries--the six 
industries--of the ones you've listed, the direct and indirect 
cost increases would be over 5 percent. For the balance, it 
would be below 5 percent, is that correct?
    Dr. Montgomery. That's correct. The average is about 3.5 
percent, if I remember correctly.
    Senator Sarbanes. Thank you.
    While I do have more questions, I think we had better go on 
the second panel, Mr. Chairman.
    Senator Hagel. Senator, thank you.
    Again, on behalf of the panel, we wish to thank our 
witnesses for your time this morning and particularly your 
courtesies in allowing Senator Sarbanes and me to escape and do 
the people's business.
    We will keep the record open and I am sure we will be back 
in touch with you to ask more questions. Thank you.
    We will now have our second panel.
    Gentlemen, welcome.
    Dr. Michaels, are you all set up there?
    Dr. Michaels. Yes, indeed.
    Senator Hagel. First let me welcome each of you. We are 
grateful that you would take time to come before this panel and 
help us get through this issue.
    Let me formally introduce each of our panelists. Dr. 
Patrick Michaels is Professor of Environmental Sciences at the 
University of Virginia. Dr. Michaels, thank you. Dr. Alan 
Robock is Maryland State Climatologist, Department of 
Meteorology, University of Maryland. Dr. Robock, thank you. Dr. 
Michaels, would you like to begin?

 STATEMENT OF DR. PATRICK MICHAELS, PROFESSOR OF ENVIRONMENTAL 
  SCIENCES, UNIVERSITY OF VIRGINIA, CHARLOTTESVILLE, VIRGINIA

    Dr. Michaels. Yes, I would.
    I would like to thank you very much for inviting my 
testimony. You may want to refer to illustrations in my printed 
version as I proceed over the next few minutes.
    Nearly 10 years ago, I testified before the Senate Foreign 
Relations Committee. At that time, I argued that forecasts of 
dramatic and deleterious global warming were likely to be in 
error because of the very modest climate changes that had been 
observed to date. Further, it would eventually be recognized 
that this more moderate climate change would inordinately be 
directed into the winter and night, rather than the summer, and 
that this could be benign or even beneficial.
    I testified that the likely warming, based upon the 
observed data, was between 1.0 and 1.5 degrees Celsius for 
doubling the natural carbon dioxide greenhouse effect.
    As you can see in Figure 1, since then the global mean 
temperature of the Earth has not warmed a bit. We have three 
independent measuring systems--surface thermometers, satellites 
that sense the temperature of the lower atmosphere, and weather 
balloons in the same region--and they all show no warming since 
that testimony.
    In science, regardless of how much external political and 
social pressure is applied, it is inevitable that the observed 
data and theoretical hypotheses or models, if you will, will 
eventually reach an internally consistent equilibrium. This is 
happening today.
    However, it was apparent that when the first so-called 
consensus was imposed upon the issue of global warming by the 
First Scientific Assessment of the United Nations 
Intergovernmental Panel on Climate Change, or IPCC, such an 
equilibrium had not been reached.
    That report in 1990 stated, ``When the latest atmospheric 
models are run with the present concentrations of greenhouse 
gases, their simulation of climate is generally realistic on 
large scales.''
    The suite of climate models extant at that time predicted 
that the globe's mean temperature should have risen by then 
between 1.3 and 2.3 degrees Celsius. Slightly revised versions 
of these models provided the technical background for the 
Framework Convention on Climate Change, signed in 1992.
    The observed warming since the late 19th Century has only 
been 0.5 degrees Celsius, or less than one-third of the 
predicted value. Critics argued, as I did before this 
committee, that there would have to be a dramatic reduction in 
the forecast of future warming in order to reconcile the facts 
and the hypotheses.
    By 1995, in its second full assessment of climate change, 
the IPCC admitted the validity of the critics' position: ``When 
increases in greenhouse gases only are taken into account, most 
climate models produce a greater mean warming than has been 
observed to date, unless a lower climate sensitivity to the 
greenhouse effect is used. There is growing evidences that 
increases in sulfate aerosols are partially counteracting the 
warming due to increases in greenhouse gases.''
    Let me translate this statement. It means either it is not 
going to warm up as much as we said it would or something is 
hiding the warming. I predict that every attempt will be made 
to demonstrate the latter before admitting that the former is 
true.
    Such attempts were made, and initial results, particularly 
those published in ``Nature'' on July 4, 1996, appeared 
initially to bolster the argument that the sulfates were 
masking the expected warming. That particular study used 
weather balloon data from 1963 through 1987. Most striking was 
a warming of the middle of the Southern Hemisphere, which you 
can see in the top of the figure on page 3. There is a box 
around this dramatic warming region. It contributed most to the 
apparent reality of the sulfate-greenhouse effect interaction.
    However, when the entire set of weather balloon data from 
1958 through 1995, rather than what was used in the paper was 
used, this most pronounced region of warming shows no change 
whatsoever.
    In the figure that I am referring to here on page 3, the 
closed circles, the filled circles, are the data that were used 
in the 1963 through 1987 study and all the circles are all the 
data.
    In response to this, the senior author of that paper told 
the December meeting of the American Geophysical Union that the 
correspondence failed because greenhouse warming had 
overwhelmed the cooling effect of sulfates since 1987.
    As you can see from Figure 1, there was no net change in 
temperature in the last decade. So this statement was clearly 
wrong.
    In the on-line discussion published recently on this, the 
explanation was now given that sulfate cooling leaked into the 
Southern Hemisphere, or exactly the opposite of the explanation 
that was given a mere 4 months earlier.
    The fact that the sign of the explanations has changed so 
quickly is prima facie evidence of a paradigm of rapid 
greenhouse warming that is in serious, serious trouble. Let's 
consider the default option, that it is not going to warm up as 
much as the earlier projections had indicated. This is becoming 
increasingly attractive.
    A new suite of climate models which now seems to fit the 
observed history bears witness to this conclusion.
    Figure 3, which is on page 4, shows the new result from the 
UKMO, United Kingdom Meteorological Office, model. The top 
line, the dashed line in the figure is the warming projected in 
the paper as it is published. But if you read the manuscript 
carefully, you will see that the changes in the greenhouse 
effect that were assumed to occur over the 21st Century were 
simply unrealistically high. When you put in the accepted mid-
range scenario from the United Nations IPCC, the warming 
dropped to the lower figure, which is a solid line, or about 
1.7 degrees Celsius by the year 2100.
    Figure 4 on the lower right of the page is the analogous 
new model from the U.S. National Center for Atmospheric 
Research, as published in the May 16 issue of ``Science.'' It, 
too, uses a change in the greenhouse effect that is 30 percent 
greater than the known and projected changes. It changes the 
greenhouse carbon dioxide effectively at 1 percent per year. It 
is know that the change is 0.7 percent per year, and that is 
the figure that is often used.
    By the way, I have never gotten an adequate explanation as 
to why this is the case. Dr. Trenberth told me at a meeting in 
Ashville about a month ago that well, it is a standard modeling 
experiment. My reply was all you have to do in the computer 
code is write ``*.7 on one line of code,'' and it will give you 
the right answer.
    Why the wrong greenhouse effect was used, nonetheless, is 
anyone's guess.
    Anyway, this NCAR model, when you put in the correct 
greenhouse effect, yields only about 1.3 degrees of warming out 
to the year 2100. It does not have any cooling from sulfate 
aerosols in it.
    The cooling from sulfate aerosols is being revised downward 
as we speak. Various and sundry empirical and laboratory 
measurements now suggest that it would probably drop the 
warming in that right hand curve by an additional 0.3 degree, 
which puts it in the 1 degree range.
    All of this may be irrelevant, Senator. We don't really 
care whether it warms. What we do is we care how and how much 
it warms. The nature of the observed changes in the atmosphere 
are rather surprising given the level of concern about this 
issue.
    Greenhouse physics predicts that the driest air masses 
should respond first and most strongly to changes in human 
activities. These are, generally, the coldest air masses, such 
as the great high pressure system that dominates Siberia in the 
winter and its only slightly more benign cousin in North 
America. When the jet stream catches a corner of that North 
American cold anti cyclone, it kills orange trees in Florida.
    A look at the trends in the satellite data, which is the 
only true record of global temperature, is remarkably 
revealing. It is on figure 5 on page 5.
    I do not put trend lines in data unless they are 
statistically significant. There is a statistically significant 
net cooling in this record which is now 18.5 years old.
    Now on page 6, what I have done at the top is plot out the 
relative change in temperature on a latitude longitude basis in 
the satellite record. What you see is a pronounced warming 
trend of the regions of the Northern Hemisphere's coldest 
winters, a band stretching from Siberia through Northern 
Europe, Iceland, and Western North America. This is not global 
warming. It is a regional warming superimposed upon a slight 
cooling trend in this data.
    Another way to appreciate this in a frame of reference that 
is longer than the satellite--and we are often criticized for 
using the satellite data because it only starts in 1979 and 
most people know there was a jump in the temperature that took 
place between 1977 and 1978, 20 years ago the last jump--
another way to appreciate this, though, would be to look at a 
longer frame of reference, say the surface temperature record 
for the last 50 years.
    In figure 7, at the bottom on page 6, I subtracted from the 
winter climate change the summer change. The redder it is, the 
more change there is in the winter compared to the warm half-
year.
    It is very obvious that what you are seeing is a warming of 
the coldest air masses in North America and Europe and very 
little else.
    Much has been made in recent years of an apparent increase 
in what has been called extreme rainfall. Federal 
climatologists recently produced a press release during last 
winter's floods in California claiming that these intense rains 
had increased by 20 percent. This was a gross distortion of 
reality and deserves investigation.
    The original study by Tom Karl and others showed that the 
percent of rain in the United States that falls from storms of 
2 inches or more in 24 hours has increased from 9 percent of 
all rain to 11 percent of all rain. Senators, this is a change 
of 2 percent.
    However, in order to create a sensational effect, this 2 
percent change was divided by the average amount of 10 percent, 
resulting in a figure of 20 percent.
    In reality, what Karl found was that, on the average, there 
is only one more day in every 730 in which the 2 inch rainfall 
threshold is exceeded. No one could notice that.
    Karl also informed me that there is no significant change 
in rain of 3 inches per 24 hours or more.
    Is a 2 to 3 inch rainfall ``extreme?'' Is it ``intense?'' 
Or, given the fact that much of our agricultural regions are in 
moisture deficit every summer--look outside--is it 
``beneficial?'' Simple logic can make that value judgment.
    Imagine if the truth had really been told. The percentage 
of rainfall originating from storms of less than 2 inches per 
24 hours has declined from 91 percent to 89 percent. That is a 
real headline grabber. Unfortunately, there is no news and no 
scare value in the truth.
    Another view of the future will conclude my remarks.
    I believe it is fair to say that the people once labeled as 
a ``small band of skeptics,'' those who championed the position 
that warming would be modest and primarily in the coldest air 
masses, have won the day.
    Many of these same scientists are now forming a new 
environmental paradigm. It is that the concept of fragile Earth 
may have to be abandoned.
    I will depart from my remarks here to tell you of an 
experience on Earth Day that I just had. Our Department of 
Environmental Sciences at the University of Virginia is a very 
highly rated department. Some say it is the best in the Nation, 
and the President and the administration are very, very proud 
of us.
    We had an Earth Day fest on the environment, and I was 
astounded to see how many of my colleagues were of the opinion 
that the new paradigm was going to be the paradigm of 
resiliency. This is the cutting edge department in the United 
States.
    It asks the impertinent question--and it is an impertinent 
question--since when is everything that man does to the planet 
necessarily bad?
    During the 20th Century, we have gone half-way toward 
effectively doubling the national carbon dioxide greenhouse 
effect and here is what happened. Life expectancy doubled in 
the free and developed world. The developing world is catching 
up as their emissions rise. Corn production per acre increased 
five-fold. The growing season in the coldest latitudes 
increased slightly, but enough to increase greenness in those 
latitudes by 10 percent.
    Rainfall in the world's breadbaskets increased slightly, 
even as summer temperatures did not warm. Australia now reports 
a massive increase in agricultural production that may be 
related to climate.
    There are thousands of laboratory and field experiments as 
well as the practical activities of professional 
horticulturists that demonstrate that rising carbon dioxide 
makes most plants grow better. Don't listen to me. Consider the 
writings of Sylvan Wittwer, the man who conducted some of the 
very first experiments on this phenomenon. He ultimately became 
chairman of the Board on Agriculture of the national Research 
Council.
    Quoting Wittwer, ``There is currently a blind spot in the 
political and informational systems of the world. This is 
accompanied by a corruption of the underlying biological and 
physical sciences. It should be considered good fortune that we 
are living in a world of gradually increasing levels of 
atmospheric CO2. The rising level of atmospheric 
CO2 does not make the United States the world's 
worst polluter. It is the world's greatest benefactor. Unlike 
other natural resources--land, water, energy--essential for 
food production, which are costly and progressively in shorter 
supply, the rising level of atmospheric CO2 is a 
universally free premium on which we can all reckon for the 
future.''
    I recommend Wittwer's book, the compilation of his 750 
articles and refereed scientific literature for a remarkable 
view of this issue.
    Now I will close by asking the questions that I think need 
to be asked.
    How much money are we willing to spend to stop this?
    How much money are we willing to spend on the slight 
amelioration of the coldest temperatures in the air masses that 
are most inhospitable to unprotected life where there is human 
settlement?
    How much money are we willing to spend to stop making the 
Earth greener, more productive, and human life increasingly 
long over the mass of the planet, and the mass of the planet 
still does find us the envy of history?
    Thank you.
    [The prepared statement of Dr. Michaels follows:]

               Prepared Statement of Patrick J. Michaels

    Nearly ten years ago, I testified before the Senate Foreign 
Relations Committee. At that time, I argued that forecasts of dramatic 
and deleterious global warming were likely to be in error because of 
the very modest climate changes that had been observed to that date. 
Further, it would eventually be recognized that this more moderate 
climate change would be inordinately directed into the winter and 
night, rather than the summer, and that this could be benign or even 
beneficial. I testified that the likely warming, based on the observed 
data, was between 1.0 and 1.5+C for doubling the natural carbon dioxide 
greenhouse effect.
    Since then, the global mean temperature of the earth has not warmed 
a bit. Three independent measuring systems (and the only three that 
exist)-surface measured temperature, temperatures of the lower 
atmosphere measured by weather balloons, and temperature of the lower 
atmosphere measured by orbiting satellites-all show no warming since 
that testimony (see Figure 1).



    In science, regardless of how much external political and social 
pressure is applied, it is inevitable that observed data and 
theoretical hypotheses will eventually reach an internally consistent 
equilibrium. However, it was apparent that when the first ``consensus'' 
was imposed on the issue of global warming, by the First Scientific 
Assessment of the United Nations Intergovernmental Panel on Climate 
Change (1990), that such an equilibrium had not been reached.
    That report stated that ``when the latest atmospheric models are 
run with the present concentrations of greenhouse gases, their 
simulation of climate is generally realistic on large scales.'' (1) The 
suite of climate models extant at the time predicted that the globe's 
mean temperature should have risen by 1.3+ to 2.3+C, with the larger 
figure for the Northern Hemisphere, where most of us live. These models 
provided the technical background for the Framework Convention on 
Climate Change, signed in 1992.
    The observed warming since the late 19th century was 0.5+C, or less 
than one-third of the predicted value. Critics argued, as I did before 
this Committee, that there would have to be a dramatic reduction in the 
forecast of future warming in order to reconcile fact and hypothesis.
    By 1995, in its second full Assessment of Climate Change, the IPCC 
admitted the validity of the critics' position: ``When increases in 
greenhouse gases only are taken into account ... most [climate models] 
produce a greater mean warming than has been observed to date, unless a 
lower climate sensitivity [to the greenhouse effect] is used ... There 
is growing evidence that increases in sulfate aerosols are partially 
counteracting the [warming] due to increases in greenhouse gases.'' (2)
    I believe the secular translation of this statement is that either 
it is not going to warm up as much as was previously forecast, or 
something is hiding the warming. I predict every attempt will be made 
to demonstrate the later before admitting that former is true. \1\
---------------------------------------------------------------------------
    \1\ However, one of the United Kingdom's most prominent modelers, 
who surely does not want his name revealed, informed me in Asheville, 
North Carolina on June 5, 1997 that ``it appears we have overestimated 
the sensitivity of the climate to greenhouse changes.''
---------------------------------------------------------------------------
    Such attempts were made, and initial results, particularly those 
published in Nature on July 4, 1996 (3), appeared to bolster the 
argument that the sulfates were masking the expected warming. That 
particular study used annual weather balloon data from 1963 through 
1987. Most striking was a rapid warming of the middle of the Southern 
Hemisphere, where there in fact are virtually no sulfates available to 
counter greenhouse warming.
    However, when the entire record of weather balloon data, from 1958 
through 1995, was used, this most pronounced region of warming turned 
out to show no change whatsoever (4) (Figure 2). In response to this, 
the senior author of the original study told the December meeting of 
the American Geophysical Union that the correspondence between the 
sulfate-greenhouse model and reality vanished because greenhouse 
warming had overwhelmed sulfate cooling since 1987. As there was no net 
change in any of the temperature records in the last decade (Figure 1), 
this statement was clearly wrong. In an on-line discussion recently 
published, the explanation is now given that sulfate cooling ``leaked'' 
into the Southern Hemisphere, or exactly the opposite of the 
explanation given a mere four months earlier.



    Clearly the default option-that it's simply not going to warm as 
much as the earlier projections had indicated-is increasingly 
attractive. And a new suite of climate models, which now seem to fit 
the observed history more accurately, bear witness to this conclusion.
    Figure 3 shows the new result from the United Kingdom 
Meteorological Office model (5). The published forecast is the higher 
value, which still shows considerable warming. But a careful read of 
the related manuscript reveals that the changes in the greenhouse 
effect that were used are much greater than the observed and projected 
changes. When the more accepted values (as given by the IPCC) are used, 
the warming drops to the lower figure, or about 1.7+C by the year 2100.
    Figure 4 is an analogous new model from the U.S. National Center 
for Atmospheric Research, as published in the May 16 issue of Science 
(6). It, too, uses a change in the greenhouse effect at least 30% 
greater than the known and projected changes. The lower figure adjusts 
this model for that error and it produces only 1.3+C of warming by 
2100.
    Notably this model does not include any cooling from sulfates. 
While this effect was apparently overestimated, new, direct 
measurements by Hobbs et al., indicate that it should reduce warming by 
about 0.3+C over this period (7).



The Nature of Observed Change

    Greenhouse physics predicts that the driest airmasses should 
respond first and most strongly to changes induced by human activities. 
These, in fact, are generally the coldest airmasses such as the great 
high pressure system that dominates Siberia in the winter, and its only 
slightly more benign cousin in northwestern North America. When the jet 
stream attains a proper orientation, it is this airmass that migrates 
south and kills orange trees in Florida.
    A look at the trends in the satellite data-our only truly global 
record of lower atmosphere temperature-is remarkably revealing (Figure 
5). In spite of a statistically significant global cooling trend over 
the 18.5 year period of record, there is a pronounced warming trend in 
the coldest winter regions (Figure 6).
    Another way to appreciate observed change in a frame of reference 
longer than the satellite record is to look at the ground-based 
thermometers for the last fifty years. In Figure 7, I have subtracted 
the summer temperature changes from the winter ones. The redder the 
map, the more pronounced is the warming in the winter versus the 
summer.
    Much has been made in recent years of an apparent increase in what 
has been called ``extreme'' rainfall. Federal climatologists recently 
produced a press release, during last winter's floods in California, 
claiming that these rains had increased by 20%. This was a gross 
distortion of reality.



    The original study, by Thomas Karl and others (8), showed 
that the percent of rain in the United States that falls from 
storms of two inches or more in 24 hours has increased from 9% 
of all rain to 11%. This is a change of 2%. However, in order 
to create a sensational effect, this 2% change was divided by 
the average amount of 10%, resulting in a figure of 20%! In 
reality, what Karl found was that, on the average, there is one 
more day in every 730 in which the two-inch threshold is 
exceeded. Karl also informed me that there is no significant 
change in rain of three inches per day or more. Is a two-to-
three inch rainfall ``extreme''? Or, given the fact that much 
of our agricultural region is in moisture deficit every summer, 
is it ``beneficial''? Simple logic can make that value 
judgment.
    Imagine if the truth had been told: The percent of rainfall 
originating from storms of less than two inches per 24 hours 
has declined from 91% of all rain to 89%. Unfortunately, there 
is no news and no scare value in the truth.

Another View of the Future

    I believe that it is fair to say that the people once 
labeled as ``a small band of skeptics'' - those who championed 
the position that warming would be modest and primarily in the 
coldest air masses-have won the day.
    Many of these same scientists are now forming a new 
environmental paradigm. It is that the concept of ``fragile 
earth'' must be abandoned. And it asks the impertinent 
question: since when is everything that man does to the planet 
necessarily bad?
    During the 20th century, we have already proceeded more 
than half way to radiatively doubling the natural carbon 
dioxide greenhouse effect. Here is what resulted:
    Life expectancy doubled in the free and developed world. 
The developing world is catching up as their emissions rise. 
Corn production per acre increased fivefold. The growing season 
in the coldest latitudes increased slightly, but enough to 
increase greenness by 10% (8). Rainfall in the world's 
breadbaskets increased slightly, even as summer temperatures 
did not warm. Australia reports a massive increase in 
agricultural production that may be related to climate (9).
    There are thousands of laboratory and field experiments, as 
well as the practical activities of professional 
horticulturalists, that demonstrate that rising carbon dioxide 
makes most plants grow better. Consider the writing of Sylvan 
Wittwer, the man who conducted some of the very first 
experiments on this phenomenon. He ultimately became chairman 
of the Board on Agriculture of the National Research Council.
    There is currently a blind spot in the political and 
informational systems of the world. This is accompanied by a 
corruption of the underlying biological and physical sciences. 
It should be considered good fortune that we are living in a 
world of gradually increasing levels of atmospheric 
CO2 .... The rising level of atmospheric 
CO2 does not make the United States the world's 
worst polluter. It is the world's greatest benefactor. Unlike 
other natural resources (land, water, energy) essential for 
food production, which are costly and progressively in shorter 
supply, the rising level of atmospheric CO2 is a 
universally free premium on which we can all reckon for the 
future. \2\
---------------------------------------------------------------------------
    \2\ Members of the Senate would do well to read Wittwer's book, 
Food, Climate and Carbon Dioxide (10) a distillation of his 750 
articles in the refereed scientific literature.
---------------------------------------------------------------------------
    I must ask this Committee the real questions of the day: 
How much of the money of the citizens of this nation are you 
willing to spend to stop this? How much to stop a slight 
amelioration of the coldest temperatures, in the airmasses most 
inhospitable to unprotected life where there is human 
settlement? How much to stop making the earth greener, more 
productive, and human life increasingly long over the mass of 
the planet that still finds us the envy of history?

                               References

    (1) Houghton, J.T., G.J. Jenkins, and J.J. Ephraums (Eds.) 
(1990). Climate Change: The IPCC Scientific Assessment. 
Cambridge: Cambridge University Press.
    (2) Houghton, J.T., L.G. Meira Filho, B.A. Callander, N. 
Harris, A. Kattenberg, and K. Maskell (Eds.) (1996). Climate 
Change 1995: The Science of Climate Change. Cambridge: 
Cambridge University Press.
    (3) Santer, B.D., et al. (1996). A Search for Human 
Influences on the Thermal Structure of the Atmosphere. Nature, 
382, 39-45.
    (4) Michaels, P.J. and P.C. Knappenberger, 1996. Human 
Effect on Global Climate? Nature, 384, 522-523.
    (5) Mitchell, J.F.B. and T.C. Johns (1997). On modification 
of Global Warming by Sulfate Aerosols. Journal of Climate, 10, 
245-266.
    (6) Kerr, R.A. (1997). Model Gets It Right-Without Fudge 
Factors, Science, 276, 1041.
    (7) Hobbs, P.V., et al. (1997). Direct Radiative Forcing by 
Smoke from Biomass Burning, Science, 275, 1777.
    (8) Karl, T.R. et al. (1995). Trends in high-frequency 
climate variability in the 20th century. Nature, 337, 217-220.
    (9) Myneni, et al. (1997). Increased plant growth in the 
northern high latitudes from 1981 to 1991. Nature, 386, 698-
702.
    (10) Nicholls, N. (1997) Increased Australian wheat yield 
due to recent climate trends. Nature, 387, 484--485.
    (11) Wittwer, S.H. (I 995). Food, Climate and Carbon 
Dioxide. CRC Press, Boca Raton, Fla. 236pp.

    Senator Hagel. Dr. Michaels, thank you. Dr. Robock.

  STATEMENT OF DR. ALAN ROBOCK, MARYLAND STATE CLIMATOLOGIST, 
  DEPARTMENT OF METEOROLOGY, UNIVERSITY OF MARYLAND, COLLEGE 
                         PARK, MARYLAND

    Dr. Robock. Thank you very much. I only had a day to 
prepare my statement, so I don't have any graphs like Pat has. 
But I will just read from it and expand on it.
    First, I would like to introduce myself and tell you who I 
am and what my expertise is. I have a Ph.D. in Meteorology from 
MIT, which I received in 1977, and I have been a Professor at 
the University of Maryland ever since. I am also the State 
Climatologist of Maryland. Pat is the State Climatologist of 
Virginia.
    I have been involved in climate research for the last 25 
years. I published more than 125 articles on my research, 
including some which address the detection issue. I have 
published a paper recently showing that the cooling of the 
stratosphere which was observed for the last 30 years is very 
unlikely to have happened by chance and is probably a signal of 
human impacts on the climate system.
    I am the contributing author to 4 of the 11 chapters of the 
most recent IPCC report, including chapter 8, the Detection of 
Climate Change and Attribution of Causes.
    The work I did in contributing information to these 
chapters and in reviewing these and other chapters was done as 
a volunteer at night, in my spare time, with no compensation.
    I have grants from several U.S. agencies to support my 
research at the university, from the National Science 
Foundation, NASA, NOAA and Department of Energy. But I do not 
receive any private financing of my research.
    I am a member of the American Meteorological Society, the 
American Geophysical Union, the American Association for the 
Advancement of Science, and I serve on the Scientific Advisory 
Board of the National Institute for Global Environmental 
Change, Great Plains Regional Center, which is at the 
University of Nebraska, in Lincoln. I have served on that since 
its inception in 1992. This is funded by Department of Energy.
    I worked as a Congressional Science Fellow 10 years ago for 
Congressman Bill Green for a year, and I also worked on the 
Energy and Environment Study Conference, which was chaired by 
him and Senator Gore at the time, and wrote a report for 
Congress on the greenhouse effect. I think it was the first one 
that was put out by them.
    I was a visiting scientist for a year at Princeton 2 years 
ago, where I worked on climate research.
    I agree with the conclusions of the 1995 Working Group I 
report. ``The balance of evidence suggests that there is a 
discernible human influence on global climate.''
    Note that this says the ``balance of evidence.'' It does 
not say that there is unambiguous proof.
    The report points out, ``Our ability to quantify the human 
influence on global climate is currently limited because the 
expected signal is still emerging from the noise of natural 
variability, and because there are uncertainties in key 
factors. These include the magnitude and patterns of long-term 
variability.'' I agree with that, too.
    So what we are saying is that if we look at all of the 
evidence, it supports that we are having a human impact on 
climate, but it does not prove it unambiguously because there 
is so much natural variability and we are trying to see a very 
small signal so far.
    What is the evidence we use? The evidence which supports a 
human influence includes observations that the concentrations 
of greenhouse gases produced by humans, especially carbon 
dioxide, are increasing. These gases warm the surface by 
enhancing the natural greenhouse effect. This is undisputed. We 
can measure the increase of CO2.
    But these gases are not the only cause of climate change. 
When we take the most recent climate models and include these 
effects plus the effects of aerosols, that is, particles in the 
atmosphere, plus the effects of volcanic eruptions, plus ozone 
depletion, solar variations, and El Ninos, then these models 
produce simulations of climate for the past 100 years that 
agree quite well with the past surface temperature record.
    This is how science progresses. We do the simple experiment 
first, putting in only CO2. Then we put in other 
factors which we begin to understand are also important. If 
this changes the result, this is scientific progress. It does 
not mean that what was done originally was wrong or that the 
people had a particular bias. It is just advancement and better 
understanding.
    In addition, stratospheric temperatures are decreasing, the 
sea level is rising, and glaciers are melting. All of these are 
in agreement with these theoretical calculations.
    So sea level rise, which has not been mentioned much here, 
is another consequence of global warming. It is usually pointed 
out that small island states would be one of the principal 
people that would be affected. But I am from the State of 
Maryland. Maryland is a small island State, too. We have small 
islands in the Chesapeake Bay. As sea level rises, they will be 
affected. In fact, there is already evidence of this in 
Chesapeake Bay.
    There will be increasing effects all along the coast as the 
sea level rises.
    So these same models that we tested to explain the past 
climate we use for projections of future climate. They say that 
the average global temperature will rise by 2 to 6 degrees 
Fahrenheit by the end of the next century. There is a typo in 
my written report. It should be 6 degrees, not 9 degrees.
    Even for the smallest increase projected, ``The average 
rate of warming would probably be greater than any seen in the 
last 10,000 years.''
    So the IPCC goes on to say, ``The actual annual decadal 
changes would include considerable natural variability. 
Regional temperature changes could differ substantially from 
the global mean value.''
    This means that at any one location on the globe, the 
probability of high temperatures will increase. But it will not 
be warmer on each and every day.
    There also could be some surprises. There could be some 
rapid changes that we do not even understand or cannot predict 
now. Ten years ago, when I worked here, I sat in on a lot of 
hearings about ozone depletion and should we restrict freons, 
and many industry people sat up here and said no, it will 
destroy our industry if we can't have freons. Some scientists 
said but the science shows that ozone is going to be depleted.
    Two years ago, Sherry Rowland, Mario Molina, and Paul 
Cruson received the Nobel Prize in Chemistry for their work 
warning us about it more than 20 years ago.
    The ozone hole appeared over the South Pole. Nobody 
predicted it. Nobody thought that that would happen. We were 
only worried about gradual ozone depletion. All of a sudden we 
have this rapid depletion of ozone that nobody predicted.
    We understand it now. It is a very complex interaction 
between stratospheric clouds and atmospheric circulation. But 
this was a surprise. It actually was much worse than we had 
thought.
    So I am giving you what we know now, this range. But the 
rest is unknown. It could be that the warming could be less or 
it could be more. We don't know. We need more research to find 
that out.
    Now what would be the consequences of this climate change? 
Well, obviously, the most threatening one is our food supply. 
If there would be an increase in the latitude of drought and 
crop failures in the bread baskets of the world, that would 
have a significant impact. The latest analysis from IPCC shows 
very large or very small changes in agricultural production in 
many different places around the world. But it is something 
that is very poorly known at this point and needs a lot more 
work.
    According to our current understanding, the average is that 
it probably would not be so much of a problem, but we don't 
know.
    Other potential impacts include stronger, more violent 
storms, coastal flooding and erosion, forest declines, 
spreading of deserts, more intense droughts and floods, the 
spread of tropical diseases, poorer winter skiing and snow 
boarding, increased human mortality and illness from heat, and 
increased economic and geographical dislocations.
    Ironically, the distribution of these impacts is not 
uniform. It looks now that the developed nations would be less 
impacted than the developing countries, even though the 
developed nations are the ones that are producing, that are 
major producers of greenhouse gases right now.
    In the rest of my written statement, I have sort of taken 
off my scientist hat and given you my opinion based on my 
knowledge of the political process and what should be done 
about it. So I don't want really to dwell too much on that 
except to say that improved knowledge is one of the things that 
we still need. We still need to know a lot about what is going 
to happen.
    There is going to be warming no matter what we do, no 
matter what treaties we sign, because all the greenhouse gases 
that we have put in in the past up until today are going to 
influence climates for decades to come. So if we try to 
restrict emissions of gases, we will change the rate of climate 
change. We will make it slower and allow us more time to adapt 
and to deal with the problems.
    In order to adapt and to know what the patterns are, we 
need more research to understand what these patterns are.
    I will just close by giving you an analogy of this very 
different problem of detecting an anthropogenic climate change. 
Suppose you have a car and you are driving down the road, but 
the front wheels are really loose and are wobbling back and 
forth. So you just hold straight to the steering wheel. But the 
car is going to be going back and forth, and back and forth. 
You cannot predict at any one time exactly where it is going to 
be.
    That is how the climate changes now because of all the 
noise generated by storms, by the changing storms. For the same 
reason that we cannot predict the weather more than a week in 
advance, those same storms, which are unpredictable, produce 
changes of climate.
    Now if we turn the wheel of the car a little bit, which is 
the analogy to putting in greenhouse gases, the car is going to 
curve a little bit. But at any individual time it is going to 
be left or right of the place that you are pointing to.
    Right now, we are trying to measure this wiggly signal 
coming out of the noise of climate change and we are just about 
at the edge. It is very hard to say, and we are looking for 
particular patterns that would not have occurred naturally. The 
change of vertical temperature is one of them. The changes from 
different hemispheres is another one. But the balance of 
evidence, all of our theoretical understanding, points to that 
there really is a greenhouse warming effect and we are seeing 
it now.
    Thank you.
    [The prepared statement of Dr. Robock follows:]
                   Prepared Statement of Alan Robock
Introduction

    First I would like to introduce myself. I earned a Ph.D. in 
Meteorology at the Massachusetts Institute of Technology in 1977. Since 
then I have been on the faculty of the Department of Meteorology of the 
University of Maryland, where I am now a Professor and the State 
Climatologist of Maryland. My research involves many aspects of climate 
change, including the greenhouse effect, impacts of climate change and 
satellite observations. I have published more than 125 articles on my 
research, more than half of these in the peer-reviewed literature. I 
conduct both observational analyses and climate model simulations.
    I have published papers on the creation of regional climate change 
scenarios for impact analysis and on the effects of climate change on 
corn production in Venezuela. I recently published a paper (Vinnikov, 
Konstantin Ya., Alan Robock, Ronald J. Stouffer, and Syukuro Manabe, 
1996: Vertical patterns of free and forced climate variations. Geophys. 
Res. Lett., 23, 1801-1804) which showed that the cooling of the 
stratosphere which has been observed during the past 30 years has a 
very small chance of having happened due to natural climate 
fluctuations, and is most likely a signal of human impacts on the 
climate.
    I am a contributing author to 4 of the 11 chapters of the most 
recent EPCC 1995 Working Group I report, including Chapter 8, 
``Detection of Climate Change and Attribution of Causes.'' The work I 
did in contributing information to these chapters, and in reviewing 
these and other chapters, was done as a volunteer, at night and in my 
spare time, with no compensation. I currently have grants from the 
National Science Foundation, the National Aeronautics and Space 
Administration (NASA), the National Oceanic and Atmospheric 
Administration (NOAA), and the US Department of Energy (DOE) that 
support my scientific research. I have no private financing of my 
research or publications.
    I am a member of the American Meteorological Society, the American 
Geophysical Union, and the American Association for the Advancement of 
Science (AAAS). I serve on the Scientific Advisory Board of the 
National Institute for Global Environmental Change, Great Plains 
Regional Center, at the University of Nebraska in Lincoln, and have 
since its inception in 1992. This center is funded by DOE. I am the 
Associate Editor for Meteorology of Reviews of Geophysics. I serve on 
the International Climate Commission of the International Association 
for Meteorology and Atmospheric Science (IAMAS) and the American 
Meteorological Society Committee on Climate Variations. I was awarded a 
AAAS Congressional Science Fellowship in 1986, and served as 
Legislative Assistant to Congressman Bill Green (R-NY) and as a 
Research Fellow with the Environmental and Energy Study Conference from 
September, 1986, through August, 1987, where I authored the report The 
Greenhouse Effect: Global Warming Raises Fundamental Issues. During the 
1994-95 academic year I was a Visiting Research Scientist at Princeton 
University in the Atmospheric and Oceanic Sciences Program, conducting 
climate research at NOAA's Geophysical Fluid Dynamics Laboratory.

Scientific Consensus on Global Warming

    I agree with the conclusions of the 1995 IPCC Working Group I 
report that ``the balance of evidence suggests that there is a 
discernible human influence on global climate.'' Note that this is the 
balance of evidence, NOT unambiguous proof. The report points out that 
``our ability to quantify the human influence on global climate is 
currently limited because the expected signal is still emerging from 
the noise of natural variability, and because there are uncertainties 
in key factors. These include the magnitude and patterns of long term 
variability....'' [Both these quotes are from p. 5 of the Summary for 
Policymakers.] I agree with this part of the assessment, too.
    What is the evidence we use? The evidence which supports a human 
influence on climate includes observations that the concentrations of 
``greenhouse gases'' which are produced by human activity, especially 
carbon dioxide, are increasing and that these gases warm the surface by 
enhancing the natural greenhouse effect. These facts are undisputed. 
But these gases are not the only cause of climate change. When the most 
recent climate models include the effects of greenhouse gases, aerosols 
(particles in the atmosphere), volcanic eruptions, solar variations, 
and El Ninio in their calculations, they produce simulations of climate 
change of the past 100 years that agree quite well with the past 
surface temperature record. In addition, stratospheric temperatures are 
decreasing, sea level is rising, and glaciers are melting, all in 
agreement with these theoretical calculations.
    It is these same models that we use for projections of future 
climate, and they say that the global average temperature will rise by 
2 to 9+F by the end of the next century. Even for the smallest increase 
projected, ``the average rate of warming would probably be greater than 
any seen in the last 10,000 years.'' [p. 6 of the EPCC Summary for 
Policymakers.] The EPCC goes on to say, ``actual annual to decadal 
changes would include considerable natural variability. Regional 
temperature changes could differ substantially from the global mean 
value.'' This means that at any one location on the globe, the 
probability of high temperatures will increase, but it will not be 
warmer on each and every day.
    Of the projected consequences of global warming to society, I see 
the threat of midlatitude drought, and resulting crop failures in the 
breadbaskets of the world, as a significant potential danger. The food 
supply of a planet that will have many more mouths to feed is 
threatened. It is difficult to quantify this threat. While IPCC studies 
show possible large increases and decreases in crop productivity in 
different regions of the world, with no net large changes in current 
production, much more work is need in this area.
    Other potential impacts on humans include stronger and more violent 
storms, coastal flooding and erosion, forest declines, spreading of 
deserts, more intense droughts and floods, spread of tropical diseases, 
poorer winter skiing and snowboarding, increased human mortality and 
illness from heat, and increased economic and geographical 
dislocations. The distribution of impacts is not uniform around the 
world. Ironically, while the developed nations of the world produce the 
majority of greenhouse gases, it appears that developing countries will 
be more severely affected. However, quantified estimates of total 
damage to society are currently quite uncertain.

What Should We Do?

    Here I give you my professional opinion based on my scientific and 
political knowledge. We need to take measures as insurance against 
possible serious consequences. Policy responses will have to made in an 
environment of uncertainty, but not in an environment of ignorance.
    Our response to the threat of global warming at this time should be 
one of adaptation, improved knowledge, and mitigation. ``No regrets'' 
responses should be strongly pursued. I will briefly comment on each of 
these.

    Adaptation. No matter what our response, the planet will warm. The 
most we can hope to achieve is to slow the rate of warming in the next 
century. Therefore, in the case of each threat to society listed above, 
all the threats not mentioned, and the threats that will appear that we 
are not smart enough to imagine now, we will have to adapt to minimize 
the negative impacts. This adaptation will require much better 
information and technological innovations. This represents a 
significant business opportunity in the United States to develop the 
necessary devices and products and to market them to the world.

    Improved knowledge. We need better data, better models, better 
computers, and more trained scientists and engineers to address the 
problems presented by global warming. Investing in the nation's 
scientific research establishment is a very inexpensive and very 
rewarding allocation of the nation's resources. We have to know where 
and when temperature, precipitation, storm, and sea level changes will 
take place. We need to know the biological response of agricultural and 
natural ecosystems to the changed climate. Only then can we gauge the 
impacts of our actions, and help to adapt precisely to the changes.

    Mitigation. If climate change is slowed down and more gradual, 
society will have more time to learn to live in this new world. This 
means stopping the global growth in the emission of carbon dioxide, and 
slowly reducing it. The only way to do this is to include burning less 
coal and oil in the response. Any combination of conservation, energy 
efficiency, energy tax, and public transportation enhancements will 
result in less gasoline being burned and less coal being burned.

    ``No regrets'' policies. Reduced usage of energy will have many 
positive benefits to society, while exacting small costs, even if 
projected global warming turns out to have been exaggerated (which is 
just as likely as that the warming turns out to have been 
underestimated). We would have cleaner air, less acid rain, greater 
visibility in the atmosphere, cooler central regions of cities, more 
trees, and less dependence on foreign oil supplies (currently about 
half of our usage). There are many proposals along this line that will 
not reduce American living standards, and our productivity will 
increase in the long run as we use energy more efficiently.

    Legislative response. In light of the above discussion, I cannot 
support the Byrd/Hagel Senate Resolution 98 which seeks to limit 
current US participation in a climate treaty unless developing 
countries are also included now. The United States agreed in Berlin in 
1995 that the current round of negotiations will only commit 
industrialized nations to emissions targets, and that the developing 
countries will produce commitments in the subsequent round of talks. 
There is no reason to change this now. The latest scientific research 
supports this position.

    The fact is that each US citizen currently produces more than 5 
times the greenhouse gas emission as the average person on earth. Once 
industrialized countries set an example, as we have in so many other 
social, moral, and environmental issues, the developing world will 
accept its responsibility to restrict greenhouse gas emissions as 
already agreed in the next few years.

    Senator Hagel. Dr. Robock, thank you very much.
    To both of you, thank you again.
    Dr. Robock, you heard your colleague, Dr. Michaels, say, I 
believe, that over the last 18.5 years there has been a net 
cooling. Obviously you disagree with that.
    Dr. Robock. No. He has a graph here showing the data from 
the satellites. He has another graph showing the data from the 
surface temperature observations.
    These are measuring different things. So the question is 
what are you talking about, surface temperatures or 
temperatures in the middle part of the atmosphere.
    In both cases, it looks like the average temperature of the 
last 20 years has been about constant. It has not gone up very 
much and if there is a negative trend, it is tiny. So the trend 
is much smaller than the individual year to year variations.
    The largest volcanic eruption of the past century, the 
Pinatubo eruption, took place in 1991 and produced substantial 
cooling for several years. 1992 was quite cold compared to the 
years before that and we are only just now recovering from that 
cooling. So he has picked a very short period of time, only 20 
years, and at the end of that period there are the effects of a 
volcanic eruption. So you have to interpret this in light of 
all the causes of climate change, not just greenhouse warming.
    This does not conflict with our understanding of how the 
climate system should behave. This is a response to greenhouse 
warming, to El Ninos which take place. There was the largest El 
Nino of the whole last 100 years at the beginning of this 
period, in 1982-1983. So it was a warm period caused by an El 
Nino at the beginning and a cold period at the end caused by a 
volcanic eruption. That, superimposed on the greenhouse gases 
that come up, can explain the entire record. So it is not 
inconsistent with a global warming theory.
    Senator Hagel. Let me ask Dr. Michaels to respond to that. 
Thank you.
    Dr. Michaels. The satellite record can be broken into 
hemispheres. One of the things that scientists like to do is to 
look at the Southern Hemisphere because it is thought to be 
relatively pristine compared to the Northern. It does not have 
a lot of the particulate emissions. It does have the changes in 
the greenhouse effect, though, because the greenhouse gases are 
long-lived.
    There is a statistically significant negative trend in the 
Southern Hemisphere satellite data as well. But, moreover, if 
we take out the period 1992 through 1994, which is when the 
Pinatubo cooling is in that record, the cooling remains 
statistically significant. Pinatubo did not do that.
    Dr. Robock. Well, you don't know that the Pinatubo effect 
ended in 1994.
    Dr. Michaels. Except that the temperature went back to 
where it was by mid-1994.
    Dr. Robock. Yes. But it might have been much warmer if 
there had not been an eruption.
    Dr. Michaels. Well, if you take a look at the modeling 
simulation from Hansen, which he was talking about in 
``Science'' magazine a few years ago, a couple of years ago, he 
said that they had correctly diagnosed both the magnitude and 
the period of the Pinatubo cooling, and he hit the bottom about 
10 months or 11 months after the eruption and then got it back 
to the background temperature about 2 years after the eruption, 
didn't he?
    Senator Hagel. Obviously we have a little difference of 
opinion here. I think this really makes the case on why, along 
with, I suspect a lot of U.S. Senators, am rather confused 
about what do we have here. What is the problem, what is the 
issue. Do we have an issue? Do we have a problem?
    But moving along from there Dr. Robock, there are your 
comments about food supply and agricultural production. Your 
colleague Dr. Michaels as well as the President of the Nebraska 
Farm Bureau, talked about the incredible increases in 
agricultural production which have occurred in this country, 
Australia and other places. Your testimony does not give that 
same indication of an increase in productivity.
    Dr. Robock. Well, just like climate change, there are many 
things that cause changes in agricultural productivity.
    If you look at agricultural productivity over the most 
recent time, climate has not been the most significant factor. 
It has been changes of fertilizers, technology, energy, new 
seeds. So, because of technological inputs to farming, there 
indeed has been an increase in agricultural productivity.
    If you look at figures of that, little wiggles on those 
impacts of climate. The drought in 1988 I am sure had an impact 
on climate productivity. There was an extreme. But to predict 
technological responses and human responses and how they will 
deal with a gradually changing climate and to know what the 
total agricultural productivity will be in the future is very 
difficult to do. I don't know how to do that.
    Indeed, it is true that right now, in our country and in 
the world, except for extreme cases, the climate change is not 
the most dominant thing for food supplies.
    But what we are talking about is the most rapid climate 
change ever before experienced in the history of our species 
happening much more rapidly than has happened in the past. 
Current model projections show that there will be significant 
drought in the summertime, much more than we have ever before 
experienced.
    So the threat is that there will be much larger climate 
extremes that we will have to deal with and it may not be 
possible to deal with that the way we are dealing with it now.
    Senator Hagel. I am going to ask Dr. Michaels to respond. I 
am sure he wishes to. But I can tell you that if Mr. Neidig, 
the Nebraska Farm Bureau President, was sitting here and 
listening to some of that, he might bring up the Dust Bowl of 
the 1930's.
    Dr. Robock. I didn't bring that up.
    Senator Hagel. No, I did, because your point was that the 
productivity increases have come as a result of fertilizer, 
technology and so on and that climate did not have much to do 
with it. Those in Nebraska and the Midwest would tend to 
differ.
    Dr. Michaels, you might have a response.
    Dr. Michaels. Well, the fact of the matter is that as a 
percentage of the yield of crops from year to year, the weather 
component drops more and more and more as the technological 
component goes up. That is a peculiarity of our society that 
many people do not realize; that we actually engineer out these 
big drops in agricultural productivity.
    Let me tell you a little story about this. It's 
fascinating.
    I actually got my Ph.D. in crops and how they change around 
the world as the climate fluctuates. I did a bunch of work 
after that in the area.
    Now Al is right. There is a tremendous increase in the 
technological component of yield and it is about to jump up 
again, I think, by the way, as selective genetic engineering 
makes plants more efficient with respect to water use and 
fertilizer use.
    We were looking at a study of Eastern agriculture. What we 
do in these models is try to put some estimator of the 
technological change in. Every time we did, we could not quite 
explain the increase.
    Well, now we are seeing research by Neville Nichols in 
Australia saying well, maybe the reason for some of this 
increase is climate change itself or, as Sylvan Wittwer would 
say, the fact that you have put more carbon dioxide in the air.
    This is not a one-way street. Everything you do is not bad 
and technology has its way of ameliorating some of the 
problems.
    Senator Hagel. Did you want to respond, Dr. Robock?
    Dr. Robock. I just wanted to say that I think maybe I was 
misunderstood.
    I agree with you that the Dust Bowl had a significant 
impact on agriculture. So if you look to include that in the 
record, certainly the increase in productivity was because the 
climate is more beneficial now than during the Dust Bowl.
    Dr. Michaels. Thirty seconds. After the Dust Bowl----
    Dr. Robock. Just let me say one other thing.
    Dr. Michaels. Sure.
    Dr. Robock. About the CO2 fertilization issue 
which Dr. Michaels brought up, increased CO2 can 
also make weeds grow faster. It can also make insects eat more 
plants than they have before in order to get enough nutrition.
    So it is not clear and we don't understand well enough yet 
what the total mix of the influence of increased CO2 
fertilization will be on productivity because it can affect 
lots of other things and not just the growth of crops.
    Senator Hagel. Dr. Michaels, we will finish with this and 
then pass the ball on to Senator Sarbanes.
    Dr. Michaels. I would just argue that if there are more 
insects eating more plants, there have to be more plants for 
the insects to eat.
    Senator Hagel. Well, would you like to pick up on that, 
Senator Sarbanes.
    Senator Sarbanes. Well, in a way.
    I take it, Dr. Michaels, that as you just said, it is not a 
one-way street. In fact, as I read your statement, you think it 
is so much a two-way street that I take it you would be in 
favor of more emission of carbon dioxide. Would that be 
correct?
    Dr. Michaels. No, I didn't say that.
    Senator Sarbanes. Let me read your statement.
    Dr. Michaels. Let me tell you what I am in favor of.
    Senator Sarbanes. No, let me read your statement. ``During 
the 20th Century, we have already proceeded more than half-way 
to radiatively doubling the natural carbon dioxide greenhouse 
effect. Here is what resulted. Life expectancy doubled in the 
free and developed world.''
    So you link the increase in life expectancy to the increase 
in carbon dioxide greenhouse effect?
    Dr. Michaels. No. No, sir. No.
    The society that developed, the technological society that 
developed that was based upon fossil fuel developed technology 
and lifestyles that clearly doubled the life expectancy. It was 
not caused by carbon dioxide nor was the fivefold increase in 
corn yield. It was the society that developed as a result of 
this. Other societies want to do the same.
    Senator Sarbanes. So it really says nothing as to whether 
the increase in carbon dioxide greenhouse effects is related to 
these measures.
    In other words, if you had developed a society which had 
exercised better control over its greenhouse effects, you might 
have still had these results, is that correct?
    Dr. Michaels. We cannot run that experiment.
    Senator Sarbanes. Well, would you run it now?
    Dr. Michaels. I don't have the ability to run it.
    Senator Sarbanes. No, I mean that we can just let this 
thing go. Do you think there is any problem here? On the basis 
of this analysis, I take it one would simply say well, just let 
it rip.
    Dr. Michaels. Why do something drastic right now? Yes, I 
agree. I certainly don't think there is any need to do anything 
drastic.
    Senator Sarbanes. Would you do anything?
    Dr. Michaels. I would believe our greener friends.
    Senator Sarbanes. Pardon?
    Dr. Michaels. I would believe our greener friends who have 
told us that technology of the future will become more energy 
effective and cost effective with respect to the current mix of 
technology. When it does that, that technology becomes cheaper.
    Senator Sarbanes. But why should we bother to do that if 
there are no harmful consequences of a greenhouse effect?
    Dr. Michaels. Well, we will run that experiment, won't we?
    Senator Sarbanes. But why should we do it if there are no 
harmful consequences?
    Dr. Michaels. Because if the technology is cost 
competitive, people are going to buy it no matter what, and 
that is what we are being told. We can buy a lot more of it in 
the year 2020 than we can in the year 1996.
    Senator Sarbanes. Why do we want a technology that reduces 
the greenhouse effect if the greenhouse effect is not harmful?
    Dr. Michaels. I don't think that's the point, Senator. I 
think we want a technology that produces energy efficiently, 
whether it emits carbon dioxide or not. That is where we are 
told we are heading.
    Senator Sarbanes. Now let me ask you this. I am interested 
in this assertion. You don't think there is any problem, I take 
it, in a rising level in the oceans.
    Dr. Michaels. I will tell you that many recent studies, 
notably by John Mather at the University of Delaware, who is a 
very esteemed climatologist, and several others that I could 
cite if I could get into my little white book here, now 
indicate sea level rise not to be thought to be as much as 
people said.
    Now hold on for a second.
    Senator Sarbanes. No, I don't want to get into that 
argument----
    Dr. Michaels. I do.
    Senator Sarbanes. [continuing]. as to whether it is more or 
less. Do you think there is sea level rise?
    Dr. Michaels. The sea level has risen a few inches in the 
20th Century. Much of the rise was before much of the 
greenhouse emissions.
    Senator Sarbanes. Now I take it you say if the heat is at 
the ice caps, it doesn't matter because they are well below 
freezing in any event, is that correct?
    Dr. Michaels. In the winter, yes.
    What you do is you actually increase the amount of snow in 
the highest latitudes. The simulations that I am referring to 
by Mather--and there are several of them; Al can probably help 
me out with this--now indicate that the two largest areas of 
ice on the planet in toto, which is Greenland and Antarctica, 
actually grow a bit if you warm the atmosphere some because of 
the propensity for winter warming.
    Dr. Robock. No. As I understand it, Greenland would melt 
slightly but Antarctica might grow.
    Dr. Michaels. And the net is positive between those two.
    Dr. Robock. But the total amount of contribution to sea 
level rise from melting ice is much smaller than the 
contribution just from thermal expansion; that is, you heat the 
water and it becomes thicker.
    So it is not a significant part of the projected sea level 
rise, anyway. It may be a third of it. There are a lot of 
glaciers on land that are melting.
    I was just in Glacier Bay, Alaska. The glacier has 
retreated 50 miles in the last 200 years. When the first 
explorers came there, there was a huge sheet of ice and how it 
has contributed to sea level rise. Glaciers around the world on 
land are melting. That is the main contribution from glaciers.
    But it is much less than the contribution just from heating 
the ocean and it is getting thicker.
    Dr. Michaels. If you melt all the land glaciers on the 
surface of the planet, I believe you raise the sea level by 7 
inches. Isn't that right?
    Dr. Robock. Yes. So that's not very important. The thermal 
expansion is much more important.
    Dr. Michaels. Thermal expansion has given us half, it has 
generally given us 50 percent of the contribution, an equal 
contribution that you get from melting ice.
    I don't think that you are going to disagree with me that 
warming in models is coming down. Nature is trying to tell us 
something. The NCAR model is sitting there at about 1.3 degrees 
with the right greenhouse effect in it. PKMO is down there. 
Nature has not really warmed us up very much in the last 20 
years, as you have said. So what about all this thermal 
expansion?
    Dr. Robock. There are about five things there that I would 
like to disagree with.
    Senator Sarbanes. Well, go ahead and do it.
    Senator Hagel. Yes, we have time.
    Dr. Robock. The argument that models are giving different 
answers now than they did before and that that trend signifies 
anything about the future is really misleading.
    If you put in aerosols into a model, which tend to cool, 
then the warming will be less than if you are only put in 
greenhouse gases. We knew that. I published a paper in 1978 
showing that and showing that the Northern Hemisphere would 
warm less than the Southern Hemisphere because of the aerosols.
    So we have known that for a long time. It is just that 
these very sophisticated models have not had the technology to 
put in the effects of aerosols in a correct way. So now that we 
do it, we get the result that we expect.
    This gives us further confidence in the models, not less.
    If you increase carbon dioxide by 0.7 percent a year rather 
than 1.0 percent a year, of course you will get less warming. 
There is nothing controversial about that.
    Any projection of future climate depends on how much 
CO2 will be in the atmosphere. That means we have to 
predict human behavior. We have to predict what the human 
emissions will be.
    So you can take any scenario you want and then get the 
answer based on those assumptions. If Pat is saying that we put 
in a better estimate of past CO2 changes and we get 
a better estimate from the models, that strengthens our 
confidence in the models, not weakens it.
    Dr. Michaels. The person who, I guess, ignited, the 
scientific witness who ignited the ``Bonfire of the Greenhouse 
Vanities'' was James Hansen from NASA in his 1988 testimony. He 
is often thought of as quite an authority.
    Let me read to you from the May 16 ``Science'' magazine his 
opinion of sulfate aerosols. I am quoting from an article by 
Richard Caere. ``But the assumptions about how hazes''--that's 
the aerosols--``affect the climate may have taken a hit 
recently from climatologist James Hansen, the man who told 
Congress in 1988 he believed `with a high degree of confidence' 
that greenhouse warming had arrived. In a recent paper, Hansen 
and his colleagues pointed out that recent measurements suggest 
that aerosols don't just cool, they warm the atmosphere by 
absorbing sunlight. The net effect of this reflection and 
absorption Hansen estimates would be small--too small to have 
an effect on temperature.''
    Dr. Robock. What Pat is talking about is the direct effect 
of aerosols; that is, aerosols just scatter some of the 
sunlight back to space and that heat doesn't get to the ground.
    Indeed, recent studies off the coast of Virginia last year, 
the TARFOX experiment, showed that a lot of the haze is carbon 
based not sulfate aerosols----
    Dr. Michaels. That would cause warming.
    Dr. Robock. [continuing]. which would cause warming.
    Dr. Michaels. And it didn't warm.
    Dr. Robock. So what Hansen is saying, which is the part Pat 
didn't read, is that, therefore, the effect of aerosols must be 
the indirect effect that is causing the cooling. This indirect 
effect of aerosols is when they go into clouds. When aerosols 
go into clouds, they produce smaller cloud droplets and make 
the clouds brighter. It increases their reflectivity. This 
indirect effect cools by reflecting more sunlight.
    You can see this if you look at a satellite picture of ship 
tracks. You can see a line in the clouds as a ship steams 
underneath it because the pollution from the smokestack of the 
ship goes up into the cloud and makes this bright white line.
    This area of indirect effects of aerosols on clouds is an 
area of active research and is very difficult to quantify by 
observations because you cannot do in the real world an 
experiment with and without the aerosols. But, based on the 
observations that were taken of how it changes over time and 
based on our climate models, the climate models will give you 
any answer you want depending on what assumptions you make 
about the theory.
    But Hansen's conclusion is that there has to be something 
missing that caused the cooling that prevented the warming that 
the models say, and it was this indirect effect of aerosols.
    So, indeed, I can agree with Pat that there are things that 
we don't understand yet. But that does not change the 
conclusion that the balance of evidence supports it. Nobody has 
found any evidence to prove that greenhouse warming is wrong, 
that the theory is wrong.
    Senator Hagel. Dr. Michaels, you have 15 seconds and then 
we will move on with our series of questions.
    Dr. Michaels. The question, again, is one of sensitivity.
    I believe you were at the American Geophysical Union 
meeting in December in San Francisco----
    Dr. Robock. Yes.
    Dr. Michaels. [continuing]. where Hansen gave the paper and 
said the effect of aerosols on the temperature of the last 20 
years is negligible. So you are right, it depends upon the 
model that you use.
    Senator Hagel. Thank you.
    Dr. Robock, I would like to read the last page from your 
statement. Senator Byrd will be concerned to hear that you 
cannot support the Byrd-Hagel Resolution, but I am going to 
pass it on anyway. Moving on to what I think is the more 
important point, you say the United States agreed in Berlin in 
1995 that the current round of negotiations will only commit 
industrialized nations to emissions targets and that the 
developing countries will enter commitments in a subsequent 
round of talks. There is no reason to change this now. The 
latest scientific research supports this position.
    Considering what we have just witnessed here, and given the 
latest scientific research presented by our two distinguished 
panelists, I am not sure that is exactly right. But I would 
like to ask a couple of questions about that.
    First of all, why must we rush into this in 6 months, 
allowing the developing countries not to commit in any binding 
way?
    Second, I keep coming back to a figure that was shown last 
week with which Secretary Wirth agreed, and with which I assume 
you agree as well. It indicated that China will be the largest 
contributor of greenhouse gas emissions in the world by the 
year 2015.
    If, as I said, and as Secretary Wirth agreed that is true, 
why would we let China and the developing countries out of 
this, while we must stick with the way it is in the protocol 
and implement it immediately?
    Dr. Robock. Well, I will give you my opinion as an amateur 
politician. I am not an expert on this.
    The way I see it is that the U.S. has to exert a leadership 
role in the world and take actions so that other people will 
follow.
    Indeed, you are correct that China and India will be much 
larger emitters of greenhouse gases in the near future than the 
developed countries are as they develop. What if everybody in 
China wants a refrigerator or a car? They will make the same 
mistakes we did.
    So the challenge really is to produce technology so that 
people can live at a better style of life using energy much 
more efficiently.
    If the U.S. begins this process now, we can develop that 
technology and it can even be an economic boon to us to produce 
that technology that the world will demand to use energy more 
efficiently.
    As far as timing, whether it is 6 months or a year, as I 
understand it, the developing countries will agree to some 
targets for themselves subsequently. But if the U.S. does 
nothing, you cannot expect them to do anything, either.
    So it is just that we should set an example and do what we 
have to, even though for 50 or 100 years we will still be using 
much more energy per person than people in China. We have to 
make some commitment to demonstrate that it is a problem.
    If we don't think it is a problem, how can we expect them 
to take any action at all?
    Senator Hagel. I would suggest that this goes well beyond 
setting an example.
    Dr. Michaels, you might want to respond to this.
    Dr. Michaels. Well, the fact of the matter is that energy 
per capita is somewhat of a misleading unit in this debate. 
What you really want to look at is the amount of energy per 
unit of GDP.
    In the United States, we now use only 60 percent as much 
energy as we did in the early 1970's to produce a unit of 
deflated Gross Domestic Product. That didn't happen because of 
somebody who was scared of the greenhouse effect. It happened 
because somebody was scared of high prices, and industry 
invested its capital in increased efficiency. That is going to 
continue to happen in the future whether or not we try to force 
it along.
    So I would suspect that we are going to see increasing 
energy efficiency and economies of scale to be the rule in the 
21st Century whether or not we mandate it.
    Senator Hagel. Senator Sarbanes.
    Senator Sarbanes. You don't see any dangers posed by the 
developing world in its use of energy as far as greenhouse 
gases?
    Dr. Robock. Are you asking me?
    Senator Sarbanes. No, I'm asking him.
    Dr. Michaels. You need to make more question more specific.
    Senator Sarbanes. Well, people say China should be brought 
into this thing because they will be emitting more than the 
U.S. by the year 2015. But you don't see that as a problem?
    Dr. Michaels. What I would suggest, again, is that the 
Chinese are going to want to become more energy efficient. I 
believe many of the things that the first panel said.
    You will see--and this is certainly an economic opinion. I 
am out of my field and probably should say nothing. You will 
doubtless see more energy efficient technologies being exported 
from the United States whether or not we mandate emissions 
reductions because everybody has to compete in an economy that 
rewards the efficient.
    When I lived in Chicago, there was a company called 
Northern Illinois Gas which had a great slogan. It was, ``The 
future belongs to the efficient.'' Nothing could be truer.
    Senator Sarbanes. So your view is that that will take care 
of the problem, that there won't be a problem because that will 
take care of it?
    Dr. Michaels. Well, we see all kinds of interesting little 
things along this line, you know. People have a difficult time 
explaining what made the United States become so much more 
efficient with respect to GDP production over the last 30 
years.
    Senator Sarbanes. What do you think there?
    Dr. Michaels. If somebody could explain that that was 
caused by regulation, I'd like to hear the explanation. It was 
clearly caused by economies of scale.
    Senator Sarbanes. By what?
    Dr. Michaels. By economies of scale and people wanting to 
be more efficient.
    Senator Sarbanes. Because of increase in costs, energy 
costs?
    Dr. Michaels. Increasing price.
    Senator Sarbanes. Yes.
    Dr. Michaels. That is supply and demand.
    Dr. Robock. If I could just make one comment about the 
latest scientific research, the reason I said that is there is 
a time lag built into this whole problem. The greenhouse gases 
we put in today and that we put in during the time we delay any 
restriction will have an impact for decades into the future. 
All the greenhouse gases we put in the past, there is nothing 
we can do about those. The climate is going to change in the 
next few decades even if we stop emitting all greenhouse gases 
now. It would still continue to change based on that.
    There is a long time lag. So we cannot wait until we see 
terrible problems. Then there is nothing we can do. There will 
still continue to be effects for decades and it will be too 
late to do anything about it.
    So we have to take a cautious attitude, looking at it from 
the viewpoint of insurance, to what if it is right, what can we 
do that would be a good thing to do anyway. What if it is going 
to be much worse? What if there is going to be a huge change in 
ocean circulation, as some people have suggested, possibly as a 
surprise and there will be a rapid climate change that nobody 
predicted?
    So it is not like aerosols where if you stop burning today, 
in a week or two they will all be out of the atmosphere. The 
greenhouse gases last for decades. So there is a big time lag. 
We cannot reverse it if we come to a point where we say oh, 
yes, it really is a problem now.
    Dr. Michaels. But Al, this leads to what you and I know is 
the great conundrum about this issue, which is if you really 
believe in the gloom and doom models, you have to reduce 
emissions by about 60 to 80 percent. No one knows how to do 
that.
    If you don't believe in them, if you believe in the modest 
climate change scenario, you have to ask yourself the question 
why bother. When we look at the emissions proposals that are 
coming out, you and I know that if you believe the 4 degree 
warming--and I don't and I'm not so sure you do, for a 
doubling--but if you believe that, how much would it change the 
temperature by the year 2050? The answer is probably somewhere 
around a tenth of a degree or so.
    These policies are not credible as far as stopping 
deleterious and dramatic climate change. The magnitude is just 
simply too small. I believe that that is the crux of the issue, 
isn't it?
    Senator Sarbanes. No. Part of the crux of the issue is 
whether you think there is any problem at all, and I take it 
you don't think there is a problem.
    Dr. Michaels. Again, I think the problem that we have is 
the lack of warming given how much was predicted.
    I think Al will agree that the climate models that were 
used as the basis for the Framework Convention predicted that 
it should have warmed between 1.3 degrees and 2.3 degrees by 
now.
    Dr. Robock. No, I don't agree with that.
    Dr. Michaels. This is Mitchell, 1995.
    Dr. Robock. No. They said only if you put in greenhouse 
gases.
    Dr. Michaels. Correct.
    Dr. Robock. They don't take into account everything else. 
They never said that that's how the real climate would behave 
because they know there are lots of other things that cause 
climate change.
    Dr. Michaels. In the 1990 IPCC report, there was precious 
little reference to sulfate cooling except a slight 
speculation.
    Senator Hagel. Senator, do you have any more questions?
    Senator Sarbanes. Well, I didn't really get an answer to my 
question, but I don't think I am going to.
    Senator Hagel. All right. Let's close it up in 60 seconds.
    Senator Sarbanes. Well, I don't really think I am going to. 
So it's all right.
    Senator Hagel. Would one of you like to take another run at 
his question?
    Dr. Michaels. Sure.
    Senator, if you don't think you are going to get an answer, 
I am trying my best to give you what I think is the answer. The 
answer is that, one, more efficient technologies we are told 
will come on the line. Two, they will result in reductions in 
greenhouse emissions.
    Senator Sarbanes. Do you want to reduce greenhouse 
emissions?
    Dr. Michaels. I want efficient technology.
    Senator Sarbanes. Do you want to reduce greenhouse 
emissions?
    Dr. Michaels. If that reduces greenhouse emissions, so be 
it.
    Senator Sarbanes. If it doesn't?
    Dr. Michaels. No comment.
    Senator Sarbanes. So be it. All right. That's my answer. 
Thank you.
    Senator Hagel. Gentlemen, thank you both. This is the great 
conundrum closing.
    I think, again, it reflects that we, at least in this 
humble Senator's opinion, have a long way to go before we have 
a strong, significant scientific base to give us some solid, 
clear direction on this.
    Thank you.
    We are adjourned.
    [Whereupon, at 12:58 p.m., the subcommittee adjourned, to 
reconvene subject to the call of the Chair.]



                            A P P E N D I X

                              ----------                              

                         June 19, 1997 Hearing

                                                  November 8, 1996.
The President
The White House,
Washington, DC 20500

    Dear Mr. President: Last summer, participants in the second 
Conference of Parties of the United Nations' Framework Convention on 
Climate Change (UNFCCC) agreed to negotiations for legally binding 
numeric limits on greenhouse gas emissions. This dramatic shift from 
voluntary to enforceable caps on greenhouse gases was led by the U.S. 
According to your spokespeople, there is now a consensus in the world 
scientific community which demands urgent action to reduce greenhouse 
gas emissions.
    There is less than agreement outside the United Nations' scientific 
body. Furthermore, there is still a lively debate among respected 
scientists about the human versus natural sources of greenhouse gases 
and their effect on climate. Controversy notwithstanding, the climate 
change treaty is moving full-speed ahead with the Administration's 
enthusiastic support. A final agreement is scheduled to be completed in 
December of 1997, with ratification by individual countries beginning 
in 1998. If ratified by the U.S. Senate, the treaty will be binding on 
the U.S. and other developed countries and may be incorporated into 
U.S. law. However, developing countries will not have to comply.
    Of great concern to agriculture are reports under consideration by 
the U.N. scientific panel which blame agriculture for more than 20 
percent of human-caused greenhouse gas emissions. Specifically, we are 
concerned about proposals for the following:

   fuel economy requirements
   reduction or phaseout of the use of diesel fuel
   limitations on production per acre for some crops
   requirements for ``plowless'' soil preparation
   mandatory fallowing of crop land
   limits and restrictions on livestock production to reduce 
        methane emissions
   restrictions on use of fertilizer
   restrictions on timber harvesting
   restrictions on processing, manufacturing and transportation 
        of food products

    Unfortunately, these proposals ignore agriculture's positive role 
in reducing greenhouse gases by removing carbon dioxide from the 
atmosphere through photosynthesis. Most importantly, they cavalierly 
disregard the most valuable function of modern agriculture--feeding a 
hungry world. Ironically, rice production has been singled out as the 
number one culprit in human-caused methane emissions.
    We are very concerned that these recommendations or similar ones 
will be incorporated in the final climate change agreement, ratified 
and imposed on U.S. farmers and ranchers through U.S. laws. Binding and 
enforceable controls would apply only to developed countries and would 
severely disadvantage U.S. farmers and ranchers in today's global 
markets.
    Moreover, we are deeply concerned and surprised that the 
Administration has not actively consulted with agriculture as the 
agreement has been developed. We respectfully request that the 
Administration take the following actions:

    (1) The Administration must fully and actively consult with 
agriculture. Agricultural interests have not been considered by the 
Department of State and other U.S. agencies which are closely involved 
with the development of the climate change agreement. The agreement 
must include an open and extensive public debate which involves 
agricultural producers and members of Congress, USDA and other 
agencies.
    (2) The Administration should withdraw its support for legally 
binding and enforceable caps on emissions until there is a stronger 
consensus from the scientific community that they are justified. If it 
is determined that controls are justified, they should be accomplished 
voluntarily or in ways which minimize disruption of U.S. agricultural 
producers.
    (3) The final climate change agreement, scheduled for completion in 
December of 1997, must be delayed to provide sufficient time for 
consultation with agriculture and for adequate risk, cost and benefit 
assessment.

    Without proper scientific and economic analyses and assessment, 
U.S. farmers and ranchers may be placed at a serious disadvantage with 
agricultural producers in countries which do not plan to reduce 
greenhouse gases.
    If the Administration does not adequately address the above 
concerns, we may raise them with Congress during the ratification 
process.
        Sincerely,

                    AMERICAN FARM BUREAU FEDERATION
               AMERICAN CROP PROTECTION ASSOCIATION
              AMERICAN SHEEP INDUSTRIES ASSOCIATION
                       AMERICAN SOYBEAN ASSOCIATION
                                              CENEX
              NATIONAL ASSOCIATION OF WHEAT GROWERS
              NATIONAL CATTLEMEN'S BEEF ASSOCIATION
                  NATIONAL CORN GROWERS ASSOCIATION
                            NATIONAL COTTON COUNCIL
               NATIONAL FOOD PROCESSORS ASSOCIATION
                                    NATIONAL GRANGE
                 NATIONAL MILK PRODUCERS FEDERATION
                    NATIONAL PORK PRODUCERS COUNCIL
                           THE FERTILIZER INSTITUTE
                         UNITED AGRIBUSINESS LEAGUE
       UNITED FRESH FRUIT AND VEGETABLE ASSOCIATION
                                           USA RICE
                        WESTERN GROWERS ASSOCIATION

                               __________

    ``There's a lot of noise in the data. It is hard to isolate cause 
and effect. But there is now an effective consensus among the world's 
leading scientists and serious and well informed people outside the 
scientific community that there is a discernible human influence on the 
climate, and a link between the concentration of carbon dioxide and the 
increase in temperature....
    ``The time to consider the policy dimensions of climate change is 
not when the link between greenhouse gases and climate change is 
conclusively proven--but when the possibility cannot be discounted and 
is taken seriously by the society of which we are part.
    ``We in BP have reached that point.''
                              --John Browne, Group Chief Executive,
                                    British Petroleum (BP America),
                                    Sanford University, 19 May 1997
                         Climate Change Speech
 By John Browne, Group Chief Executive, British Petroleum (BP America) 
                    Stanford University, 19 May 1997
    Dean Spence, Ladies and Gentlemen, good morning.
    It is always marvelous to come pack to Stanford and it is a 
pleasure and a privilege to be here to speak to you today on a subject 
which I believe is of the utmost importance.
    I can't think of anywhere better than Stanford to discuss in a calm 
and rational way a subject which raises great emotion and which 
requires both analysis and action.
    I think it's right to start by setting my comments in context.
    Following the collapse of Communism in Europe and the fall of the 
Soviet Empire at the end of the 1980s, two alternative views of the 
consequences for the rest of the world were put forward.
    Francis Fukuyama wrote a book with the ironic title ``The End of 
History''. Jacques Delors, then President of the European Commission, 
talked about the ``Acceleration of History''.
    In the event, history has neither accelerated nor stopped. But it 
has changed.
    The world in which we now live is one no longer defined by 
ideology. Of course, the old spectrums are still with us--of left to 
right--of radical to conservative, but ideology is no longer the 
ultimate arbiter of analysis and action.
    Governments, corporations and individual citizens have all had to 
redefine their roles in a society no longer divided by an Iron Curtain 
separating Capitalism from Communism.
    A new age demands a fresh perspective of the nature of society and 
responsibility.
    The passing of some of the old divisions reminds us we are all 
citizens of one world, and we must take shared responsibility for its 
future, and for its sustainable development.
    We must do that in all our various roles as students and teachers, 
as business people with capital to invest, as legislators with the 
power to make law, as individual citizens with the right to vote, and 
as consumers with the power of choice.
    These roles overlap, of course. The people who work in BP are 
certainly business people, but they're also people with beliefs and 
convictions, individuals concerned with the quality of life for 
themselves and for their children.
    When they come through the door into work every morning they don't 
leave behind their convictions and their sense of responsibility.
    And the same applies to our consumers. Their choices determine our 
success as a company. And they too have beliefs and convictions.
    Now that brings us to my subject today--the global environment.
    That is a subject which concerns us all--in all our various roles 
and capacities.
    I believe we've now come to an important moment in our 
consideration of the environment.
    It is a moment when because of the shared interest I talked about, 
we need to go beyond analysis to seek solutions and to take action. It 
is a moment for change and for a rethinking of corporate 
responsibility.
    A year ago, the Second Report of the Inter-Governmental Panel on 
Climate Change was published. That report and the discussion which has 
continued since its publication, shows that there is mounting concern 
about two stark facts.
    The concentration of carbon dioxide in the atmosphere is rising, 
and the temperature of the earth's surface is increasing.
    Karl Popper once described all science as being provisional. What 
he meant by that was that all science is open to refutation, to 
amendment and to development.
    That view is certainly confirmed by the debate around climate 
change.
    There's a lot of noise in the data. It is hard to isolate cause and 
effect. But there is now an effective consensus among the world's 
leading scientists and serious and well informed people outside the 
scientific community that there is a discernible human influence on the 
climate, and a link between the concentration of carbon dioxide and the 
increase in temperature.
    The prediction of the IPCC is that over the next century 
temperatures might rise by a further 1 to 3.5 degrees centigrade, and 
that sea levels might rise by between 15 and 95 centimeters. Some of 
that impact is probably unavoidable, because it results from current 
emissions.
    Those are wide margins of error, and there remain large elements of 
uncertainty--about cause and effect and even more importantly about the 
consequences.
    But it would be unwise and potentially dangerous to ignore the 
mounting concern.
    The time to consider the policy dimensions of climate change is not 
when the link between greenhouse gases and climate change is 
conclusively proven, but when the possibility cannot be discounted and 
is taken seriously by the society of which we are part.
    We in BP have reached that point.
    It is an important moment for us. A moment when analysis 
demonstrates the need for action and solutions.
    To be absolutely clear--we must now focus on what can and what 
should be done, not because we can be certain climate change is 
happening, but because the possibility can't be ignored.
    If we are all to take responsibility for the future of our planet, 
then it falls to us to begin to take precautionary action now.
    But what sort of action? How should we respond to this mixture of 
concern and uncertainty?
    I think the right metaphor for the process is a journey.
    Governments have started on that journey. The Rio Conference marked 
an important point on that journey. So was the Berlin review meeting. 
The Kyoto Conference scheduled for the end of this year marks another 
staging post.
    It will be a long journey because the responsibilities faced by 
governments are complex, and the interests of their economies and 
peoples are diverse, and sometimes contradictory. But the journey has 
begun, and has to continue.
    The private sector has also embarked upon the journey, but now that 
involvement needs to be accelerated.
    This too will be long and complex, with different people taking 
different approaches. But it is a journey that must proceed.
    As I see it, there are two kinds of actions that can be taken in 
response to the challenge of climate change.
    The first kind of action would be dramatic, sudden and surely 
wrong. Actions which sought, at a stroke, drastically to restrict 
carbon emissions or even to ban the use of fossil fuels would be 
unsustainable because they would crash into the realities of economic 
growth. They would also be seen as discriminatory--above all in the 
developing world.
    The second kind of action is that of a journey taken in partnership 
by all those involved. A step by step process involving both action to 
develop solutions and continuing research that will build knowledge 
through experience.
    BP is committed to this second approach, which matches the 
agreement reached at Rio based on a balance between the needs of 
development and environmental protection. The Rio agreements recognize 
the need for economic development in the developing world. We believe 
we can contribute to achievement of the right balance by ensuring that 
we apply the technical innovations we're making on a common basis--
everywhere in the world.
    What we propose to do is substantial, real and measurable. I 
believe it will make a difference.
    Before defining that action I think it is worth establishing a 
factual basis from which we can work.
    Of the world's total carbon dioxide emissions only a small fraction 
comes from the activities of human beings, but it is that small 
fraction which might threaten the equilibrium between the much greater 
flows.
    You could think of it as the impact of placing even a small weight 
on a weight scale which is precisely balanced.
    But in preserving the balance we have to be clear where the problem 
actually lies.
    Of the total carbon dioxide emissions caused by burning fossil 
fuels only 20% comes from transportation.
    80% comes from static uses of energy--the energy used in our homes, 
in industry and in power generation. Of the total 43 per cent comes 
from petroleum.
    We've looked carefully using the best available data at the precise 
impact of our own activities.
    Our operations--in exploration and in refining--produce around 8 
megatonnes of carbon.
    On top of that a further 1 megatonne is produced by our Chemical 
operations. If you add to that the carbon produced by the consumption 
of the products we produce--the total goes up to around 95 megatonnes.
    That is just one per cent of the total carbon dioxide emissions 
which come from all human activity.
    Let me put that another way--to be clear.
    Human activity accounts for a small part of the total volume of 
emissions of carbon--but it is that part which could cause 
disequilibrium.
    Only a fraction of the total emissions come from the transportation 
sector--so the problem is not just caused by vehicles. Any response 
which is going to have a real impact has to look at all the sources.
    As a company, our contribution is small, and our actions alone 
could not resolve the problem.
    But that does not mean we should do nothing.
    We have to took at both the way we use energy--to ensure we are 
working with maximum efficiency--and at how our products are used.
    That means ensuring our own house is in order. It also means 
contributing to the wider analysis of the problem--through research, 
technology and through engagement in the search for the best public 
policy mechanisms--the actions which can produce the right solutions 
for the long term common interest.
    We have a responsibility to act, and I hope that through our 
actions we can contribute to the much wider process which is desirable 
and necessary.
    BP accepts that responsibility and we're therefore taking some 
specific steps.

        To control our own emissions,
        To fund continuing scientific research,
        To take initiatives for joint implementation,
        To develop alternative fuels for the long term,
        And to contribute to the public policy debate in search of the 
        wider global answers to the problem.

    First we will monitor and control our own carbon dioxide emissions.
    This follows the commitment we've made in relation to other 
environmental issues. Our overall goal is to do no harm or damage to 
the natural environment. That's an ambitious goal which we approach 
systematically.
    Nobody can do everything at once. Companies work by prioritising 
what they do. They take the easiest steps first--picking the low 
hanging fruit--and then they move on to tackle the more difficult and 
complex problems. That is the natural business process.
    Our method has been to focus on one item at a time, to identify 
what can be delivered, and to establish monitoring processes and 
targets as part of our internal management system and to put in place 
an external confirmation of delivery.
    In most cases the approach has meant that we've been able to go 
well beyond the regulatory requirements.
    That's what we've done with emissions to water and to air.
    In the North Sea, for instance, we've gone well beyond the legal 
requirements in reducing oil discharges to the sea.
    And now at our crude oil export terminal in Scotland--at Hound 
Point--which handles 10% of Europe's oil supplies--we're investing 
$100m to eliminate emissions of volatile organic compounds.
    These VOCs would themselves produce carbon dioxide by oxidation in 
the atmosphere.
    No legislation has compelled us to take that step--we're doing it 
because we believe it is the right thing to do.
    Now, as well as continuing our efforts in relation to the other 
greenhouse gases, it is time to establish a similar process for carbon 
dioxide.
    Our carbon dioxide emissions result from burning hydrocarbon fuels 
to produce heat and power, from flaring feed and product gases, and 
directly from the process of separation or transformation.
    So far our approach to carbon dioxide has been indirect and has 
mainly come through improvements in the energy efficiency of our 
production processes. Over the last decade, efficiency in our major 
manufacturing activities has improved by 20%.
    Now we want to go further.
    We have to continue to improve the efficiency with which we use 
energy.
    And in addition we need a better understanding of how our own 
emissions of carbon can be monitored and controlled, using a variety of 
measures including sequestration. It is a very simple business lesson 
that what gets measured gets managed.
    It is a learning process--just as it has been with the other 
emissions we've targeted but the learning is cumulative and I think it 
will have a substantial impact.
    We have already taken some steps in the right direction.
    In Norway, for example, we've reduced flaring to less than 20% of 
1991 levels, primarily as a result of very simple, low cost measures
    The operation there is now close to the technical minimum flare 
rate which is dictated by safety considerations.
    Our experience in Norway is being transferred elsewhere--starting 
with fields in the UK sector of the North Sea and that should produce 
further progressive reductions in emissions.
    Our goal is to eliminate flaring except in emergencies.
    That is one specific goal within the set of targets which we will 
establish.
    Some are straightforward matters of efficient operation--such as 
the reduction of flaring and venting.
    Others require the use of advanced technology in the form of 
improved manufacturing and separation processes that produce less waste 
and demand less energy.
    Other steps will require investment to make existing facilities 
more energy efficient. For instance we're researching ways in which we 
can remove the carbon dioxide from large compressors and reinject it to 
improve oil recovery. That would bring a double benefit--a cut in 
emissions and an improvement in production efficiency.
    The task is particularly challenging in the refining sector where 
the production of cleaner products require more extensive processing 
and a higher energy demand for each unit of output.
    That means that to make gasoline cleaner, with lower sulphur 
levels, takes more energy at the manufacturing stage. That's the trade 
off.
    In each case our aim will be to establish a data base, including 
benchmark data; to create a monitoring process, and then to develop 
targets for improvement through operational line management.
    Monitoring and controlling emissions is one step.
    The second is to increase the level of support we give to the 
continuing scientific work which is necessary.
    As I said a few moments ago, there are still areas of significant 
uncertainty around the subject of climate change. Those who tell you 
they know all the answers are fools or knaves.
    More research is needed--on the detail of cause and effect; on the 
consequences of what appears to be happening, and on the effectiveness 
of the various actions which can be taken.
    We will increase our support for that work.
    That support will be focused on finding solutions and will be 
directed to work of high quality which we believe can address the key 
outstanding questions.
    Specifically, we've joined a partnership to design the right 
technology strategy to deal with climate change. That partnership which 
will work through the Batelle Institute includes the Electric Power 
Research Institute and the US Department of Energy. We're also 
supporting work being done at MIT in Cambridge and through the Royal 
Society in London.
    We're also joining the Greenhouse gas programme of the 
International Energy Agency which is analysing technologies for 
reducing and offsetting greenhouse gas emissions from fossil fuels.
    The third area is the transfer of technology and the process of 
joint implementation which is the technical term for projects which 
bring different parties together to limit and reduce net emission 
levels of greenhouse gases.
    Joint implementation is only in its infancy, but we believe it has 
great potential to contribute to the resolution of the climate change 
problem. It can increase the impact of reduction technology by lowering 
the overall cost of abatement actions.
    We need to experiment and to learn and we'd welcome further 
partners in the process. The aim of the learning process must be to 
make joint implementation a viable and legally creditable concept that 
can be included in international commitments.
    We've begun by entering into some specific programmes of 
reforestation and forest conservation programmes in Turkey and now in 
Bolivia, and we're in discussion on a number of other technology based 
joint implementation projects.
    The Bolivian example I think shows what can be done.
    Its a programme to conserve 1.5 million hectares of forests in the 
province of Santa Cruz. It is sponsored by the Nature Conservancy and 
American Electric Power and sanctioned by the US Government.
    We're delighted to be involved, and to have the chance to transfer 
the learning from this project to others in which we are involved. 
Forest conservation projects are not easy or simple, and that learning 
process is very important.
    Technology transfer is part of the joint implementation process but 
it should go wider and we're prepared to engage in an open dialogue 
with all the parties who are seeking answers to the climate change 
problem.
    So those are three steps we can take--monitoring and controlling 
our own emissions, supporting the existing scientific work and 
encouraging new work, and developing experiments in joint 
implementation and technology transfer.
    Why are we doing all those things? Simply because the oil industry 
is going to remain the worlds predominant supplier of energy for the 
foreseeable future.
    Given that role we have to play a positive and responsible part in 
identifying solutions to a problem which is potentially very serious.
    The fourth step--the development of alternative energy--is related 
but distinct.
    Looking ahead it seems clear that the combination of markets and 
technology will shift the energy mix.
    The world's population is growing by 100 million every year. By 
10,000 just since I started speaking.
    Prosperity is spreading. By the end of the century 60 per cent of 
the world's economic activity will be taking place in the South--in 
areas which ten years ago we thought of as Third World countries.
    Both these factors will shade a crowing level of demand for energy.
    At the same time technology moves on.
    The sort of changes we've seen in computing--with continuing 
expansion of semiconductor capacity is exceptional but not unique.
    I think it is a reasonable assumption that the technology of 
alternative energy supplies will also continue to move forward.
    One or more of those alternatives will take a greater share of the 
energy market as we go into the next century.
    But let me be clear. That is not instead of oil and gas. It is 
additional.
    We've been looking at alternative energies for a long time, and our 
conclusion is that one source which is likely to make a significant 
contribution is solar power.
    At the moment solar is not commercially viable for either peak or 
base load power generation. The best technology produces electricity at 
something like double the cost of conventional sources for peak demand.
    But technology is advancing, and with appropriate public support 
and investment I'm convinced that we can make solar competitive in 
supplying peak electricity demand within the next 10 years. That means, 
taking the whole period from the time we began research work, that 25 
to 30 years will have elapsed.
    For this industry that is the appropriate time scale on which to 
work.
    We explore for oil and gas in a number of areas where production 
today wouldn't be commercially viable at the moment.
    Thirty years ago we did that in Alaska.
    We take that approach because we believe that markets and 
technology do move, and that the frontier of commercial viability is 
always changing.
    We've been in solar power for a number of years and we have a 10 
per cent share of the world market.
    The business operates across the world--with operations in 16 
countries.
    Our aim now is to extend that reach--not least in the developing 
world, where energy demand is growing rapidly.
    We also want to transfer our distinctive technologies into 
production, to increase manufacturing capacity and to position the 
business to reach $1bn in sales over the next decade.
    I am happy to report that there will be significant investment in 
the USA and we'll be commissioning a new solar manufacturing facility 
here in California before the end of this year.
    The result of all is that gradually but progressively solar will 
make a contribution to the resolution of the problem of carbon dioxide 
emissions and climate change.
    So a series of steps on the journey. These are the initial steps. 
We're examining what else we should do, and I hope to be able to 
announce some further steps later in the year.
    Of course, as I said at the beginning, nothing we can do alone will 
resolve the concern about climate change. We can contribute, and over 
time we can move towards the elimination of emissions from our own 
operations and a substantial reduction in the emissions which come from 
the use of our products.
    The subject of climate change, however, is a matter of wider public 
policy.
    We believe that policy debate is important. We support that debate, 
and we're engaged in it, through the World Business Council on 
Sustainable Development, through the President's own Council here in 
the United States, and in the UK where the Government is committed to 
making significant progress on the subject.
    Knowledge in this area is not proprietary, and we will share our 
expertise openly and freely.
    Our instinct is that once clear objectives have been agreed, market 
based solutions are more likely to produce innovative and creative 
responses than an approach based on regulation alone.
    Those market based solutions need to be as wide ranging in scope as 
possible because this is a global problem which has to be resolved 
without discrimination and without denying the peoples of the 
developing world the right to improve their living standards.
    To try to do that would be arrogant and untenable--what we need are 
solutions which are inclusive, and which work through cooperation 
across national and industry boundaries.
    There have been a number of experiments--all of them partial, but 
many of them interesting because they show the way in which effective 
markets can change behaviour.
    We're working, for instance. with the Environmental Defence Fund to 
develop a voluntary emissions trading system for greenhouse cases, 
modelled on the system already in place in respect of sulphur.
    Of course, a system which just operates here in the United States 
is only a part of the solution. Ideally such structures should be much 
wider.
    But change begins with the first step and the development of 
successful systems here will set a standard which will spread.
    Ladies and Gentlemen, I began with the issue of corporate 
responsibility. The need for rethinking in a new context.
    No company can be really successful unless it is sustainable--
unless it has capacity to keep using its skills and to keep growing its 
business.
    Of course, that requires a competitive financial performance .
    But it does require something more, perhaps particularly in the oil 
industry.
    The whole industry is growing because world demand is growing. The 
world now uses almost 73 million barrels of oil a day--16% more than it 
did 10 years ago.
    In another ten years because of the growth of population and 
prosperity that figure is likely to be over 85 mbd, and that is a 
cautious estimate. Some people say it will be more.
    For efficient, competitive companies that growth will be very 
profitable.
    But sustainability is about more than profits. High profitability 
is necessary but not sufficient.
    Real sustainability is about simultaneously being profitable and 
responding to the reality and the concerns of the world in which you 
operate. We're not separate from the world. It's our world as well.
    I disagree with some members of the environmental movement who say 
we have to abandon the use of oil and gas. They think it is the oil and 
gas industry which has reached the end of history
    I disagree because I think that view underestimates the potential 
for creative and positive action.
    But that disagreement doesn't mean that we can ignore the mounting 
evidence about climate change and the growing concern.
    As businessmen, when our customers are concerned, we'd better take 
notice.
    To be sustainable, companies need a sustainable world. That means a 
world where the environmental equilibrium is maintained but also a 
world whose population can all enjoy the heat, light and mobility which 
we take for granted and which the oil industry helps to provide.
    I don't believe those are incompatible goals.
    Everything I've said today--all the actions we're taking and will 
take are directed to ensuring that they are not incompatible.
    There are no easy answers. No silver bullets. Just steps on a 
journey which we should take together because we all have a vital 
interest in finding the answers.
    The cultures of politics, and of science, and of enterprise, must 
work together if we are to match and master the challenges we all face.
    I started by talking about the end of history. Of course it hasn't 
ended. It's moved on.
    Francis Fukuyama who coined that phrase describes the future in 
terms of the need for a social order--a network of interdependence 
which goes beyond the contractual. An order driven by the sense of 
common human interest. Where that exists, societies thrive.
    Nowhere is the need for that sort of social order--at the global 
level--more important than in this area. The achievement of that has to 
be our common goal.
    Thank you very much.

                               __________

                                                     June 18, 1997.
   Greenpeace Dumps Coal and Oil Barrels on Capitol Steps to Protest 
           ``Byrd-Brained'' Attempt to De-Rail Climate Treaty
    WASHINGTON, D.C. (GP)--Today, Greenpeace dumped four tons of coal 
and seven barrels of oil in front of the US Capitol to protest a 
resolution introduced by Senator Robert Byrd (D-WV) and 45 other 
senators. The Resolution (S. 98) threatens to derail international 
negotiations of the Framework Convention on Climate Change, first 
signed by President Bush at the Rio Summit in June 1992.
    Under the terms of the Climate Convention, to which the US 
government is a signatory, countries such as the United States must 
take the first steps to cut greenhouse gas emissions caused by the 
burning of coal and oil. The US has been and continues to be the number 
one emitter of greenhouse gases that cause global warming and climate 
change. Now, Senator Byrd and 45 other co-signers are threatening to 
renege on this international agreement by mandating that some of the 
world's poorest nations and lowest greenhouse gas emitters assume the 
same international commitments as industrialized countries.
    ``Greenpeace will remove the coal and oil from the Capitol when all 
of the 45 Senators remove their names from the resolution,'' said Kalee 
Kreider, Director of the Greenpeace Climate Campaign. ``The Senator's 
Byrd-brained scheme will only perpetuate our dependence on coal and oil 
rather than allow us to save the climate and make the twenty-first 
century the solar century,'' she continued.
    The coal and oil industry together have spent millions of dollars 
in paid advertising and propaganda to downplay the threat of global 
warming and climate change. Currently, the Business Roundtable (an 
industry group) is engaged in a $1 million dollar campaign to draw 
attention to the ``economic consequences'' of the climate treaty. 
``Interestingly, the industry's language concerning the Climate Treaty 
is markedly similar to the language of senator Byrd's resolution,'' 
stated Kreider. ``By threatening to derail the climate negotiations 
these Senators show a criminal disregard for human health and the 
environment.''
    In 1995, 2,500 of the world's global warming and climate change 
experts concluded that human activities, such as burning coal and oil, 
are causing the temperature and seas to rise. In response to the 
overwhelming consensus of opinion in this scientific body (the 
Intergovernmental Panel on Climate Change) Greenpeace advocates that 
industrialized countries reduce greenhouse gas emissions 20 percent by 
2005 and stop new oil exploration in frontier areas such as Alaska and 
North Atlantic.

FOR MORE INFORMATION CONTACT:
Kalee Kreider 202-253-1295 (cell phone) 202-319-2523 (office)
Deborah Rephan 202-319-2492 (office)
ATTENTION BROADCASTERS--SATELLITE FEED OF TODAYS ACTION AVAILABLE AT: 
3:00 [email protected] 3:30P (EST) ON GALAXY C4, TRANSPONDER 9.
1436 U Street. NW--Washington, DC 20009 Tel (202) 462-1177--Fax (202) 
462-4507--Tlx 89-2359

                               __________

                                       REDEFINING PROGRESS,
                                                     June 18, 1997.
 AUTHORS OF ECONOMISTS' STATEMENT ON CLIMATE CHANGE URGE ACTION AT THE 
                    SUMMIT OF THE EIGHT IN COLORADO
   2,600 Economists Declare that Policies to Slow Global Warming are 
                               Warranted
               ``The greatest risk lies with inaction.''
    The authors of the widely circulated ``Economists' Statement on 
Climate Change'' urged the United States government, the other Group of 
Seven nations, and Russia to address the topic of global climate change 
at their upcoming meeting in Denver, Colorado.
    ``A meaningful climate change treaty must contain significant 
commitment to a reduction in greenhouse emission. The G-7 countries and 
Russia must take the first steps in emission control since they can 
best afford them and are the source of most of the emissions,'' stated 
Stanford University economist and Nobel-laureate Kenneth J. Arrow.
    Added Dale W. Jorgenson, Chairman of the Economics Department at 
Harvard University: ``The Kyoto summit on climate change is just six 
months away. Without leadership among the developed world, it is 
unlikely we will see any progress in Kyoto. The Summit of the Eight 
provides an excellent chance to lay the groundwork toward a meaningful 
international agreement.''
    Arrow and Jorgenson, along with Nobel-winner Robert M. Solow of the 
Massachusetts Institute of Technology, Paul R. Krugman of the 
Massachusetts Institute of Technology, and William D. Nordhaus of Yale 
University, crafted the statement in January 1997. To date, more than 
2,600 economists have joined in signing the statement, including eight 
Nobel Laureates of Economics. The effort was sponsored by Redefining 
Progress, a nonpartisan, non-profit public policy organization.
    The statement makes three major points:

   A review of the evidence has found a discernible human 
        influence on global climate. Climate change ``carries with it 
        significant environmental, economic, social, and geopolitical 
        risks'' and ``preventative steps are justified.''
   Economic studies have determined that there are many 
        potential policies for which the benefits outweigh the costs. 
        Policy options are available that would slow climate change 
        without harming employment or U.S. living standards and these 
        may be economically beneficial in the long run.
   The economists emphasize the importance of market 
        mechanisms, such as carbon taxes or trading of marketable 
        emissions permits among countries. It is essential that nations 
        coordinate their policies so that the costs of attaining the 
        climate objectives can be minimized. Revenues raised from such 
        taxes or permits can be used to reduce the budget deficit or to 
        lower existing taxes.

    One of the concerns of policymakers is whether the U.S. can reduce 
greenhouse gas emissions (predominantly carbon dioxide emissions from 
energy use) without damaging the economy. The economists' statement 
emphasizes that well-designed policies relying on market mechanism can 
be economically beneficial and ``may in fact improve U.S. productivity 
in the longer run.'' The statement specifically endorses market-based 
policies such as carbon taxes and the auction of internationally 
tradable emissions permits as a way of reducing the costs of slowing 
climate change.
    ``A panel of the world's foremost scientists, under the auspices of 
the Intergovernmental Panel on Climate Change, have concluded that the 
balance of evidence suggests a discernible human influence on global 
climate,'' said Stephen DeCanio, senior economic fellow for Redefining 
Progress and a former senior staff economist with President Reagan's 
Council of Economic Advisors.
    ``This statement will be extremely valuable to the G-7 and Russian 
leaders when they address climate change policy options in Denver,'' 
DeCanio went on to say. ``Many people remain unaware that ongoing 
changes in the Earth's climate pose large economic and environmental 
risks. Some groups have asserted that we cannot address the global 
climate problem without incurring serious economic harm. These 2,600 
economists have said essentially the opposite--that the greatest risk 
lies with inaction.''



                         June 26, 1977 Hearing

         I. DECISIONS ADOPTED BY THE CONFERENCE OF THE PARTIES
                            Decision 1/CP.1
 The Berlin Mandate: Review of the adequacy of Article 4, paragraph 2 
   (a) and (b), of the Convention, including proposals related to a 
                  protocol and decisions on follow-up
    The Conference of the Parties, at its first session,

    Having reviewed Article 4, paragraph 2(a) and (b), of the United 
Nations Framework Convention on Climate Change, and

    Having concluded that these subparagraphs are not adequate,

    Agrees to begin a process to enable it to take appropriate action 
for the period beyond 2000, including the strengthening of the 
commitments of the Parties included in Annex I to the Convention (Annex 
I Parties) in Article 4, paragraph 2(a) and (b), through the adoption 
of a protocol or another legal instrument:
                                   I
    1. The process shall be guided, inter alia, by the following:
    (a) The provisions of the Convention, including Article 3, in 
particular the principles in Article 3.1, which reads as follows: ``The 
Parties should protect the climate system for the benefit of present 
and future generations of humankind, on the basis of equity and in 
accordance with their common but differentiated responsibilities and 
respective capabilities. Accordingly, the developed country Parties 
should take the lead in combating climate change and the adverse 
effects thereof;''
    (b) The specific needs and concerns of developing country Parties 
referred to in Article 4.8; the specific needs and special situations 
of least developed countries referred to in Article 4.9; and the 
situation of Parties, particularly developing country Parties, referred 
to in Article 4.10 of the Convention;
    (c) The legitimate needs of the developing countries for the 
achievement of sustained economic growth and the eradication of 
poverty, recognizing also that all Parties have a right to, and should, 
promote sustainable developments;
    (d) The fact that the largest share of historical and current 
global emissions of greenhouse gases has originated in developed 
countries, that the per capita emissions in developing countries are 
still relatively low and that the share of global emissions originating 
in developing countries will grow to meet their social and development 
needs;
    (e) The fact that the global nature of climate change calls for the 
widest possible cooperation by all countries and their participation in 
an effective and appropriate international response, in accordance with 
their common but differentiated responsibilities and respective 
capabilities and their social and economic conditions;
    (f) Coverage of all greenhouse gases, their emissions by sources 
and removals by sinks and all relevant sectors;
    (g) The need for all Parties to cooperate in good faith and to 
participate in this process.
                                   II
    2. The process will, inter alia:
    (a) Aim, as the priority in the process of strengthening the 
commitments in Article 4.2(a) and (b) of the Convention, for developed 
country/other Parties included in Annex 1, both

   to elaborate policies and measures, as well as
   to set quantified limitation and reduction objectives within 
        specified time-frames, such as 2005, 2010 and 2020, for their 
        anthropogenic emissions by sources and removals by sinks of 
        greenhouse gases not controlled by the Montreal Protocol,

taking into account the differences in starting points and approaches, 
economic structures and resource bases, the need to maintain strong and 
sustainable economic growth, available technologies and other 
individual circumstances, as well as the need for equitable and 
appropriate contributions by each of these Parties to the global 
effort, and also the process of analysis and assessment referred to in 
section III, paragraph 4, below:
    (b) Not introduce any new commitments for Parties not included in 
Annex I, but reaffirm existing commitments in Article 4.1 and continue 
to advance the implementation of these commitments in order to achieve 
sustainable development, taking into account Article 4.3, 4.5 and 4.7.
    (c) Take into account any results from the review referred to in 
Article 4.2(f), if available and any notification referred to in 
Article 4.2(g).
    (d) Consider, as provided in Article 4.2(e), the coordination among 
Annex I Parties, as appropriate, of relevant economic and 
administrative instruments, taking into account Article 3.5;
    (e) Provide for the exchange of experience on national activities 
in areas of interest, particularly those identified in the review and 
synthesis of available national communications; and
    (f) Provide for a review mechanism.
                                  III
    3. The process will be carried out in the light of the best 
available scientific information and assessment on climate change and 
its impacts, as well as relevant technical, social and economic 
information, including, inter alia, reports of the Intergovernmental 
Panel on Climate Change. It will also make use of other available 
expertise.
    4. The process will include in its early stages an analysis and 
assessment, to identify possible policies and measures for Annex I 
Parties which could contribute to limiting and reducing emissions by 
sources and protecting and enhancing sinks and reservoirs of greenhouse 
gases. This process could identify environmental and economic impacts 
and the results that could be achieved with regard to time horizons 
such as 2005, 2010, and 2020.
    5. The protocol proposal of the Alliance of Small Island States 
(AOSIS), which contains specific reduction targets and was formally 
submitted in accordance with Article 17 of the Convention, along with 
other proposals and pertinent documents, should be included for 
consideration in the process.
    6. The process should begin without delay and be conducted as a 
matter of urgency, in an open-ended ad hoc group of Parties hereby 
established, which will report to the second session of the Conference 
of the Parties on the status of this process. The sessions of this 
group should be scheduled to ensure completion of the work as early as 
possible in 1997, with a view to adopting the results at the third 
session of the Conference of the Parties.
                                                9th plenary meeting
                                                       7 April 1995

                               __________

                     Framework Convention on Climate Change
                                                       18 July 1996
CONFERENCE OF THE PARTIES
Second session
Geneva, 8-19 July 1996
Agenda item 5
REVIEW OF THE IMPLEMENTATION OF THE CONVENTION AND OF DECISIONS OF THE 
             FIRST SESSION OF THE CONFERENCE OF THE PARTIES
                        Ministerial Declaration*
The Ministers and other heads of delegations present at the second 
session of the Conference of the Parties to the United Nations 
Framework Convention on Climate Change,

Noting that this, our meeting at Ministerial level under the 
Convention, is a demonstration of our intention to continue to take an 
active and constructive role in addressing the threat of climate 
change,

    *This text was introduced by the President at the 6th plenary 
meeting, on 18 July.
    1. Recall Article 2 of the Convention; the principles of equity and 
of common but differentiated responsibilities and respective 
capabilities in Article 3.1 of the Convention; and the provisions of 
Article 3.3 concerning precautionary measures; as well as the specific 
national and regional development priorities, objectives and 
circumstances of the Parties to the Convention;
    2. Recognize and endorse the Second Assessment Report of the IPCC 
as currently the most comprehensive and authoritative assessment of the 
science of climate change, its impacts and response options now 
available. Ministers believe that the Second Assessment Report should 
provide a scientific basis for urgently strengthening action at the 
global, regional and national levels, particularly action by Annex I 
Parties to limit and reduce emissions of greenhouse gases, and for all 
Parties to support the development of a Protocol or another legal 
instrument; and note the findings of the IPCC, in particular the 
following:

   The balance of evidence suggests a discernible human 
        influence on global climate. Without specific policies to 
        mitigate climate change, the global average surface temperature 
        relative to 1990 is projected to increase by about 2C (between 
        1C and 3.5C) by 2100; average sea level is projected to rise by 
        about 50 centimetres (between 15 and 95 centimetres) above 
        present levels by 2100. Stabilization of atmospheric 
        concentrations at twice preindustrial levels will eventually 
        require global emissions to be less than 50 per cent of current 
        levels;
   The projected changes in climate will result in significant, 
        often adverse, impacts on many ecological systems and socio-
        economic sectors, including food supply and water resources, 
        and on human health. In some cases, the impacts are potentially 
        irreversible; developing countries and small island countries 
        are typically more vulnerable to climate change;
   Significant reductions in net greenhouse gas emissions are 
        technically possible and economically feasible by utilizing an 
        array of technology policy measures that accelerate technology 
        development, diffusion and transfer; and significant no regrets 
        opportunities are available in most countries to reduce net 
        greenhouse gas emissions;

    3. Believe that the findings of the Second Assessment Report 
indicate that the continued rise of greenhouse gas concentrations in 
the atmosphere will lead to dangerous interference with the climate 
system, given the serious risk of an increase in temperature and 
particularly the very high rate of temperature change;
    4. Recognize also the need for continuing work by the IPCC to 
further reduce scientific uncertainties, in particular regarding socio-
economic and environmental impacts on developing countries, including 
those vulnerable to drought, desertification or sea-level rise;
    5. Reaffirm the existing commitments under the Convention, 
including those intended to demonstrate that Annex I Parties are taking 
the lead in modifying longer-term trends in emissions by sources and 
removals by sinks of greenhouse gases not controlled by the Montreal 
Protocol, and agree to strengthen the process under the Convention for 
the regular review of the implementation of present and future 
commitments;
    6. Take note that Annex I Parties are fulfilling their commitments 
to implement national policies and measures on the mitigation of 
climate change. Also take note that this is not the only commitment 
that Annex I Parties have made and that many of these Parties need to 
make additional efforts to overcome difficulties that they face in 
achieving the aim of returning their emissions of greenhouse gases to 
1990 levels by 2000;
    7. Acknowledge the considerable work done by the Ad Hoc Group on 
the Berlin Mandate (AGBM) since the first session of the Conference of 
the Parties, including the substantive proposals presented by a number 
of Parties, and call on all Parties to come forward with proposals to 
facilitate substantive negotiations beginning at the fifth session of 
AGBM in December 1996;
    8. Instruct their representatives to accelerate negotiations on the 
text of a legally-binding protocol or another legal instrument to be 
completed in due time for adoption at the third session of the 
Conference of the Parties. The outcome should fully encompass the remit 
of the Berlin Mandate, in particular:

--commitments for Annex I Parties regarding:


   policies and measures including, as appropriate, regarding 
        energy, transport, industry, agriculture, forestry, waste 
        management, economic instruments, institutions and mechanisms;
   quantified legally-binding objectives for emission 
        limitations and significant overall reductions within specified 
        timeframes, such as 2005, 2010, 2020, to their anthropogenic 
        emissions by sources and removals by sinks of greenhouse gases 
        not controlled by the Montreal Protocol;


--commitments for all Parties on continuing to advance the 
        implementation of existing commitments in Article 4. 1;
--a mechanism to allow the regular review and strengthening of the 
        commitments embodied in a Protocol or other legal instrument;
--commitments to a global effort to speed up the development, 
        application, diffusion and transfer of climate-friendly 
        technologies, practices and processes; in this regard, further 
        concrete action should be taken;

    9. Welcome the efforts of developing country Parties to implement 
the Convention and thus to address climate change and its adverse 
impacts and, to this end, to make their initial national communications 
in accordance with guidelines adopted by the Conference of the Parties 
at its second session; and call on the GEF to provide expeditious and 
timely support to these Parties and initiate work towards a full 
replenishment in 1997;
    10. Recognize that the continuing advancement of existing 
commitments by developing country Parties, in the context of their 
national priorities for sustainable development, requires determined 
and timely action, in particular by Annex II Parties. Access to 
financial resources and to environmentally-sound technologies 
consistent with Articles 4.3, 4.4, 4.5 and 4.7 will be most critical;
    11. Thank the Government of the Swiss Confederation for its 
contribution to the work of the second session of the Conference of the 
Parties in Geneva and look forward to meeting again at the third 
session in Kyoto, in 1997, thanks to the generous offer of the 
Government of Japan.

                               __________

                                   The Business Roundtable,
                                                      July 8, 1997.
The Hon. Chuck Hagel
Chairman, Senate Foreign Relations
Subcommittee on International Economic Policy,
    Export and Trade Promotion
450 Dirksen Senate Office Building
Washington, D.C. 20510

    Dear Mr. Chairman: The Business Roundtable is pleased to provide 
comments for inclusion in the record of the June 19 and 26 Senate 
Foreign Relations Subcommittee on International Economic Policy, Export 
and Trade Promotion's hearings on issues related to global climate 
change.
    The Roundtable is a public policy organization comprising the chief 
executive officers of over 200 of the nation's largest corporations. We 
view global climate change as an important and complex issue with 
significant potential environmental and economic implications. We 
congratulate you on the dialogue begun in your committee, and your 
engagement of the Administration as it prepares for the upcoming 
negotiations on this subject. The Roundtable is committed to full and 
open public dialogue on this issue.
    While the science of global warming is far from clear, the Second 
Assessment Report of the Intergovernmental Panel on Climate Change has 
concluded that the concentration of greenhouse gases in the earth's 
atmosphere are increasing and this may contribute to climate change. 
This fact has the attention and concern of the Roundtable and its 
member companies. At the same time, the analytical methods used to 
predict the extent and timing of future climate changes related to 
these increases in greenhouse gases are imprecise, indicating the need 
to be cautious in our approach to global climate policy.
    Climate change predictions currently are based on three-dimensional 
General Circulation Models (GCMs) which must take into account a range 
of complex and naturally variable factors. While scientists are 
improving the state of three-dimensional GCMs, they remain an inexact 
tool for measuring the complex and naturally variable factors linked to 
global transfer of heat from myriad sources. As a recent summary 
article in the May 16, Science Magazine stated: ``... most modelers now 
agree that the climate models will not be able to link greenhouse gas 
warming unambiguously to human actions for a decade or more.''
    However, The Roundtable believes our inability to accurately 
predict the effects of greenhouse gases need not delay discussion of 
this important issue. Rather, the current state of the science should 
only give pause to taking precipitous action on a unilateral basis 
without judging the economic consequences. We would note that the 
documented .5 degree centigrade increase in global temperature in the 
last 120 years may be within the normal range of variability. Moreover, 
most of this increase occurred prior to 1940, while most of the 
increase in man-made greenhouse gas emissions occurred after that date.
    Because the science is less than compelling, the current debate 
over global climate change creates difficult policy choices. At one 
extreme we may indeed face the prospect of dramatic climate changes 
with severe economic impacts for ours or future generations. At the 
other extreme, if we rush to judgment and take drastic measures, we 
could do irreparable harm to our economy. This is why The Roundtable is 
adamant about the need for a full and open public debate of the 
scientific and economic issues in order to steer a more reasonable 
course. And we have welcomed the Administration's most recent responses 
to engage in this debate prior to committing to any specific course of 
action later this year in Kyoto.
    The Roundtable believes that a dialogue should begin between the 
many stakeholders affected by this issue with the objective of 
developing policies that stimulate reductions in greenhouse gas 
emissions, while also stimulating continued economic growth. This, we 
believe, can be achieved through innovative tax and capital formation 
policies that reward development of low greenhouse gas emissions 
technology and the actions of those companies that have proven records 
of greenhouse gas emissions reductions. A pro-investment strategy is a 
pro-environment policy. As noted environmental scholar Jesse Ausubel of 
The Rockefeller University notes: ``... over the last two centuries we 
have been freeing ourselves from carbon and dramatically increasing our 
energy efficiency at the same time.'' New policies should encourage 
this natural tendency of the free market system toward greater 
efficiencies, not burden it with additional regulations. The Roundtable 
believes it would be unfortunate if we imposed the same punitive, 
command and control approach to what is a more complicated problem 
involving virtually every aspect of our society.
    The Roundtable is opposed to tax and regulatory structures which 
would impose unnecessary burdens on our economy in advance of more 
compelling scientific insight into the problem. A DRI/McGraw Hill study 
shows stabilizing emissions at 1990 levels by the year 2000 would 
require a tax equal to $16/barrel of oil or a $0.40/gallon of gasoline 
in the U.S. This study also shows such a tax would reduce GDP by 2.3%/
year and cost the average American family $900/year. A larger 20% 
reduction from 1990 levels by year 2020 would require a tax of $80-$85/
barrel of oil or a gasoline tax of nearly $2/gallon. Dr. Lawrence 
Horowitz of Primark Decision Economics argues that taxes necessary to 
reduce emissions to 1990 levels by 2010 would reduce US GDP by more 
than 4% annually or over $350 billion/year; household disposable income 
would fall 1.2%; wages would drop; and electricity prices could double 
from $0.07 per kwh to $0.15-$0.16 per kwh.
    Among the more recently discussed policy options for reducing 
greenhouse emissions are those which focus on a system of tradable 
emissions between countries. Notwithstanding how such a system would be 
enforced on a multilateral basis, such a system does recognize that a 
ton of carbon dioxide emitted in a developing country has the same 
effect as one in a developed economy. If economic projections are 
correct, sometime in the early part of the next century, the developing 
world will emit the majority of greenhouse gases. Soon afterwards, 
China will become the leading source of greenhouse gas emissions. 
According to the United Nations, developing nations are producing 52 
percent of all new emissions of greenhouse gases and are expected to 
contribute 75 percent of all carbon dioxide emissions by the year 2050.
    A critical role for our government is to lead the way toward a 
sound, achievable multilateral policy on global climate change; one 
which does not put our economy at a competitive disadvantage. For this 
reason, The Roundtable supports the climate change resolution offered 
by Senator Byrd now pending before the Senate.
    Proposals to limit future emissions of greenhouse gases involve 
possible consequences and tradeoffs that could affect not only the 
environment, but also economic development, employment, trade, 
investment, energy security and national sovereignty. The decisions 
made on how best to address global climate change may well be the among 
the most important we will make in the next decade. For this reason The 
Roundtable believes specific plans to reduce greenhouse gas emissions 
need to be carefully reviewed for their overall impacts.
    The Roundtable plans to be an active participant in analyzing such 
plans and for developing its own recommendations. We clearly need a 
public debate that engages us in reconciling the uncertainties in the 
science in a way which balances prudent action and sound economics.
    In sum, The Business Roundtable believes that:

   Climate change is an issue which will evolve over many 
        decades, and strategies must incorporate such a long term 
        focus.
   Policy and long term goals should recognize the scientific 
        uncertainty and consider the associated range of environmental 
        and economic consequences.
   A climate change policy that fails to meaningfully include 
        all nations should be opposed.
   There is a need for policy flexibility so that government 
        and the private sector can craft individual responses to their 
        own situations, with maximum emphasis on performance based 
        approaches rather than prescriptive measures.
   Any policy options also should have the objective of 
        stimulating economic growth through innovative tax, capital 
        formation and technology policies.

    Until the scientific and economic issues are better understood, 
there should be no rush to impose dramatic climate change policy 
measures, either by individual nations or, collectively. Further 
agreements reached must include a requirement or negotiating process to 
bring all countries, developed and developing, into the commitment 
making process.
    The member companies of The Roundtable look forward to continuing 
to participate in these discussions and congratulate the subcommittee 
for their leadership in further engaging this discussion.
        Sincerely yours,
                                    Robert N. Burt,
                         Chairman and CEO, FMC Corporation,
  Chairman, Environment Task Force, The Business Roundtable

                               __________

                         Association of American Railroads,
                                                     June 24, 1997.
The Honorable Chuck Hagel
Chairman, Subcommittee on
    International Economic Policy,
    Export, and Trade Promotion
Committee on Foreign Relations
United States Senate
Washington, DC 20510

    Dear Mr. Chairman: The Association of American Railroads (AAR) \1\ 
submits these comments in connection with the Subcommittee's July 26, 
1997 hearing on the issue of global climate change. AAR asks that its 
comments be made a part of the hearing record.
---------------------------------------------------------------------------
    \1\ AAR is a trade association whose members account for 77 percent 
of total linehaul mileage, produce 93 percent of total freight revenue, 
and employ 91 percent of the freight railway workforce.
---------------------------------------------------------------------------
    AAR favors continued efforts by the scientific community to narrow 
the range of uncertainty about climate change. At present, however, the 
state of scientific knowledge does not justify the extreme measures 
being contemplated on the international level.

Background

    In 1992, the United States and other nations ratified the Framework 
Convention on Climate Change whose objective is to reduce 
concentrations of greenhouse gases in the atmosphere to a level that 
will prevent dangerous interference with the Earth's climate.
    While scientists generally agree that the Earth's climate has 
warmed about 0.5 degree C since the late 19th century, uncertainty 
remains about whether this is the result of human-induced climate 
change, or simply fluctuation within the range of normal climate 
variability.
     As recently as last month, the respected journal Science reported, 
``Many climate experts caution that it is not at all clear yet that 
human activities have begun to warm the planet.'' Likewise, the 
Intergovernmental Panel on Climate Change, the world's leading body of 
climate experts, said in its latest report on climate change that 
slight variations in temperature ``...cannot be considered compelling 
evidence of a clear cut cause-and-effect link between anthropogenic 
forcing [human activity] and changes in the Earth's surface 
temperature.''
     Despite these cautionary notes, the signatories to the Framework 
Convention on Climate Change in 1995 approved the so-called ``Berlin 
Mandate'' which calls for the adoption of a protocol or other legal 
instrument in Kyoto, Japan in December 1997 strengthening emissions 
reduction commitments for developed nations after the year 2000. The 
Berlin Mandate, however, specifically exempts developing countries from 
any new commitments--despite the fact that their greenhouse gas 
emissions are rapidly increasing and are expected to surpass emissions 
of the U.S. and other OECD countries as early as 2015.

Economic Impacts

     Near-term requirements to stabilize or reduce carbon emissions 
would be likely to produce significant economic dislocation in the 
United States, including profound job losses and major economic 
restructuring.
     A DRI/McGraw-Hill study of carbon taxes as a means of reducing 
carbon emissions to 1990 levels by the year 2010 suggests that such an 
approach would lead to job losses averaging more than 500,000 per year. 
Economist Alan Manne of Stanford University, who studied abatement 
proposals intended to reduce carbon emissions to 80 percent of their 
1990 level by the year 2010, found that such steps would result in 
annual losses ranging from 1.0-2.5 percent of the nation's gross 
domestic product.
     Emissions reduction requirements would also have a sharply 
negative impact on international trade, with resulting higher fuel 
prices adversely affecting both industries whose production processes 
are energy-intensive as well as industries which are dependent upon 
transportation between distant suppliers and manufacturing locations, 
and between manufacturing locations and ocean ports.
     Nowhere in the world is the importance of transportation greater 
than it is in the U.S. In Western Europe, most manufacturing centers 
are located no more than a few hundred miles from ports. Distances to 
ports are even less in Japan, Taiwan, and Korea.
     In the U.S., however, major manufacturing centers are often 
located far from ports. One critical industrial concentration is in the 
upper Midwest. An efficient transportation system is essential for 
these industries to play a vital role in the global marketplace.

Rail Impacts

     Policies aimed at stabilizing or reducing greenhouse gas emissions 
levels would have a strongly negative effect on railroad customers and 
revenues. Based upon available sectoral analyses--and depending upon 
the reduction targets and implementation alternatives selected--AAR 
estimates that rail carloads would drop 8-16 percent by 2010, rail 
tonnage would drop 11-24 percent, and freight revenue would drop 7-15 
percent.
     In particular, emissions reduction requirements would have a 
pernicious effect on domestic coal production, which accounts for 59 
percent of the fuel burned in electric utilities and comprises the 
largest source of revenue for the railroad industry. AAR estimates that 
such requirements would lead to a reduction in coal traffic and coal-
related revenue of 25-54 percent. Chemical, auto, mining, pulp, and 
paper production would also suffer, causing further industrial and rail 
industry losses.

S. Res, 98

     AAR commends you and Senator Robert Byrd for introducing S. Res. 
98, a resolution calling upon the U.S. to refrain from signing any 
agreement regarding the Framework Convention on Climate Change which 
would cause serious harm to the economy or which would mandate new 
commitments to reduce greenhouse gases in developed nations unless the 
agreement also mandates ``new specific scheduled commitments to limit 
or reduce greenhouse gas emissions for developing countries within the 
same period.'' The fact that the resolution has more than 60 Senate 
sponsors indicates that there is a high level of concern regarding 
precipitate governmental action.
     AAR agrees with the Transportation Trades Division of the AFL-CIO, 
which earlier this year adopted a resolution calling on the Clinton 
administration to renegotiate the terms of the Berlin Mandate so that 
``all nations bear an equal level of responsibility for addressing 
concerns arising out of greenhouse emissions.''
     Until the world community reaches such agreement--given the 
potential for crippling costs that would be inflicted with aggressive 
emissions abatement policies--reasoned concern and study appear to be 
the most responsible ways to proceed. In that respect, AAR supports a 
coordinated international research effort, in addition to the 
continuation of the multi-billion dollar U.S. climate research program.
        Sincerely,
                                                  M.B. Oglesby, Jr.

                               __________

               Prepared Statement of Richard K. Davidson
    Chairman Hagel, Members of the Committee, thank you for the 
opportunity to share our perspective on the pending global climate 
treaty and its potential economic impact on us and our customers. Union 
Pacific is a diversified transportation company with primary operations 
in rail, trucking and logistics. Through our various operating 
companies, we serve all 50 states and employ more than 65,000 people. 
Our core business is the Union Pacific Railroad, headquartered in 
Omaha, Nebraska. Since the merger of Union Pacific Railroad with the 
Southern Pacific, we now operate a 36,000 mile rail network linking 23 
states from the Midwest to the West and Gulf Coasts.
    As the international community takes steps to reduce the levels of 
greenhouse gases in the environment, it is important that the United 
States not be saddled with a disproportionate share of the burden in 
the effort to improve our environment. Union Pacific Railroad ships 
hundreds of commodities for use in every component of the economy from 
coal to agricultural products to automobiles. We can safely say that 
every one of our customers will be adversely affected by this Treaty if 
it is implemented--because of their and our need for readily available, 
reasonably priced energy. Accordingly, we join our customers in the 
agriculture, automotive, coal, petroleum, steel, chemical and 
intermodal sectors, as well as our unionized workforce in urging the 
United States not to enter an international treaty that would 
jeopardize our economy, our transportation network and the thousands of 
jobs they support.
    As the Committee is aware, in 1992, the United States signed the 
Rio Framework Convention on Climate Change. This agreement required a 
reduction in greenhouse gases, such as carbon dioxide, to the 1990 
levels by the year 2000. Following that, in 1995, the United States 
agreed, in the so called Berlin Mandate, for a process of negotiations 
to establish emission goals for the next century. Under this Mandate, 
developed countries, including the United States, must take the lead in 
fighting climate change. However, developing countries are excluded 
from any obligation to further reduce greenhouse gases. Under this 
scenario, the United States is being asked to significantly reduce 
greenhouse emissions from all sources, while countries that are now 
developing their production capacity will bear a minimal burden from 
this Treaty. Current treaty proposals could do significant damage to 
the U.S. economy without achieving any appreciable benefit to the 
environment. Developing countries like China and India, which by early 
in the next century will be the worlds largest emitters of greenhouse 
gases, do not have to participate. This situation will force U.S. 
companies to shift production to developing countries, thus 
jeopardizing our current economic base and the jobs it supports. More 
importantly, by shifting production to developing countries and giving 
them the upper hand with respect to this Treaty, the goal of reducing 
greenhouse gases will have been missed entirely. There will simply be 
fewer emissions from the United States, but significantly more 
emissions from developing countries. There will also be fewer jobs in 
the United States, fewer automobiles to ship, less coal to meet our 
energy needs and fewer chemicals for manufacturing and household needs. 
This Treaty makes it very difficult for us to run the race if we are 
forced to shoot ourselves in the foot with the starting gun.
    The United Nations is currently in the midst of negotiations over 
the magnitude of reductions and the time frame that will be imposed for 
meeting those reductions under the Berlin Mandate. In order to meet the 
goals being considered, the American Mining Congress estimates that 
coal production would be curtailed by a minimum of 25 percent. Coal is 
currently the largest single commodity shipped by domestic railroads, 
representing more than 40 percent of the tons originated and nearly 22 
percent of the rail revenue. New energy taxes would need to be imposed, 
a new permit trading program would be required for consumers of fossil 
fuels and gasoline and diesel prices would soar. DRI/McGraw Hill 
estimates the cost of holding emissions at 1990 levels by the year 2000 
would require a minimum new fuel tax equal to $16 per barrel of oil or 
$0.40-0.50 per gallon. The rail industry currently consumes more than 
3.5 billion gallons of diesel fuel annually. Of that amount, Union 
Pacific uses nearly 1.4 billion gallons of diesel fuel per year, making 
us the largest private consumer of diesel fuel in the United States. In 
spite of these figures, railroads are highly fuel efficient and 
recognized as the most environmentally friendly method of surface 
transportation. A significant increase in the cost of fuel, coupled 
with diminished car loadings, as would be the case under the Treaty, 
would have a devastating impact on Union Pacific and all the other 
freight railroads. In fact, the Association of American Railroads 
estimates a $1.8-4.0 billion decline in annual rail revenues under this 
Treaty.
    Quite frequently big business and labor are at odds over various 
government policies. With respect to this Treaty, however, business and 
labor are together. In fact, the AFL-CIO passed a resolution expressing 
concern that the Administration has not completed a thorough analysis 
of the effects of the proposed treaty on the U.S. economy, and that the 
proposals under discussion will cause the loss of U.S. jobs to such 
countries as China, Mexico and Korea. With unionized labor representing 
more than 85 percent of freight rail employment, we are pleased to say 
that we have reached agreement on this issue before we had to go to the 
bargaining table.
    Before the U.S. takes the next step, the Administration needs to 
provide important details about global climate change and the potential 
ramifications of this Treaty. These details should include targets, 
timetables and other components of the U.S. proposal contingent upon 
commitments for binding emission reductions from developing countries. 
Given the scientific uncertainty surrounding the benefits of any 
greenhouse gas reduction treaty, an accurate assessment of the cost 
becomes critical. Key assumptions as well as an assessment of the 
impact on the economy and employment need to be thoroughly addressed 
before we move forward with this Treaty. Corporate America has a 
responsibility to ensure a healthy economy and an ever-increasing 
standard of living for current and future generations, and an equal 
responsibility to protect our environment. We know that it is possible 
to do both with a balanced approach. A balanced approach is not 
possible however without careful study, input from a wide variety of 
sources, and extensive public debate prior to the Administration 
negotiating a U.S. position in Kyoto this December.
    Chairman Hagel, again I want to thank you and the Members of the 
Committee for the opportunity to share our views on this critical 
issue. On behalf of Union Pacific, I especially wish to convey my 
appreciation to you and Senator Byrd for your work on Senate Resolution 
98. This Sense-of-the-Senate Resolution calls upon the United States to 
refrain from signing any protocol or agreement that would seriously 
harm the U.S. economy. Additionally, the Resolution calls for greater 
parity between developed and developing nations as we try to meet 
mutual environmental goals. Your willingness to carefully review the 
ramifications of this Treaty is of vital importance to us and our 
hundreds of customers and employees throughout the country.

                               __________

                               GREENPEACE

   Global Warming and Avoiding Dangerous Human Interference with the 
                                Climate
    The United Nations Environment Programme Advisory Group on 
Greenhouse Gases has calculated indicators of ``ecological limits'' to 
total amounts of temperature change and sea level rise and to the rates 
of change that human health and the environment can tolerate.
    Staying within ecological limits is a central objective of the 
Framework Convention on Climate Change, signed at Rio in 1992. The 
Convention clearly states that ``stabilization of greenhouse gas 
concentrations in the atmosphere at a level that would prevent 
dangerous anthropogenic (human made) interference with the climate 
system.'' It adds that ``Such a level should be achieved within a 
timeframe sufficient to allow ecosystems to adapt naturally to climate 
change, to ensure that food production is not threatened and enable 
economic development to proceed in a sustainable manner.''
    Greenpeace has adopted these United Nations Environment Programme 
indicators of ecological limits as a means to protect both ecosystems 
as well as human systems.

Sea Level Rise

   maximum rate of rise 2 millimeters per decade
   maximum 0.2 meters above the 1990 global mean sea level

Global Mean Temperature

   maximum rate of 0.1 C degrees per decade
   maximum increase of 1.0 degree C

    The United Nations report continues to say that above 1.0 C there 
may be ``rapid, unpredictable and non-linear responses that could lead 
to extensive ecosystem damage.'' A total of 2 degrees C increase is 
viewed as an upper limit beyond which the risks of grave damage to 
ecosystems, and of non-linear response, are expected to increase 
rapidly. (The report identified the carbon dioxide--CO2--
equivalent concentrations corresponding to these potential temperature 
changes as 330-400ppm for 1 degree C and 400-560ppm for 2 degrees C. 
Carbon dioxide is the primary greenhouse gas which causes global 
warming and is emitted when oil, coal and gas are burned).
    The global mean temperature already has risen 0.3-0.6 C degrees 
above pre-industrial levels and current rates of increase are around 
0.2 C degrees per decade.
                  Global Warming and the Carbon Budget
    In order to avoid dangerous human interference with the earth's 
climate svstem, using the IPCC science, Greenpeace has calculated a 
global carbon budget. This budget demonstrates how much carbon dioxide 
(CO2) may be emitted while remaining within the limits human 
identified by the United Nations Environment Programme health and the 
environment can endure. Carbon dioxide is the primary Greenhouse gas 
and the main sources are fossil fuels--oil, coal and gas. The logic 
which follows is that in order to limit emissions of carbon dioxide, we 
must limit the exploration for and use of fossil fuels.

Background

    Each year, the world releases over 6 billion metric tonnes of 
carbon for a total of approximately 240 billion tonnes since 
industrialization (1860). The United States historically has been and 
continues to be the largest emitter of greenhouse gases.
    Currently, the world has over 1,000 billion tonnes of carbon in 
current economically recoverable reserves of oil, coal and gas. If all 
of these reserves were burnt, it would lead to over 4 degree C increase 
in global temperature in the long far above what would be safe for 
human health and the environment.
    The fossil fuel resource base is well over 4,000 billion tonnes of 
carbon. Over time, and with the development of technology to extract 
oil. coal and gas, these resources will become available as economic 
reserves.

The Carbon Budget

    To limit ecological damage, the carbon budget calculated by 
Greenpeace demonstrates that only approximately 150-270 billion tonnes 
of carbon may be emitted.
    If no action is taken to stop deforestation then only around 150 
billion tonnes can be emitted.
    With action to halt deforestation and with a significant 
afforestation program around 230 billion tonnes may be emitted. At 
current rates of fossil fuel use this amount would be used up in less 
than 40 years.
    With a major afforestation program then around 270 billion tonnes 
may be emitted.
    The inescapable conclusion: not only must new exploration for oil, 
coal and gas be stopped but also fossil fuel use be phased out. 
Reserves and future resources of oil, coal and gas cannot all be burnt 
if we are to protect human health and the environment from global 
warming.
               Global Warming and the Greenpeace Solution
The Greenpeace Position

    In order to protect human health and the environment by ensuring we 
do not exceed ecological limits. Greenpeace believes that US policy 
should be set to achieve the carbon budget (150-270 billion tonnes of 
carbon). In order to meet these ecological and policy goals, immediate 
action must be taken to stop new exploration for oil, coal and gas and 
to stop deforestation.
    The carbon logic demonstrates that unless fossil emissions are 
reduced soon a complete Global phase out will be necessary within 30-40 
years on current trends in fossil fuel use.

What the Governments Can Do

    Achieving a fossil fuel phase out on such a timescale is the only 
way to achieve the necessary dramatic reductions in emissions of 
greenhouse gases such as carbon dioxide. As a first step, Greenpeace is 
calling on governments of industrialized nations to agree to reduce 
carbon dioxide emissions to 20 percent below 1990 levels by 2005 for 
the December 1997 Climate Convention in Kyoto, Japan.
    In addition to adopting strong stance at the treaty negotiations, 
Greenpeace also is advocating that as a first step toward a fossil fuel 
phase out that governments in industrialized nations stop new oil 
exploration. Given that society cannot afford to burn even a quarter of 
oil, coal and gas reserves, continued exploration for more fossil fuels 
is irresponsible. As well, governments should stop offering subsidies 
to fossil fuel companies and encouraging aggressive new oil, gas and 
coal development.
    For example, the US government currently subsidizes the coal, oil, 
gas and nuclear industry at a rate of $33 billion per year. In 
contrast, aid to welfare mothers (Aid to Families with Dependent 
Children) totals only $18 billion and subsidies to clean, renewable 
energy is a mere $1 billion (Federal Energy Subsidies, April 1993, 
Department of Health and Human Services). In the European Union, close 
to $15 billion US dollars of taxpayers' money has been used every year 
since 1990 to prop up the fossil fuel and nuclear industry.
                           Greenpeace Demands
    The United States has a special responsibility to act on global 
warming and climate change. The US is: responsible for about one 
quarter of historical and current global emissions of C02 from coal, 
oil and gas; the world's largest economy; and, a technological and 
market leader in delivering clean energy solutions such as solar power. 
In order to protect the climate, which is the aim of the international 
agreements under the climate treaty, substantial cuts in emissions of 
C02 must be achieved.
    Therefore, Greenpeace is calling upon all industrialized 
governments attending the Kyoto meeting in December 1997 to agree 
mandatory cuts in emissions of C02 to 20 per cent belowl990 levels to 
be achieved by 2005.
    Additionally, Greenpeace calls on the US government to:

   Shift subsidies away from dirty energy sources such as coal, 
        oil, gas and nuclear power to renewable energy such as solar 
        and wind power,
   Stop new oil exploration in Alaska, and
   Recognize that the world cannot afford to burn more than a 
        fraction of the coal, oil and gas reserves known to exist, much 
        less to search for additional reserves. Therefore, the US must 
        take a lead in beginning a phase out of fossil fuels over the 
        next 30 to 40 years.
   Work closely with labor unions to create an economic justice 
        package to help American workers transition from a fossil fuel 
        economy to a renewable energy economy.
   Raise car fuel efficiency standards (so that automobiles run 
        more efficiently and on less gas);
   Increase and improve energy efficiency programs;
   Begin to invest in renewable energy sources for federal 
        Government buildings and facilities; and,
   Use funds to rebuild homes destroyed by natural disasters 
        with solar and renewable energy.