Business

Press Release: Major Mining Company Joins Fight Against Global Climate Change

For Immediate Release:  
May 15, 2001

Contact: Dale Curtis, 202-777-3530
Katie Mandes, 703-516-4146

Major Mining Company Joins Fight Against Global Climate Change

Washington, D.C.- One of the world's leading mining companies has joined efforts to reduce the emissions that cause global warming and to bring about an effective international agreement on climate change.

The move makes Rio Tinto, based in London, the 33rd member of the Business Environmental Leadership Council (BELC), a project of the Pew Center on Global Climate Change.

Members of the BELC believe enough is known about the science and environmental impacts of climate change to take action to address its consequences. They are committed to taking steps in their U.S. and international operations to reduce their greenhouse gas emissions. They believe it is possible to address climate change and sustain global economic growth by adopting reasonable policies and transition strategies. And they support further negotiations to develop an international climate change regime that is efficient, effective and fair to all nations.

"At a crucial moment in the global climate change debate, Rio Tinto has taken a bold step forward," said Eileen Claussen, President of the Pew Center on Global Climate Change. "Like the other members of the BELC, Rio Tinto believes the costs of inaction are far greater than the costs of doing what is necessary to protect future generations. And they are demonstrating that businesses can take action against climate change while continuing to grow."

Rio Tinto has a self-imposed goal to reduce greenhouse gas emissions per unit of production by 5% by 2001, based on 1998 levels. Rio Tinto is making good progress on achieving this challenging target and by the end of 2000 had reduced on-site greenhouse gas emissions by 5.7 percent from its 1998 baseline.

Rio Tinto is also the first mining company to join the BELC. The other members of the council, mostly Fortune 500 companies, represent a diverse group of industries including energy, chemicals, consumer appliances, motor vehicles and high technology. These corporations do not contribute financially to the Pew Center, which is supported solely by contributions from charitable organizations.

The other members of the BELC are: ABB; Air Products and Chemicals; Alcoa; American Electric Power; Baxter International; Boeing; BP; California Portland Cement Co.; CH2M HILL; Cummins Inc.; DTE Energy; DuPont; Enron; Entergy; Georgia-Pacific; Holnam; IBM; Intel; Interface Inc.; Lockheed Martin; Maytag; Ontario Power Generation; PG&E Corporation; Rohm and Haas; Royal Dutch/Shell; Sunoco; Toyota; TransAlta Corp.; United Technologies; Weyerhaeuser, Whirlpool and Wisconsin Energy Corporation.

For more information on the Pew Center and the Business Environmental Leadership Council, see www.c2es.org.

# # #


About the Pew Center
The Pew Center was established in May 1998 by the Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is an independent, nonprofit, and non-partisan organization dedicated to providing credible information, straight answers and innovative solutions in the effort to address global climate change. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

The Pew Center includes the Business Environmental Leadership Council, which is composed of more than 30 largely Fortune 500 corporations, all working with the Pew Center to address issues related to climate change. The companies do not contribute financially to the Pew Center -- it is solely supported by contributions from charitable foundations.

Transportation and America's Clean-Energy Future

Transportation and America's Clean-Energy Future

Speech by Eileen Claussen, President
Pew Center on Global Climate Change

Institute of Transportation Studies
University of California, Davis
Davis, CA

May 3, 2001

Thank you very much. It is a pleasure to be here in California to talk about some of the connections between transportation and global climate change. I want to thank Dan Sperling and the Institute of Transportation Studies-both for the invitation to speak here and for all of your wonderful and groundbreaking work on these issues.
Transportation, of course, is an issue that is near and dear to Americans' hearts-and for one reason: we love our cars. While pondering the question of why we love our cars so much, I came upon a quotation from the political satirist P.J. O'Rourke, who said:
"Automobiles are free of egotism, passion, prejudice and stupid ideas about where to have dinner. They are, literally, selfless. A world designed for automobiles instead of people would have wider streets, larger dining rooms, fewer stairs to climb and no smelly, dangerous subway stations."
The truth, of course, is that we already have a world designed for automobiles. And the world is becoming more and more automobile-centric every day. Here in California, where the notion of the "freeway" came to life, the Governor's budget from last year placed the number of registered vehicles-that includes cars, trucks, trailers and motorcycles-at roughly 26 million. This was projected to rise by more than half a million this year. Nationally, Americans own roughly 140 million cars, according to the Department of Transportation, and we travel almost 4 billion miles in our cars every day. According to my calculations, this is the equivalent of more than 20 trips to the sun and back-and you thought you had a rough commute.

The Transportation-Climate Connection
What does all of this have to do with climate change? Well, the truth is a great deal. Because in driving our cars, SUVs and pick-up trucks so much, we throw more than 300 million metric tons of greenhouse gases into the atmosphere each year. Overall, transportation activities accounted for an almost constant 26 percent of total U.S. greenhouse gas emissions from 1990 to 1998, according to the U.S. Environmental Protection Agency. These emissions consisted primarily of carbon dioxide from fuel combustion, but they also included nitrous oxide and other greenhouse gases.
Looking ahead, carbon dioxide emissions from transportation sources in the United States are projected to grow at an average annual rate of 1.8 percent between now and 2020. This compares to an overall increase in CO2 emissions in the U.S. of 1.4 percent per year, meaning emissions from transportation will become an even larger part of the problem in the years ahead. This continuing growth will result from projected increases in vehicle-miles traveled-translated, this means more cars driving greater distances-as well as growth in freight shipments and air travel.
Not only are more and more Americans driving longer distances, but we are driving greater numbers of bigger and more fuel-inefficient vehicles. Someone recently told me about a bumper sticker he saw on a sport utility vehicle that read: "Have you driven over a Ford lately?"
In the last few years, it seems, the car companies have been engaged in a battle royal to build the biggest, most fuel-gluttonous vehicles they can. My personal favorite is the Civilian HumVee, which I am sure you know is based on the military vehicle of the same name. The following is a description of the Hummer, as it is affectionately known, from one of the many websites created for aficionados of this remarkable vehicle:
"The Hummer has a ground clearance of 16 inches, it can scale 22-inch vertical walls, climb 60-percent grades, traverse 40-percent side slopes, and ford 30 inches of water, all while carrying up to two tons of cargo."
Just what you need to brave that weekend trip to the supermarket. And, in case you were wondering, the Hummer's fuel efficiency is a truly abysmal 9 miles to the gallon.

Cars and Climate in the Developing World
The United States, of course, is not the only country where people love their cars and trucks. Looking worldwide, energy use is increasing faster in the transportation sector than in any other. And where it is growing fastest is in the developing world. One more statistic, if you will bear with me: from 1980 to 1997, transportation energy use and associated greenhouse gas emissions increased by more than 5 percent per year in Asia and 2.6 percent per year in Latin America, compared to 1 percent annual growth in greenhouse gases from all sectors worldwide.
What is driving the increases in transportation emissions from developing countries? The answer, once again, is cars. In an upcoming series of Pew Center reports, your very own Dan Sperling and others assess the climate impacts of transportation trends in the developing world. Let me talk very briefly about two case studies that will be part of the series-both looking at trends in major cities-because I believe they underscore the importance of addressing the transportation-climate connection in the years ahead.
Shanghai, China is a city of more than 13 million that is projected to experience economic growth of roughly 7 percent per year through 2020. As a result, city planners expect the number of cars and trucks in Shanghai to quadruple by 2020. The net effect: a seven-fold increase in greenhouse-gas emissions compared to today.
Another city that is the focus of one of the upcoming reports is Delhi, India-which, coincidentally, also has a population of 13 million. By 2000, Delhi had about 2.6 million motor vehicles on its streets, but most of these were small, inexpensive motorcycles and scooters, not cars. However, in recent years, increasing incomes combined with an extensive network of roads have started to push local car sales up. The domestic auto industry in India is projecting sales growth of 10 percent a year for the foreseeable future.
Both of these cities, along with many others in the developing world, already are experiencing high levels of air pollution, much of it transportation-related. The Supreme Court of India, in fact, became so alarmed about pollution levels that it recently ordered a major expansion of the bus system, as well as other measures to reduce motor vehicle emissions. What is happening in India is not an isolated incident among developing countries. Concerns about pollution and related issues--such as congestion, rampant energy consumption and traffic safety--could well provide the impetus for efforts to reduce the growth in transportation-related greenhouse gas emissions.
The good news is that it won't require revolutionary change for these cities to accomplish this, according to the Pew reports. Among the low-cost, incremental strategies suggested by Dan and his colleagues are everything from enhancing the quality and range of mass transit to separating slow-moving traffic (including bicycles and even rickshaws) from motorized traffic. Longer-term strategies mentioned in the reports include: restructuring land development patterns to reduce demand for cars; and accelerating the introduction of highly efficient advanced vehicle technologies-a priority that I will talk about later in my remarks.
Controlling Transportation Emissions: Options for the U.S.
Of course, a lot of these same strategies would work in the United States-well, everything except creating special rickshaw lanes, I suppose. In discussing the U.S. options for reducing transportation-related greenhouse gas emissions, I believe it is useful to separate what we can do into two categories. On the one hand are options designed to encourage reductions in fuel use, including raising gas prices, tightening fuel efficiency standards for new cars and trucks, or encouraging fuel-saving consumer behaviors by promoting public transit, carpooling and other strategies. All of these, needless to say, are very controversial.
The other category of options are technology options that in and of themselves will reduce the transportation-related use of fossil fuels and associated greenhouse gas emissions. These options (from hybrid gasoline-electric vehicles to, ultimately, cars that run on hydrogen and other alternative fuels) have a policy component to them as well. But, in the end, it will be industry rather than government that brings these technologies to market and makes them a viable alternative for the average consumer.
So let's talk about fuel use first. Despite the recent increases in our consumption of gasoline, the last 20 to 30 years have seen several periods when that consumption slowed and then picked up once again. And I believe it is instructive to look at what happened during these times so we can find clues about what might work to encourage reductions in fuel use.
Going back to the Energy Information Administration trendlines, we see that growth in transportation-sector energy demand averaged 2.0 percent per year during the 1970s but then slowed during the 1980s. What happened is we saw a combination of rising fuel prices and the implementation of federal vehicle efficiency standards. Thanks in large part to these standards-known as the CAFE rules (for "corporate average fuel economy")-the average fuel efficiency of cars on U.S. roadways increased by an unprecedented 2.1 percent per year during the 1980s.
All of this followed the Arab oil embargoes of the 1970s, which led to widespread gas shortages and price increases and made smaller, more fuel-efficient cars more attractive to consumers. The oil shocks also created support for strong government action on the issue, with Congress going so far as to enact a "gas guzzler tax" in 1978; this was in addition to the new CAFE rules. However, in a decision with enormous and unforeseen consequences for the future, Congress set looser standards for so-called "light-duty trucks" on the theory that many of these were used in businesses or on farms. At the time, these vehicles made up about a quarter of new-vehicle sales.
During the 1980s, gas prices in the United States stabilized and then began to decline. And consumer preferences began to shift back from smaller cars toward mid-sized and larger vehicles. In response, the government relaxed the CAFE requirements for both light trucks and passenger cars, and fuel use was again on the rise. In 1987, the Reagan administration even proposed an outright repeal of the CAFE law, claiming it was harmful to U.S. competitiveness and jobs. Congress kept the program in place.
The Administration of George Bush (the first) restored the original CAFE standard for passenger cars of 27.5 miles per gallon in 1989, and that is where it stands today. The standard for light trucks stands at 20.7 mpg. During the 1990s, members of Congress regularly voted to "freeze" the CAFE standards at these levels, and now every year we see a congressional debate about whether the freeze should continue, or whether the standards should be raised. So far, advocates of the freeze have prevailed. And, because SUVs and light trucks now make up as much as half of the new-vehicle product mix, the average fuel economy of all the cars and light trucks sold in America-import and domestic- is no better today than it was in the early 1980s.
So over the years, you see an interplay between gas prices, fuel efficiency standards and the amount of gasoline Americans use. When prices and fuel efficiency standards rise, we tend to use less gasoline-and when they drop we tend to use more.
But gas prices and the regulation of fuel efficiency have been, and continue to be, very thorny issues politically. President Bush (the second) is on record opposing any increase in CAFE standards. And if you believe the current Administration and Congress will support any kind of gasoline tax increase, I'd say you've been inhaling too many tailpipe emissions. Right now, any significant changes in consumer behavior appear to be driven primarily by market fluctuations in gas prices, rather than high-level policy interventions.
Of course, this does not mean policy changes are playing no role whatsoever in influencing or encouraging reductions in fuel use. Last month, the Washington Post carried a front-page story about the increase in Americans' use of mass transit in recent years. The bottom line: mass-transit ridership-this includes subways, buses and commuter railroads-grew faster than highway use for the third year in a row last year. While there are legitimate questions about exactly what is driving the increase in transit use, it surely would not have happened without a stepped-up investment in buses, trains, track and other infrastructure by public authorities.
Expanded public transit is not the only way to encourage more Americans to leave their cars at home. High-occupancy vehicle (or HOV) lanes are now a fixture on American highways, both here in California and throughout the country. And new technologies such as "smart cars" and "smart roads" are on the way. And, while the primary goal of these developments, in most cases, is to reduce traffic congestion, they also can contribute to reductions in greenhouse gas emissions and smog.
Similarly, California and many other states and localities are implementing so-called "smart-growth" strategies that could lead to additional reductions in automobile use and related emissions. In these cases, once again, you see a range of factors-not just automobile emissions-driving the changes. Chief among these factors are quality-of-life concerns. Many people are just plain sick and tired of sitting in traffic.
The Road Ahead
So the fact is we are seeing a good deal of attention paid by policy makers at all levels to transportation issues in general, and, in many cases, to policy changes that have the potential to reduce transportation-related greenhouse gas emissions. Looking ahead, it is becoming increasingly clear to me that we will see even more progress on these issues in the next few years. Back in Washington, I see a growing recognition of two fundamental truths: (1) We need to do something about oil use and greenhouse gas emissions from cars and trucks; and (2) we need to think more broadly about our policy options for addressing these issues.
This summer, the National Academy of Sciences will release an evaluation of the CAFE law along with recommendations about how it might be improved. Among the members of Congress who requested the study was Spencer Abraham, then a senator and now the U.S. Energy Secretary. In the meantime, Secretary of Transportation Norm Mineta recently testified that he would like to see the CAFE freeze lifted. While he said he did not necessarily want to raise the standards, he wanted the authority to do so.
At the same time, the car companies are showing signs that they recognize the need to address the efficiency issue voluntarily-perhaps to stave off any kind of additional regulatory action. In late July 2000, Ford announced it would improve the fuel economy of its SUV model lines by 25 percent over a five-year period. This was followed by a statement from General Motors that it would do the same thing. And Daimler Chrysler recently chimed in with a similar commitment. At the same time, the car companies have agreed to reduce new car fleet-average CO2 emissions by 25 percent in Europe by 2008. And a new rule in Japan will result in a 22-percent overall improvement in the fuel economy of the cars sold there by 2010.
The car companies, in other words, are taking responsibility for finding new ways forward-whether it is through their investments in research and development of new climate-friendly products, their publicly stated targets, their new obligations in Europe and Japan or other activities. The car companies also are partners with the federal government in the Partnership for a New Generation of Vehicles. These are all very important developments because they reflect an understanding that this is an increasingly important issue-not just among regulators but among consumers as well.
Yet another potentially important development is the introduction of legislation in the United States Senate just last week to promote the use of alternative fuel vehicles and advanced car technologies through tax credits. The legislation has bipartisan support, as well as support from leading automobile companies such as Toyota, Honda and Ford. The original co-sponsors are Senators Hatch, Rockefeller, Jeffords, Kerry, Crapo, Lieberman, Collins, Chafee, and Gordon Smith. And while previous incarnations of the measure were limited to promoting natural gas and propane vehicles, the new bill provides substantial incentives for both fuel cells and gasoline-electric hybrid vehicles. The tax credits are provided for everything from the construction of fueling stations for alternative fuels to the purchase of such fuels at retail by the consumer. The bill is called the Cleaner Efficient Automobiles Resulting From Advanced Car Technologies Act, or CLEAR for short.
Introduction of the CLEAR measure followed the introduction earlier this year of a bill by Senator Jeff Bingaman of New Mexico to set a cap on petroleum use among the entire "light duty sector," which includes cars, trucks and SUVs. Under the Bingaman proposal, the Department of Transportation would negotiate with vehicle manufacturers on a set of measures that would result in an increase in fuel use among these vehicles of no more than 5 percent by 2008-compared to a 25-percent increase if current trends hold. According to Bingaman, this provides manufacturers with even more flexibility than the CAFE rules while focusing on total gasoline use as opposed to the efficiency of various types of vehicles.
Some of what is happening on these issues right now may be familiar, but some is not. Ten years ago, as part of the debate over the Energy Policy Act in the aftermath of the Gulf War, there were serious discussions about CAFE reform that ultimately went nowhere. Now, in the midst of a different kind of energy crisis, we're once again talking about oil use by cars and trucks. But the key difference between now and then is the proactive role that the auto companies are playing in the current discussion.
It is because of this that I sense a real opening. For people like yourselves, who are in the business of generating new ideas and new approaches to transportation, this may be your moment. At the very least, it is your best opportunity in a long time to help set a more rational course for oil use and associated greenhouse gas emissions from cars and trucks.
The Automotive Technologies of Tomorrow
In the end, I believe it will be difficult to achieve truly significant, long-term reductions in transportation-related greenhouse gas emissions without technological changes to our cars themselves. Toyota, which is a member of the Pew Center's Business Environmental Leadership Council, recently introduced the Prius, a gasoline-electric hybrid car that gets 48 miles per gallon in combined city-highway driving. Other car-makers have similar vehicles either in development or already on the market.
Ultimately, though, these hybrids will represent an interim step in the progression toward truly climate-friendly vehicles. Among the technologies that may power these cars and trucks of the future are fuel cells that combine hydrogen and oxygen from the air to create a chemical reaction that produces electricity. Long a staple of the U.S. space program, hydrogen fuel cells produce only heat and water vapor as byproducts-in other words, no carbon dioxide and no smog-creating pollutants. It is important to note, however, that right now it takes a lot of energy to produce the hydrogen needed to power these fuel cells. Either you have to make it from fossil fuels or you have to use electricity to break water into its component parts of hydrogen and oxygen. Unless the power comes from renewable sources, this requires the burning of fossil fuels. Moreover, even liquefying the hydrogen so it can be transported requires a lot of energy.
Even with these drawbacks, however, hydrogen fuel cells would result in substantial reductions in greenhouse gas emissions. And researchers are working on less energy-intensive methods for producing hydrogen as we speak. In a widely quoted speech in January 2000, William Clay Ford, Chairman of the Ford Motor Company, said:
"I believe fuel cell vehicles will finally end the 100-year reign of the internal combustion engine as the dominant source of power for personal transportation. It's going to be a winning situation all the way around-consumers will get an efficient power source, communities will get zero emissions, and automakers will get another major business opportunity."
It's not just the auto companies that are interested in fuel cells. Energy companies long associated with fossil fuels-from BP and Shell to Sunoco-also are investing in R&D, participating in demonstrations, and developing new fuel cell technologies.
Right now, we are already seeing successful demonstration projects, including the California Fuel Cell Partnership-which will place about 70 fuel cell passenger cars and buses on the road between 2000 and 2003. Hydrogen fuel cell-powered bus fleets are already on the road here in California and in other places from Vancouver to Chicago. The goal of these demonstrations is to build public awareness about fuel cells, test the technology under day-to-day driving conditions, and begin to figure how to develop the fueling infrastructure to support these vehicles.
In addition to fuel cells, there is a lot of work being done to develop other power options for cars-from state-of-the-art electric vehicles to cars that run on ethanol derived from agriculture wastes and even municipal solid wastes. A recent report from General Motors and others says this last option actually would result in negative greenhouse gas emissions because some carbon would be removed from the atmosphere in the process.
But fuel cells and other climate-friendly transportation innovations won't go far or fast enough without some level of government involvement. This means making significant investments, in partnership with industry, in research and development of alternative technologies. It means providing incentives for manufacturers to invest in more cutting-edge research. It means doing more to convert public vehicle fleets to alternative fuels. And it means thinking long and hard, in the context of developing a national energy strategy for the 21st century, about how best to transition to fuel cells and other low- or no-emission alternatives.
I have often said that responding successfully to the issue of climate change will require a second industrial revolution. But industry alone can't make the revolution happen. Consumers and government can-and must-play an active role. Here in California, legislators have said that 10 percent of the cars and trucks sold in the state in 2003 will have to be zero- or low-emission vehicles. This is precisely the kind of policy leadership that is needed to help create America's clean-energy future. And, when combined with cooperative, incentive-based programs to get industry and consumers to buy into that future, these types of policies can help Americans realize that meeting the challenge of climate change doesn't mean abandoning our cars. It just means being smart and making the right short-term and long-term choices about everything from commuting and fuel economy to the automotive technologies of tomorrow.
Yes, it's true that Americans love their cars. But we also love progress and technological solutions to problems. And, at the same time, we hate inefficiency, and we hate sitting in traffic even more. Combine all these loves and hates, and you start to see the outlines of a good road forward for all of us. Thank you very much.

Addressing Climate Change and Growing the Global Economy: Can We Do It?

Addressing Climate Change and Growing the Global Economy: Can We Do It?

Lake Louise Energy Conference

January 26, 2001

Thank you very much. It is a great pleasure to be here with such an interesting and distinguished group of business and investment leaders. And how appropriate to be discussing the implications of global climate change against the backdrop of the beautiful Victoria Glacier and glacier-fed Lake Louise. In assessing the future of this remarkable area under a global warming scenario, I can't help but borrow from the investment lingo and say this: the glacier may not have much of a future, but there are real growth opportunities for the lake.

Seriously, I truly appreciate this opportunity to provide you with some perspective on: 1) what is happening on the issue of climate change today; 2) how this might affect your business and investment decisions in the years ahead; and 3) more fundamentally, whether we can address climate change and still maintain a growing global economy.

In preparing for my speech, I found it helpful to think of it as a visit to the ski slopes. I will take you up the lift with a brief overview of where things stand today, and then we will be free to explore the trails ahead. Rest assured that I fully intend to avoid any extreme plunges or expert runs. I am reminded of the old definition of a skier as someone who pays an arm and a leg for an opportunity to break them.

One of the messages I want to convey to you today is that climate change is real. The earth is warming, and the human hand in this warming is becoming clearer and clearer. A report due this spring (and already leaked) from the United Nations' Intergovernmental Panel on Climate Change suggests that the upper range of global warming over the next 100 years could be far higher than previously thought, with temperatures rising by 11 degrees Fahrenheit since 1990. By comparison, average temperatures today are 9 degrees Fahrenheit higher than they were at the end of the last ice age.

Even at the low end of the projected warming range, we can expect to see significant changes in weather patterns and sea-level rise. Such changes will be accompanied by effects on areas as diverse as human health, managed ecosystems (such as agriculture and water supply systems), and natural ecosystems. You may have heard that these changes could bring with them potential benefits as well as risks for certain regions - particularly parts of North America, where temperature increases could lead to longer growing seasons. But it is important to note that any positive impacts from global warming are unlikely to be sustained as the globe continues to warm. At higher temperatures, even high-latitude areas will eventually face decreased crop yields and negative impacts.

In the same way that we must accept that climate change is real, we must also accept that the time will have to come when we become significantly less dependent on the sources of energy that have fueled the world economy since the dawn of the Industrial Revolution. Environmental necessity, combined with the relentless drive to improve efficiencies and reduce costs, will spur a movement away from fossil fuels and toward a new energy future. And while it will be neither cheap nor easy, rewards will surely come to the early adopters and first movers. The task at hand is to allow these first movers the ability to experiment and innovate, while at the same time establishing the framework that sends clear signals to the market about what must be done in the long term.

Where Things Stand Today

So where do we stand today on responses to climate change? As we board the ski lift, I caution you to heed the advice of an actual sign on a lift in Taos, New Mexico. The sign reads: "No jumping from lift. Survivors will be prosecuted." That reminds me of another actual sign I heard about that read-and I quote-"Door Alarmed." Nearby, someone had posted a hand-made sign reading, "Window Frightened."

Well, in November, a great many people became both frightened and alarmed-or at the very least, somewhat concerned-about the current status of the international negotiations on climate change. As all of you know, that was when negotiators from 180 countries gathered in The Hague for the latest round of global climate talks. The goal of the meeting-officially known as the Sixth Session of the Conference of the Parties to the Framework Convention on Climate Change, or COP 6-was to put the finishing touches on the rules needed to implement the Kyoto Protocol. The Kyoto Protocol is the international agreement negotiated in 1997 that commits industrialized countries, including Canada and the U.S., to binding reductions below 1990 levels in their emissions of greenhouse gases.

The talks in The Hague, however, failed to reach their intended outcome. One of the key sticking points was how to account for the role of forestry and land-use practices in keeping carbon dioxide out of the atmosphere. There also was no agreement on whether there should be limits on how much of a country's emission reductions could be achieved by actions taken abroad, either through emissions trading, the Clean Development Mechanism or joint implementation.

But the standoff in The Hague should not have come as a complete surprise. There is no escaping the fact that expectations for the talks were too high. I can only compare it to the expectation that Washington, D.C. will become a partisanship-free zone in the wake of the 2000 presidential election. If you believe that one, then I have a bridge to the 22nd century that you might be interested in purchasing.

As we consider why the November meeting failed, as well as what needs to happen now, it is important to remember how we arrived at this point. The Kyoto Protocol was negotiated in recognition of the fact that the emission reduction provisions outlined in 1992's U.N. Framework Convention on Climate Change were not effectively limiting atmospheric concentrations of greenhouse gases. It had become eminently clear that the voluntary measures spelled out in the Convention were inadequate. Few developed countries were on track to reducing their emissions to 1990 levels by 2000, as they voluntarily agreed to do.

Under the Kyoto Protocol, industrialized countries agreed to binding emissions reductions during the period from 2008 to 2012, with countries' targets averaging about 5 percent below 1990 levels. The Protocol also began to outline how countries could achieve their targets-for example, by trading emission credits or by using "sinks" such as forests to remove carbon from the atmosphere. However, further elaboration of the rules that would allow the Kyoto Protocol to enter into force was still needed.

The breadth of the agenda for the meeting in The Hague--approximately 275 pages of text covering the full spectrum of tough political and technical issues-was enough to give new meaning to the term "full plate."

But the fact that the agenda was dominated by many complicated political and technical issues was not the only reason the talks failed. The U.S.-EU split on the issue of carbon sinks was emblematic of a deep divide between Europe on one side and the United States on the other over how best to respond to climate change. The EU takes as its starting point the need to effect widespread-and immediate-behavioral changes to address this problem: using public transportation, for example, and keeping our houses colder in the winter and warmer in the summer.

In contrast, the United States, Canada, Australia and Japan come down on the side of short-term, cost-effective actions, coupled with an effort to develop and deliver the technologies that will be needed for the long-term.

The negotiating positions inherent in these distinct philosophical approaches proved too far apart to bridge in The Hague. And there were other difficulties as well. These included the inability of the European Union to reach internal agreement on how to proceed; the position of the United States and others that credit should be given for "business as usual" activities and practices; and the virtual neglect of the developing world, which had important contributions to make to the discussion, and which would have to be a part of any consensus that emerged from the meeting.

The result of all these difficulties was a failed meeting, and although most countries are anxious to pick up the scattered ideas and pieces of negotiated language and meld them back together again, it is clear that this can only happen if there is a willingness to compromise. And, in this instance, compromise will mean the acceptance of different approaches under a common Kyoto umbrella. Hope is not a strategy, but I am hopeful that over time, we will develop a framework that will allow for these differences of view.

The Response from Business

So now we have taken the lift to the top of the mountain with an overview of where things stand today. I hope you are all still with me, and trust that no one has jumped off into the snow. (If you did, I understand that the Canadians have a wonderful health care system, and you will be back on your feet in no time.)

As I promised at the start of my speech, I will use the time I have left to explore the trails ahead. And I can think of no better place to start than by exploring the role of business in national and global efforts to reduce the risk of climate change.

Over the past several years, we have witnessed a remarkable shift in business activity and thinking on the issue of climate change. Many corporate leaders in North America and throughout the world no longer view climate protection efforts as a threat. Rather, they acknowledge the strength of the scientific case for action. And they accept that businesses must play a leading role in the global effort to reduce emissions.

I found it particularly interesting, in fact, that it was not just government officials and environmentalists who were disappointed in the unhappy ending to the talks in The Hague last November. Business leaders, as I mentioned before, also were notably glum. As a representative of the International Chamber of Commerce put it in an interview with the Los Angeles Times:


"We came here expecting a decision which would have clarified the rules and guidelines of the Kyoto Protocol. We now walk away as empty-handed as everyone else and leave as confused as when we arrived about the role we might play in contributing to solutions."


Or, as another business representative said, "There was industry, all dressed up with nowhere to go."

But all hope is not lost. Disappointing as the meeting in the Hague was for the progressive business community, most companies will forge ahead with existing programs to reduce their emissions, encourage greater energy efficiency, begin a switch to less carbon intensive fuels, and continue to develop alternative energy technologies. What they may not do is to undertake activities that are dependent on the Kyoto rules. For example, some industries are eager to pursue emissions-reducing power projects in other countries. But they are unlikely to move ahead vigorously until they know what kinds of projects will be eligible for credits under the Protocol. Similarly, there are many companies in a variety of industries that would like to begin participating in global emissions trading. And while they may begin these activities, they will hold off on major transactions until the climate negotiations paint a clearer picture of exactly how the market in emissions might work.

This turnaround in business behavior has been most evident in statements and actions from the companies associated with the Pew Center's Business Environmental Leadership Council. This Council now comprises 28 major corporations, including ABB, Alcoa, American Electric Power, Baxter, Boeing, BP, Dupont, Enron, Georgia-Pacific, IBM, Intel, Shell, Toyota, United Technologies, Weyerhaeuser, and Whirlpool. And just for comparison purposes, it is interesting to note that the combined annual revenues of these companies is in excess of $770 billion per year, greater than the GDP of most countries. In fact, it would rank number 11 in the world, ahead of Mexico, Canada, Russia and 180 other countries.

The fact remains, however, that industry efforts to meet the challenge of climate change will not be applied as broadly or as seriously as they need to be in the absence of a viable framework for national and international action on this issue. So to those who argue for an even greater commitment to protecting the climate on the part of the private sector, I say it will come. But only if we see a similar commitment on the part of national governments throughout the world to develop an environmentally effective, private-sector friendly framework for action. Companies will not sit on their hands and wait for governments to catch up, but governments will have to provide clear direction.

Speeding Technology Development

The way I see it, the business response to the issue of climate change in the years ahead will go through three phases. The first, short-term phase is the one I have already described, where companies are investing in energy efficiency and exploring and participating in emissions trading and carbon sequestration. The second, medium-term phase (and these are not sequential - there will clearly be overlap) will see a shift to fuels that are less carbon-intensive, particularly natural gas, but also to other fuels, including hydrogen, in those cases where the existing fossil fuel infrastructure can still be used.

The longer-term outlook is dramatically different. As individual countries and the international community finally come to grips with the need for serious, long-term action to reduce greenhouse gas emissions, we are destined to see a flood of new attention and new investment going to those technologies that are essentially carbon free. The development and delivery of these new technologies will be absolutely crucial to the success of national and international efforts to reduce worldwide concentrations of greenhouse gases. In fact, there is no other possibility. Behavioral changes, no matter how drastic (and drastic ones are politically impossible as we have seen over last summer and this winter in both North America and Europe), will not be sufficient to address the problem. What we need is a second industrial revolution, but one that allows us to move to a brave new world in an orderly and systematic way, a way that meets both our environmental and economic objectives.

In fact, I believe we are beginning to see attention being paid to this kind of phased approach. Industry leaders are now beginning to make serious commitments to everything from solar energy, biomass and other renewables to fuel cell technologies. Of course, many of you know more about this than I do, but let me offer a couple of examples from the companies that are part of the Pew Center's Business Environmental Leadership Council:


BP-which, as we all know, now stands for "Beyond Petroleum"-announced in June of last year that it was planning to invest $500 million in renewable energy projects. BP Solar, the world's largest solar electric company, now provides photovoltaic energy technology in 150 countries around the world, with major, multi-million dollar contracts for rural electrification in Indonesia and the Philippines. BP Solar's revenue projections for 2007? Over $1 billion.


Also making a significant investment in solar power and other alternative energy technologies is Shell. Shell Hydrogen was formed in 1999 to develop business opportunities related to hydrogen and fuel cells on a global basis. Among other activities, Shell is now cooperating with both Daimler Benz and Zevco (which stands for the Zero Emissions Vehicle Company) in the development of hydrogen fuel cells and the necessary infrastructure to support the supply and distribution of hydrogen fuels. The company also is investing $500 million in Shell International Renewables, with projects on forestry, photovoltaics, and biomass.


Toyota, for its part, also is working to develop fuel cell vehicles. The year 2000 marked the introduction of the Toyota Prius, the first mass-produced hybrid gas-electric car. The car's fuel efficiency rating is a remarkable 52 miles per gallon in city driving. This is a dramatic improvement, of course, over where we now stand on fuel efficiency for vehicles. And greater improvements, and more innovative technologies that will take us beyond hybrid vehicles, are now under development.


And finally, let us look at United Technologies, which through its International Fuel Cells (or IFC) subsidiary, produces the world's only commercial fuel cell power plants. More than 200 units have been installed in 15 countries on four continents to date. Since 1996, all U.S. manned (and womanned) space flights, including the Space Shuttle, have been powered with fuel cells supplied by IFC. And in 1999, IFC delivered its first hydrogen-fuel power unit to BMW.


As these examples show, there is a remarkable transition going on in how industry views environmental issues such as climate change. These issues are no longer considered mere opportunities for public relations gambits. Rather, they are serious problems that demand serious solutions. And, equally important, they represent serious opportunities for continued growth, innovation and improved performance.

The key in the years ahead, I believe, will be for governments in the U.S., Canada and elsewhere to work with industry to craft long-term policies that will enable a smooth transition. These policies can include incentives and support for research and development as well as conservation and energy efficiency, and, most importantly, clear goals and strategies for reducing greenhouse gas emissions both domestically and throughout the world.

The Future of the Kyoto Protocol

To return to the skiing metaphor for a moment, allow me to make the observation that the trails ahead for government and business may not be one and the same, but they certainly cross at important points. And the goal for the future should be to make a serious effort to coordinate and manage these crossings so there are as few collisions as possible. Speaking of collisions on the slopes, how could I forget the words of the minister at the funeral for a fallen skier: "We are gathered together on this slalom occasion." (You will be glad to know that is my final ski joke for the day.)

So where do the trails ahead for business and government cross? The answer is in the use of market-based strategies to achieve environmental progress. This has become a bedrock principle of national and global efforts on issues from climate change to reducing acid rain. The Kyoto Protocol reflects this principle by including a number of market-based strategies among the avenues that countries can pursue in order to meet their targets for reducing emissions.

Emissions trading, the Clean Development Mechanism, the use of carbon sinks, and other elements of the accord all rely to varying degrees on markets and business initiative to work effectively. It is my belief that all of these elements, which will keep costs down as they promise environmental improvement, will have to be part of a final agreement. I also believe that governments and industry will need to be granted a high degree of flexibility in how the market mechanisms are applied.

Right now, the EU nations and many countries in the developing world do not fully appreciate how market mechanisms can be put to work for the betterment of the environment. This must change, and I believe it will change

Of course, the alternative to reaching consensus on international action is to put the negotiations on hold and to proceed with domestic actions on a piecemeal basis. But everyone knows this is not a real solution. Global climate change is a global problem. And it can only be solved if the nations of the world work together to create an effective yet flexible regime for reducing atmospheric concentrations of greenhouse gases.

This does not mean that Canada and the United States and other nations should sit idly by while we wait for the negotiations to produce a final agreement that we all can live with. Rather, at the same time that we are working on this issue internationally, our nations must begin to take serious action at home to reduce our contribution to climate change. The United States in particular has a clear responsibility to move forward on this issue. With only 4 percent of the world's population, we are responsible for 24 percent of global emissions of greenhouse gases. And we have yet to forge a coherent national policy for significantly reducing our emissions.

A priority for the United States, I believe, should be to design a straightforward system that will recognize and give credit to corporations that want to take early action to reduce greenhouse gas emissions. Put very simply, these companies need to know that reducing their emissions now will not put them at a competitive disadvantage down the line.

In addition to addressing the early action issue, governments must put in place the kinds of programs that will pave the way for dealing with this issue over the medium and long-term. We need to do more to improve the energy and carbon intensity of our economy, and we need to provide incentives for the development and diffusion of the best technologies that we are capable of producing. Governments can play an important role by setting targets that are ambitious, but not impossible to meet. And industry can do what it does best: experiment and innovate, until we have found the most effective and efficient ways of moving forward.

In short, we need to accept once and for all that this problem is real-and that real programs will be taking shape in the coming years that will require the world to shift away from fossil fuel combustion and implement changes in land use practices, such as deforestation, that are altering the global climate.

Now that we have concluded our little visit to the slopes-and our exploration of the trails ahead for climate change-I would like to leave you with two quotes to consider as you head out for a ski this afternoon. The first is from a great American outdoorsman who visited this area in 1915 and called the landscape here "as lovely as it is varied." President Theodore Roosevelt, in his inaugural address, told Americans, "There is no good reason why we should fear the future, but there is every reason why we should face it seriously."

The second is from a former Saudi Arabia Oil Minister, Sheik Ahmed Zaki Yamani, who, in speaking about the potential of alternative fuels, said, " The Stone Age came to an end not for a lack of stones, and the Oil Age will end, but not for a lack of oil."

Looking ahead, we would be wise to keep these words in mind as we consider how to address one of the critical challenges of our time.

Thank you very much.

Download Transcript (in PDF format)

Press Release: IBM Joins Pew Center's Business Environmental Leadership Council

For Immediate Release:
November 22, 2000

Contact: Juan Cortinas, 202-777-3519
Dale Curtis, 011-44-77-300-522-06 (in The Hague)
Katie Mandes, 011-44-77-300-521-94 (in The Hague)

IBM Joins Effort To Mitigate Climate Change - Pew Center's Business Environmental Leadership Council Climbs to 28 Members

Washington, D.C.-The Pew Center on Global Climate Change today announced that IBM has joined the organization's efforts to battle global climate change.

The Pew Center established the Business Environmental Leadership Council (BELC) with 13 members in May 1998. The addition of IBM brings the BELC's total membership to 28 companies.

Members of the BELC are committed to take steps in their domestic and foreign operations to assess their greenhouse gas emissions and establish programs to reduce those emissions. The BELC considers the Kyoto Protocol a first step in global efforts to mitigate climate change and supports the development of market-based mechanisms as called for in the Kyoto Protocol.

The BELC includes many Fortune 500 companies in a diverse group of industries including energy, chemicals, metal, consumer appliances and high technology. These companies do not contribute financially to the Pew Center, which is supported solely by contributions from charitable organizations.

"The private sector is increasingly taking independent steps to address climate change because companies understand that ignoring the problem could bring greater costs in the long run," said Eileen Claussen, President of the Pew Center. "The companies that compose the BELC are providing innovative solutions to the climate change problem that many governments, including our own, should recognize."

The other members of the BELC are: ABB; Air Products and Chemicals; Alcoa; American Electric Power; Baxter International; Boeing; BP; CH2M HILL; DTE Energy; DuPont; Enron; Entergy; Georgia-Pacific; Holnam; Intel; Lockheed Martin; Maytag; Ontario Power Generation; PG&E; Rohm and Haas; Shell International; Sunoco; Toyota; United Technologies; Weyerhaeuser, Whirlpool and Wisconsin Electric.

For more information about global climate change and the activities of the Pew Center and the BELC, visit www.c2es.org.

About the Pew Center: The Pew Center was established in May 1998 by the Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is a nonprofit, non-partisan and independent organization dedicated to providing credible information, straight answers and innovative solutions in the effort to address global climate change. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

Op-Ed: Getting It Right: Climate Change Problem Demands Thoughtful Solutions

OPINION EDITORIAL
"Getting It Right: Climate Change Problem Demands Thoughtful Solutions"

By Eileen Claussen, Executive Director for the Pew Center on Global Climate Change

Appeared in the Washington Post

November 14, 2000

Many of the government officials gathering this month for the climate change negotiations in The Hague are hoping to put the finishing touches on rules to implement the Kyoto Protocol. But getting those rules right is more important than getting them all completed.

Still unresolved on the eve of the meeting are a range of very complicated political and technical issues that will play a decisive role in determining whether we achieve our goal of stabilizing the earth's climate system. It is not a stretch to say that how we decide these issues will determine how we are judged by future generations.

Decision-makers in The Hague should remember that the Kyoto Protocol was designed as both a first step in reducing atmospheric concentrations of greenhouse gases and as a framework for long-term, cost-effective action. In other words, this is a treaty that will have to stand the test of time. Short-term political considerations-including the desire to resolve all remaining issues this year-should therefore take a backseat to the goal of creating a global system that is transparent, fair, environmentally effective, economically efficient, and as simple as possible.

The Remaining Issues

Four key sets of issues remain in play as the negotiators come together:

  1. The Kyoto Mechanisms. The Kyoto mechanisms were designed to allow countries to pursue the most cost-effective means of reducing their emissions-for example, by engaging in international emissions trading. But there are provisions being negotiated that would make the Kyoto mechanisms totally inoperable, and others that would seriously limit their use. If the negotiators are careless in defining the rules, or determined to constrain when and how the mechanisms can be used, this will simply increase the costs of complying with the Protocol. And the result might be a higher level of noncompliance, an outcome that no one should want.
  2. Carbon Sequestration. The question here is whether and how countries should receive credit toward their emissions reduction targets for using agricultural lands and forests to store carbon. A related question is whether credit should be given for investments in sequestration projects in developing countries. The important role of soil and forest sequestration in stabilizing the global climate system cannot be denied. However, we have not yet defined what types of sequestration activities ought to count-or even how to count them.
  3. Compliance. Yet another unanswered question is whether the Kyoto Protocol will include binding consequences for noncompliance. In other words, how will we penalize those countries that miss their targets? This is a crucial issue to the Protocol's success. Only by establishing and enforcing significant noncompliance penalties can we create a fair and efficient global system, and one that yields results.
  4. Assistance to Developing Countries. Developing countries properly argue that the industrialized world is not doing enough to implement provisions of the United Nations Framework Convention on Climate Change. In that precursor agreement to the Kyoto Protocol, the United States and other nations pledged to support developing countries in their efforts to reduce emissions through capacity building, technology transfer, and funding for "adaptation" initiatives. Decision makers in The Hague will have to respond seriously to these concerns at the same time as they are working on the more fractious issues of the Kyoto framework.

Looking Ahead

As if resolving these immediate questions were not enough of a challenge, everyone concerned with this issue must also give serious thought to the future. After all, the 2008-2012 deadline for achieving the first round of emissions reductions under the Kyoto Protocol is fast approaching. And, even if these initial targets are met (an unlikely prospect), they represent only a first step toward the sustained and significant reductions in emissions that will be necessary to reduce the threat of climate change throughout the 21st century.

A crucial issue for the future, then, is to think about what kind of targets we will have to establish in the years after 2012. At the same time, we need to think about how to involve developing countries in these future global efforts in a more active way. Developing countries are struggling to lift their people to a higher standard of living, and doing so will mean absolute increases in energy use and emissions.

We will accomplish very little, if anything, by requiring developing countries to achieve short-term emissions reductions. The better approach is to craft an equitable and effective framework for future targets for all countries, bearing in mind that we face a common challenge: maximizing the environmental benefits we are able to achieve while minimizing the costs of reducing and limiting our emissions.

Meeting the challenge of global climate change calls for no less than a second industrial revolution. We need to promote new technologies and new investments that will put the entire world on a path to clean economic development. And, in creating the global legal framework to make this happen, we need to make absolutely certain that we get it right.

Appeared in the Washington Post, Tuesday, November 14, 2000— by Eileen Claussen

Technology and the Economics of Climate Change Policy

Technology and the Economics of Climate Change Policy

Prepared for the Pew Center on Global Climate Change
September 2000

By:
Jae Edmonds, Joseph M. Roop, and Michael J. Scott of Battelle, Washington, DC

Press Release

Download Entire Report (pdf)

Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

Climate change policy analysis is fraught with uncertainty and controversy, but at least one thing is perfectly clear: technological innovation is the key to addressing climate change. Moving the economy to a greenhouse - friendly future will necessitate a profound economic transition - a transition that simply cannot come to pass without technological progress.

In this report, an impressive team of economists led by Jae Edmonds and Joe Roop explains how economic models of climate change take technological innovation into account. The authors demystify a highly technical subject that is essential to sound policy formulation, raising five central insights:

  • All future projections of technological change are a matter of assumption. Much is known about how technological change has occurred in the past and what will drive it in the future. However, all projections require assumptions about the future role of technological change in the way the economy grows, in the way energy is used, and in the options available as alternatives to fossil fuels.
  • Technological progress reduces the cost of climate change mitigation. This result is robust across a broad range of model types and assumptions.
  • Significant technological progress occurs over long time horizons. This fact should be taken into account in establishing lead times for climate policies.
  • Policies and prices can "induce" technological change. Thus both policy-makers and businesses play a major role in fostering technological change.
  • Modeling "induced" technological change (that is, change stimulated by climate policies or price changes) is important because it more closely reflects reality. However, modeling this phenomenon is in its infancy.

This report on technological change addresses one of the factors identified by the Pew Center as having the largest influence on economic modeling results. An earlier Center report, "An Introduction to the Economics of Climate Change Policy," by John Weyant describes the five factors, which include: how baseline greenhouse gas projections are measured, what climate policies are considered, how the substitution of goods and services by producers and consumers is represented, and whether and how GHG reduction benefits are addressed. Two other Pew Center reports explore in detail the role of climate policies, with an emphasis on international emissions trading, and the role of substitution in determining the outcome of economic modeling.

The Center and the authors appreciate the valuable insights of several reviewers of early drafts of this paper, including Nebojsa Nakicenovic, Ian Parry, and Alan Sanstad. Special thanks are due to Ev Ehrlich for serving as a consultant for the Center's economics series and to Judi Greenwald for her editorial assistance.

Jae Edmonds
Joseph M. Roop
Michael J. Scott
0

An Overview of Greenhouse Gas Emissions Inventory Issues

An Overview of Greenhouse Gas Emissions Inventory Issues

Prepared for the Pew Center on Global Climate Change
August 2000

By:
Christopher P. Loreti, William F. Wescott, and Michael A. Isenberg, Arthur D. Little Inc., Cambridge, Massachusetts

Press Release

Download Entire Report (pdf)

Foreword

Eileen Claussen, President, Pew Center on Global Climate Change

At a Pew Center conference on Early Action held in September 1999, DuPont announced plans to reduce its greenhouse gas emissions 65 percent from 1990 levels by 2010. BP Amoco intends to reduce greenhouse gas emissions by 10 percent of 1990 levels by 2010 and has implemented an emissions trading system across all of its businesses. United Technologies Corporation has announced targets to reduce energy and water usage by 25 percent per dollar of sales by 2007.

Motivated by factors ranging from a desire to monitor and reduce energy consumption to concern for the environment to anticipation of future requirements to cut emissions that contribute to climate change, a growing number of companies are voluntarily undertaking action to reduce their greenhouse gas emissions. This report provides an overview of how greenhouse gas emissions are estimated and reported in emissions inventories. It highlights a variety of approaches taken by companies to identify, track, and curb their emissions, and provides insights from their experiences.

This Pew Center report is the first in a new series aimed at identifying practical solutions to address climate change. The Solutions series is aimed at providing individuals and organizations with tools to evaluate and reduce their contributions to climate change. This first report, prepared by Christopher Loreti, William Wescott, and Michael Isenberg of Arthur D. Little, Inc., identifies credible approaches and offers a set of principles for conducting emissions inventories. The authors identify key decision points in efforts to conduct an emissions inventory. They note that the purpose of an inventory should influence the approach, pointing out, for example, the tension that exists between encouraging consistency in reporting practices and providing flexibility to reflect a specific company's unique circumstances.

In the absence of a comprehensive climate policy regime, voluntary efforts to identify and reduce greenhouse gases at the source are critical. Ensuring that such efforts are ultimately recognized under future policy regimes is equally important and only likely to be possible if greenhouse gas emissions reductions are found to be real, quantifiable, and verifiable. A subsequent Pew Center report will address key issues in the verification of emissions inventories and emissions reductions.

The authors and the Pew Center would like to thank the companies featured in this report for sharing their stories and insights, and acknowledge the members of the Center's Business Environmental Leadership Council, as well as Janet Raganathan and others involved in the Greenhouse Gas Measurement & Reporting Protocol Collaboration, for their review and advice on a previous draft of this report.

Executive Summary

There is great interest today in the inventorying of greenhouse gas (GHG) emissions by corporations — perhaps more than there has ever been for a voluntary environmental initiative. This interest is part of the general trend among corporations towards increased reporting of environmental performance. In addition, many organizations have concluded that enough is known to begin taking action now to understand, to manage, and to reduce their GHG emissions. The possibility of earning credit for taking voluntary actions to reduce emissions is also a motivating factor for many companies to conduct inventories. Conducting an inventory is a necessary first step in managing greenhouse gas emissions.

This paper provides an overview of key issues in developing greenhouse gas emissions inventories, with particular emphasis on corporate-level inventories. It illustrates the range of current activities in the field and the experience of major corporations that conduct GHG emissions inventories. Areas of general agreement, as well as unresolved issues in emissions inventorying, are described. More specifically, the paper discusses:

  • How national level emissions inventories relate to corporate and facility inventories,
  • How companies conduct their inventories,
  • Inventory accuracy,
  • How companies decide which emissions to include (drawing boundaries),
  • Baselines and metrics,
  • Challenges for corporations in conducting global inventories, and
  • Learning from similar measurement approaches.


One important issue this paper does not address is the verification of emissions inventories and emissions reductions. Verification is the subject of another paper being prepared by Arthur D. Little, Inc. for the Center.

This review of GHG emissions inventory issues is based on meetings and discussions with the Center's Business Environmental Leadership Council, a survey of selected major corporations on their greenhouse gas inventory practices, and a review of pertinent literature. It is also informed by the participation of the Center and Arthur D. Little, Inc. in a collaborative effort led by the World Resources Institute and the World Business Council for Sustainable Development to develop an internationally accepted protocol for conducting GHG emissions inventories.

The intent of this paper is not to advocate any specific methodology or approach for conducting GHG emissions inventories, nor to promote any particular policy positions. The review of the experience to date and issues surrounding GHG emissions inventories, however, suggests several general principles for developing effective GHG emissions inventory programs:

1. Start by understanding your emissions. Knowing the relative magnitude of emissions coming from various sources is necessary to understand whether or not they are material contributors to a firm's total emissions. Understanding the nature and the number of the emissions sources will facilitate the use of the inventory development guidance that is becoming available.

2. Understand the likely uses of the emissions inventory. Companies conduct GHG emissions inventories for purposes that range from internal goal-setting to external reporting to obtaining financial benefits. These different uses of the inventory information imply different levels of completeness, accuracy, and documentation in the inventory. Each organization will need to reach its own conclusion as to the cost/benefit balance of developing its inventory, depending upon its set of likely uses.

3. Decide carefully which emissions to include by establishing meaningful boundaries. Questions of which emissions to include in a firm's inventory and which are best accounted for elsewhere are among the most difficult aspects of establishing GHG emissions inventories. Since the purpose of conducting an inventory is to track emissions and emissions reductions, companies are encouraged to include emissions they are in a position to significantly control and to clearly communicate how they have drawn their boundaries.

4. Maximize flexibility. Since requirements to report or reduce greenhouse gas emissions under a future climate policy regime are uncertain, companies should prepare for a range of possibilities. By maximizing the flexibility in their emissions inventories — for example, by being able to track emissions by organizational unit, location, and type of emission or by expressing emissions in absolute terms or normalized for production — organizations will be prepared for a wide range of possible future scenarios.

5. Ensure transparency. Transparency in reporting how emissions and emissions reductions are arrived at is critical to achieving credibility with stakeholders. Unless the emissions baseline, estimation methods, emissions boundaries, and means of reducing emissions are adequately documented and explained in the inventory, stakeholders will not know how to interpret the results.

6. Encourage innovation. Now is the time to try innovative inventory approaches tailored to a company's particular circumstances. The range of experience and lessons learned will be invaluable as voluntary reporting protocols are developed or as possible regulatory requirements are established. Learning what works best — and doing it before any requirements for reporting are in place — will be as important as learning what does not work.

Christopher P. Loreti
Michael A. Isenberg
William F. Wescott
0

Press Release: Report Describes Companies' Efforts To "Inventory" Greenhouse Gas Emissions

For Immediate Release :
August 1, 2000

Contact:  Katie Mandes, 703-516-0606
              Dale Curtis, 202-777-3530

Report Describes Companies' Efforts To "Inventory" Greenhouse Gas Emissions: Voluntary Initiatives Mark First Step Toward Emissions Reductions

Washington, DC - A growing number of companies are launching voluntary efforts to measure and track their greenhouse gas emissions, raising a host of practical questions and presenting opportunities for others to learn from their experiences.

A new report released by the Pew Center on Global Climate Change describes the pioneering work being done by some of the world's leading companies to inventory and report their greenhouse gas emissions. The report, authored by a team from Arthur D. Little, Inc., presents a set of principles for such efforts; describes credible approaches being tried by more than a dozen major companies; identifies key decision points in the process; and lists information resources that are available to companies contemplating such projects.

"In the absence of a comprehensive policy regime, we must encourage voluntary efforts to identify and reduce greenhouse gases," said Eileen Claussen, President of the Pew Center. "Ensuring that such efforts are recognized in the future requires that they be well thought out and documented today. This report is a thorough guide to the choices involved in inventorying greenhouse gas emissions."

Benefits of Emissions Inventories



The trend toward increased corporate reporting of greenhouse gas (GHG) emissions is driven in part by the companies' recognition that enough is known about climate change to warrant emissions reductions in the near term. An emissions inventory is the first step in that process.

Beyond considerations of environmental concern and good corporate citizenship, companies conducting inventories can also identify ways to enhance their productivity and energy efficiency; improve relationships with key stakeholders; and support the development of flexible, market-oriented policies such as emissions trading. An accurate inventory will also put companies in a better position to count voluntary, near-term emissions reductions toward any future regulatory requirements.

Among the practical issues addressed by the report are:

  • How national-level emissions inventories influence corporate- and facility-level inventories;
  • The specifics of a dozen companies' inventory programs;
  • How companies decide which emissions to count, given complex questions of ownership, direct versus indirect emissions, and more;
  • Questions of accuracy and estimates;
  • Baselines and metrics;
  • The challenges of conducting inventories across international boundaries; and
  • Lessons learned from emissions inventories conducted under the acid rain title of the U.S. Clean Air Act and the U.S. EPA's Toxics Release Inventory program.


The report also describes the efforts of many specific companies, including American Electric Power of Columbus, OH; Air Products of Allentown, PA; Baxter International Inc. of Deerfield, IL; BP of London, England and New York, NY; DuPont of Wilmington, DE; Entergy of New Orleans, LA; ICI of London, England and Bridgewater, NJ; Niagara Mohawk of Syracuse, NY; Shell International of the London, England and Houston, TX; Suncor of Calgary, Canada; Sunoco of Philadelphia, PA; United Technologies Corp. of Hartford, CT; and Whirlpool Corp. of Benton Harbor, MI.

The report also lists 14 respected sources of information that companies may use to get started, including official government guidance, software programs, and guidebooks produced by environmental groups and business associations.

The report was authored by Christopher Loreti, William Wescott and Michael Isenberg of Arthur D. Little, Inc.

First in "Solutions" Series



The inventory report is the first in a new series aimed at identifying practical solutions to the challenges presented by climate change. Other Pew Center series focus on domestic and international policy issues, environmental impacts, and the economics of climate change.

A complete copy of this report - and information on previous reports -- is available on the Pew Center's web site, www.c2es.org.

The Pew Center was established in May 1998 by the Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is conducting studies, launching public education efforts and working with businesses to develop market-oriented solutions to reduce greenhouse gases. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs. The Pew Center includes the Business Environmental Leadership Council, which is composed of 21 major, largely Fortune 500 corporations all working with the Pew Center to address issues related to climate change. The companies do not contribute financially to the Pew Center - it is solely supported by contributions from charitable foundations.

Press Relase: Corporate and Government Leaders Focus On Global Climate Change At Washington Conference

For Immediate Release:
April 12, 2000

Contact: Kelly Sullivan, 202-289-5900
             Katie Mandes, 703-516-4146

Corporate and Government Leaders Focus On Global Climate Change At Washington Conference

Developing Country Perspectives Roundtable To Conclude The Conference

WASHINGTON, D.C. — Senior decision-makers and leaders will gather on April 25th and 26th in Washington, D.C. to participate in the "Innovative Policy Solutions to Global Climate Change" Conference. The international conference will discuss the proactive initiatives governments and the private sector are implementing in industrialized countries and key questions related to program design and implementation.

The Pew Center on Global Climate Change and the Chatham House/Royal Institute of International Affairs will host the conference at the Willard Inter-Continental Washington Hotel. Featured speakers are:

  • John Prescott, Deputy Prime Minister, United Kingdom
  • Jan Pronk, Minister of Housing, Spatial Planning and the Environment, The Netherlands
  • Robert Hill, Minister for the Environment and Heritage, Australia
  • Theodore Roosevelt, IV, Managing Director, Lehman Brothers, Inc.
  • Rodney Chase, Deputy Group Chief Executive, BP Amoco


Governments and the private sector are beginning to address the climate change challenge because they recognize that the problem and its consequences cannot be ignored. The conference will highlight the measures that are being implemented to address global climate change," said Eileen Claussen, President of the Pew Center on Global Climate Change. She will deliver the opening and closing remarks at the conference.

The conference also includes various discussion panels on the climate change problems. State and local policies to help alleviate climate change, energy and transportation policies, and competitiveness and trade effects on climate change are among the topics the international gathering will address.

The conference will conclude with a Roundtable Discussion, co-sponsored by the Pew Center and the Shell Foundation Sustainable Energy Programme. The Developing Country Perspectives on climate change discussion will be chaired by Bakary Kante of the United Nations Environment Programme and will feature Luiz Gylvan Meira Filho, Espen Ronneberg and other distinguished individuals from various developing countries. There is no fee to register for the Roundtable.

The Pew Center was established in May 1998 by the Pew Charitable Trusts, one of the nation's largest philanthropies and an influential voice in efforts to improve the quality of the U.S. environment. The Pew Center is conducting studies, launching public education efforts, promoting climate change solutions globally and working with businesses to develop marketplace solutions to reduce greenhouse gases. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.

The Pew Center includes the Business Environmental Leadership Council, which is composed of 21 major, largely Fortune 500 corporations working with the Center to address issues related to climate change. The companies do not contribute financially to the Center, which is solely supported by charitable foundations.

For more information on the Innovative Policy Solutions conference, the Developing Country Perspectives Roundtable, or on the Pew Center on Global Climate Change, please visit the Center's web site at www.c2es.org.

Getting Real on Climate

Address by Eileen Claussen, President, Pew Center on Global Climate Change

Berlin, Germany

February 3, 2000
Thank you very much. I am delighted to be here, and to take part in these very important discussions about how we can move forward to address what may be the most important global issue of the 21st century.

Whenever I appear before an international group such as this, with people from different countries who speak different languages, I am reminded of a joke I first heard long ago. We all know that if you can speak three languages, you're trilingual. And if you can speak two languages, you're bilingual. But what are you if you can speak only one language? Why, you're American, of course.

Today, I would like to speak to you as an American, but as an American who has been in close contact with others around the world on the topic of global climate change. And I would like to base my remarks on an American expression. That expression is "reality check." It means taking a moment to reflect on what is really happening in the world. And it means being truthful with ourselves and others about what we are capable of achieving. A reality check is an affirmation of yet another American expression-an expression that our mothers repeated again and again while we were young. "Honesty is the best policy," they would tell us. And, of course, there was no doubt that they were right. They were our mothers, after all.

And the reality is that honesty is the best policy when we are addressing the issue of global climate change. It was honesty about the risks of a changing climate that brought 150 nations together to negotiate a framework for reducing greenhouse gas emissions around the world. In the same way, today we all need to be honest about what we can achieve and when-and about how best to move forward so that future generations don't look back and wonder why we couldn't work together to meet this global challenge.

In the time that I have with you tonight, I want to talk about some of the issues that the United States, Germany and other nations need to be more honest about in order to achieve real progress in addressing the challenge of climate change. I also would like to offer a realistic view of what is happening on this issue in the United States-in both the public and private sectors, as well as among the media and the general public. And I will close with some recommendations about how to move the global dialogue on this issue forward and achieve real progress.

Getting Real: What We Can Achieve

So let us begin with a few reality checks. From my perspective, there are three issues that our governments need to be more honest about as the world addresses the challenge of climate change in the months and years ahead. The first is the timeframe in which the world can achieve entry into force of the Kyoto Protocol. The German government-which, to its infinite credit, has been out front on this issue for years-is urging entry into force in 2002. Although this is surely an admirable goal, the honest truth is that it is unlikely to happen.

While it is certainly true that many European countries are anxious and willing to ratify the Protocol in the near term, some of them-such as the Netherlands-have said that the United States must ratify at the same time. Ratification by non-European countries such as Japan, Canada and Australia also is unlikely without U.S. action on this issue. And here is the reality check: Given the current mood and political situation in Washington, U.S. ratification of the Kyoto Protocol-in the near term at least-is about as likely as hell freezing over. And if hell did freeze over, I am certain that many in the U.S. Congress would make every effort to attribute it to nothing more than normal climatic variations.

Another reason why entry into force in 2002 is unlikely is the sheer volume of work that remains to be done. We should not diminish the complexity or the importance of establishing environmentally effective, private sector-friendly rules for the Kyoto mechanisms; or of determining how to handle the sequestration of carbon in trees or soils; or of establishing a compliance regime that is both meaningful and fair. It is absolutely essential that these issues be addressed in an honest and an effective way. The system we create is likely to be in place for many, many years. Completing all of these jobs this year to give countries the time that would be required for entry into force in 2002 is both unrealistic and unlikely.

The second thing that our governments need to be realistic and honest about is the ability to meet the targets in the Kyoto Protocol if entry into force comes later in this decade. Reality check number two, therefore, is this: For the United States at least, meeting the targets in the existing timeframe will be impossible.

Even if we saw a profound shift in Washington on this issue in the next one or two years, the United States will not be able to achieve the Kyoto targets as they are currently drawn for the simple reason that administrative process in our county can be enormously time-consuming. For the Kyoto Protocol to become U.S. law, the Senate would have to grant its advice and consent; both Houses of Congress would have to pass implementing legislation that would then have to be signed by the President; and a designated Agency would have to draft rules and regulations that would have to go through formal notice and comment procedures before they could be finalized and then implemented.

Given that such legislation and regulation would clearly result in regional and sectoral economic impacts, the odds of all this activity occurring by 2008 are very small indeed.

Lest you think that my doubts are reserved to my own country, I firmly believe that the United States will not be alone in its inability to move fast enough to meet the Kyoto targets. Surely, there is much effort on this issue in Europe and elsewhere, but even in the countries that have fully embraced the importance of reducing emissions, it is not a given that the targets can be met, particularly with current programs. And I would venture to say that the likelihood that these targets will be met will decrease as people and governments become convinced that the United States will not be able to meet its targets.

This brings up the third issue that we all must be realistic and honest about, which is the serious engagement of the developing world. The reality, whether we like it or not, is that most developing countries are unlikely to agree to binding emission reduction targets that would take effect in this decade. This is based in part on their fear that emission limitations would place unacceptable constraints on their economic development. It is also based on their view that, even among environmental issues, climate change is less of a priority than such things as reducing local air and water pollution.

But the developing world's opposition to targets cannot be allowed to hide the fact there is movement on this issue among these countries. For example:

Privatization of the electricity sector is moving forward in India, where competition is expected to increase the use of natural gas and lower greenhouse gas emissions.

Korea is beginning to plan for opening up its power sector to competition, again with a projected increase in the use of natural gas.

And China, which has dramatically lowered its energy consumption per unit of output over the last decade, is on a path to continue making significant energy-saving improvements over the decade to come.

In these and other developing nations, investment decisions made in the power and transportation sectors in the coming years will have a significant impact on global greenhouse emissions for decades to come. And the reality is that many opportunities exist for lowering these countries' emissions from a business-as-usual trajectory. In other words, binding commitments for these countries may not be possible, but significant action to lower emissions from their expected path may very well be. Indeed, this is already happening in some countries.

So there they are-three issues that the governments of the United States, Germany and other nations need to get real about in order to push this discussion forward. The timeframe for entry into force. Whether the existing Kyoto targets can be met. And the serious engagement of the developing world. If we follow our mothers' advice and are honest with one another about these issues, I believe we will go a long way to ushering in the next phase in the global effort to meet the challenge of climate change-a phase that will move us from rhetoric to reality and from discussion to action.

The View from the U.S.

Just as it is important to understand what is truly happening on this issue in developing countries, I believe it is also critical that everyone clearly understand the current situation in the United States. While there is still bickering within and outside the U.S. government about: 1) whether climate change is even real; and 2) what the United States should do about it and when, the reality is that the American news media is devoting more attention than ever before to the topic of climate change, the American people accept that it is something that demands our government's attention, and American businesses are moving ahead on their own in the absence of government action.

Let me talk briefly about the news media first, because I believe this is a very important development. Based in part on the growing consensus among scientists that global climate change is real-and in part as well on the fact that 1997, 1998 and 1999 were the three hottest years on record-the U.S. news media has devoted increasing attention to this issue over the last year or two.

In a television news report just last month, CBS correspondent Jim Axelrod reviewed some of the likely effects of global climate change-including rising sea levels and shifts in water resources. He also made note of a likely increase in global temperatures that he suggested, rightly or wrongly, was already evident in the early January hot spell that hit much of the country and had residents of Washington, DC, jogging in shorts and t-shirts. The correspondent concluded his report with this observation:

"Such thoughts used to be called "doom and gloom" by many. Now, however, a growing number of scientists are hearing the critics, looking at the data, and saying it's a forecast that can't be ignored."

The U.S. television networks are not alone in drawing fresh attention to the risks of global climate change. The Washington Post, in a January editorial entitled "Warming to Reality," issued its own warning that-quote-"reckless inaction in the face of global warming is the costliest of all options." And, in the American news media's turn-of-the-century rush to identify the critical issues of the new millennium, global climate change was always front and center.

No doubt in response to the news media's increasing attention to this issue, the American public is more willing than ever to accept that global climate change poses a real threat and that action is needed to avert a crisis.

A September 1998 survey conducted for the World Wildlife Fund revealed that nearly 60 percent of Americans believe global warming is happening now, and another 26 percent believe it will happen in the future. According to the survey, fully three-quarters of Americans want the United States to take action to reduce emissions of carbon dioxide as a way to address the problem.

In an effort to determine whether these opinions carry over into the realm of national decisionmakers and opinion leaders who influence U.S. policy, the Pew Center did its own survey in March 1999. We conducted nearly 450 interviews with staff members in Congress, industry association leaders, corporate decisionmakers in the affected industries, media representatives, economists, scientists and policy experts across the country-in short, a fairly comprehensive sample of the wide assortment of quote-unquote "elites" who are in a position to influence U.S. action-or inaction-on this topic.

What did we find? Well, to our surprise, we found that these elites are even more likely than the general public to believe that global warming is happening now. We also found broad support among elites for U.S. action to reduce carbon dioxide emissions. Even the Kyoto Protocol-the target of often-harsh criticism from many in Congress--attracted strong bipartisan support. More than one-third said the agreement actually would help our economy and create new jobs because we would develop new technologies that would help reduce our greenhouse emissions.

Business Accepts the Challenge

The belief that progress on this issue can be compatible with sustained economic growth in the United States-and may even contribute to that growth-is one reason there is increasing acceptance among U.S. businesses of the need for strong action to reduce emissions.

In late 1999, as many of you may know, the Ford Motor Company announced it was resigning from a coalition of oil companies, auto makers, electric utilities and others who stubbornly argue that we still don't have enough evidence to know whether or not global warming is real-and that we shouldn't do anything serious about it until more is known. Word of Ford's decision was followed closely by the news that Daimler Chrysler also would be leaving the group known as the Global Climate Coalition. The companies' moves were seen as an indication of the growing acceptance of the reality and the urgency of this issue-even in the nation's corporate boardrooms-and as yet another sign of a growing consensus for rational action to reduce U.S. greenhouse gas emissions.

But the fact is that many American businesses have long been way ahead of the U.S. government-and even ahead of the media and the general public-in their willingness to acknowledge and work on the issue of global climate change. This progressive stance became obvious when a large group of mostly Fortune 500 companies became affiliated with my organization, the Pew Center on Global Climate Change, to help forge a consensus response to the problem.

The Pew Center's Business Environmental Leadership Council now includes 21 companies with combined annual revenues of more than $550 billion. Working together, these companies developed a joint statement asserting that in the new millennium-quote-"one of our most important challenges at home and abroad will be addressing global climate change as we work to sustain a growing global economy."

"One of our most important challenges." That is an enormously powerful statement coming from these companies, which include such household names as American Electric Power, Boeing, BP Amoco, Lockheed Martin, Shell International, Toyota, Enron, United Technologies and Whirlpool. And, in making this statement, these companies announced publicly that they:

1) Accepted that there was enough known about the science of global climate change to warrant action;

2) Would establish their own emission reduction targets--and meet them;

3) Viewed the Kyoto Treaty as a first although incomplete step to addressing the issue internationally; and

4) Believed that addressing climate change can be compatible with sustained economic growth in the United States.

Some of the member companies of our Business Environmental Leadership Council already have announced their emission reduction targets, all of which are at least as stringent as those in the Kyoto Protocol. One large company affiliated with the Pew Center, DuPont, has established a goal of reducing emissions to 65-percent below 1990 levels by 2010, with an additional commitment of obtaining 10 percent of its energy needs from renewable sources. This is a stunning target, far in excess of the 7-percent reduction required for the United States as a whole in the Kyoto Protocol.

The commitment of DuPont and these other companies is an important reminder that there are many steps industry can and should be taking now to reduce greenhouse gas emissions. Unfortunately, however, the fact that these forward-thinking companies are acting of their own volition and without a clear sense that their actions will be rewarded in the marketplace is a reminder of something else. And that something else is the lack of leadership the U.S. government has taken on this issue, particularly at home, where a government framework for reducing U.S. emissions is sorely needed.

The U.S. Government: A Lack of Leadership

The U.S. government's lack of leadership is especially unfortunate because the United States is the largest emitter of greenhouse gases in the world--responsible for 25 percent of global emissions in a nation that comprises less than 5 percent of the global population. If leadership on this issue should come from anywhere, it should come from the United States.

But leadership is not coming from the United States. It is rare both in Washington and on the presidential campaign trail for the discussion of this issue to get past the question of whether to support the Kyoto Protocol or whether to declare it dead. What the discussion has not touched on-and should-is the further development and implementation of programs that would change the expected trajectory of our nation's greenhouse gas emissions. The U.S. Congress, in particular, appears determined to let absolutely nothing happen that would even remotely suggest that the United States is concerned about this issue. Virtually every budget item that deals with emission reductions is viewed by many in Congress as a quote-unquote "backdoor" attempt to implement the Kyoto Protocol and is therefore voted down or pushed aside.

What, you may ask, is driving the U.S. government's reluctance to deal with this issue in a serious way? I would like to suggest that there are two issues at the heart of the debate. And, while these issues are significant, my belief is that they have not been framed in ways that are honest or open to solution. The first issue relates to the economic costs of action to reduce emissions; the second centers on developing country participation. In my view, these are the chief stumbling blocks to serious action on this issue in the United States. Only by confronting them head-on will we be able to mount an effective response to the challenge of global climate change-both in the United States and throughout the world.

So let me begin with the economics. There is a popular joke in the United States that says economists have predicted nine of the last five U.S. recessions. And it is hard to argue with the premise of the joke when one looks at the varying predictions that have been made about the potential impacts of achieving the Kyoto targets on the U.S. economy. Interest groups across the ideological spectrum have produced markedly different results from economic models that are often not that different in their structure but that use very different assumptions to achieve the results these groups want to achieve. And the only result that is truly achieved is confusion.

How do we get beyond this confusion? We get beyond it by admitting that the models we are using-even when stripped of assumptions that bear no resemblance to reality-are not infallible. The complexity and time frame of the climate change problem stretches the capabilities of even the most sophisticated economic models on the benefits side. And the ability of models to quantify the value of reducing the risks of climate change is still in its infancy. On the cost side, models are still confronted with a series of challenges, the most important of which is anticipating the pace and direction of technological progress. As far as I know, no economic model would have predicted the information technology or communications revolutions that we are now witnessing. Nor have any models anticipated the decoupling of economic growth and carbon emissions that has occurred in the United States in recent years.

I am not mentioning these things to suggest there will be no costs to the United States should it act decisively to reduce emissions. There is almost always a cost associated with major changes to the economy. What I would like to suggest is that a fixation with 10 or 20-year-out predictions of increases or decreases in the U.S. GDP really misses the mark. To argue, as some have done, that the costs will be catastrophic and that entire industrial sectors will immediately be wiped out is as dishonest as the assertion that the economy can effortlessly achieve major emission reductions at no cost. What the United States should be concerned about are the impacts that are likely to occur in certain industries, certain labor categories, and certain regions of the country. The question is how these impacts can be minimized over time--and with careful transitional planning.

The second issue that has become a roadblock to progress in the United States is that of developing country commitments. I call this the "fairness issue." Is it fair, people ask, for the United States to have to abide by the Kyoto targets while competitors such as China, India and Mexico get a quote-unquote "free ride?" One fear is that American jobs will be lost to these and other countries because their production costs will be lower. But lost in the debate is the reality that fairness demands a decisive U.S. response for two reasons. First, because the United States is responsible, both historically and currently, for more emissions than anyone else. And second, because the United States has the ability to pay the costs of reducing our emissions.

Also lost in the debate about global climate change in the United States-and this may be even more important-is the question of what the problem actually is, and how it can most effectively be addressed. As I suggested earlier, emissions in developing countries will grow as these nations industrialize, and the infrastructure that will support this growth--for power generation and transportation, in particular--will set in place the global emissions trajectory for decades to come. So the real issue is not how to pressure these countries into accepting binding emission reduction targets in this decade. Rather, the issue should be how to influence the character of this infrastructure investment so that it becomes more climate friendly. We should look to our export credit agencies and to private investors for the tools to accomplish these objectives.

Moving Forward

So what is the world to do? We have all these difficult issues on the table, and yet we all understand-or at least most of us do-that we need to start acting to address this global challenge as soon as possible. I already have laid out some of the steps I believe need to be taken in order for this discussion to move forward and in order for Germany, the United States and other nations to move from discussion to action. These include being honest about the Kyoto targets and timetables even while working to complete the Kyoto framework; devoting more attention to encouraging progress on this issue in the developing world; and fostering discussion in the United States and elsewhere of some of the fairness and economic issues that must be resolved in order to build support for strong and decisive action.

But what about the Kyoto Protocol itself? I would not be honest if I didn't tell you there are many voices in the United States that have proclaimed that Kyoto is dead-some of them with the same satisfaction as the characters in the American movie "The Wizard of Oz" who dance and sing to celebrate the demise of the wicked old witch. But I believe it is important for all of us to remember that while some of those who have said Kyoto is dead come from industries that would be negatively affected by any regime to control greenhouse gases, others have much less, if anything, at stake. At issue for these critics are the complexity of the Kyoto framework, and the stringency of its targets and timetables.

Of course, the reality about the fate of the Kyoto Protocol is that it is unlikely to be cast aside even if it does not deliver on its first set of emission reduction targets. But at the same time, we all must accept that Kyoto remains a work in progress.

This leads me to one final reality check: Making the Kyoto Protocol into an agreement that can deliver on the promise of reducing the risk of global climate change will, in all likelihood, take longer than from now until the meeting this November in The Hague. The delegates should do what they can at that meeting, but they cannot and should not expect that all of these issues will be resolved. And, just because it takes longer than everyone hoped does not mean the Kyoto framework is not valuable and ultimately viable. In fact, I believe that structuring the framework more definitively into one that has realistic timetables and targets and is environmentally effective, economically sound, and-yes-fair will go a long way to improving its chances of success, whether we have agreement this year, next year or the year after that.

In the meantime, I am not suggesting that the governments of the world stand around and wait for a better document on which to base their work on this issue. The reality is that the United States and other governments should be implementing substantive programs now that seriously respond to the overall Convention goal of stabilizing atmospheric concentrations of greenhouse gases at levels that will prevent dangerous interference with the climate system. And it is heartening to see the initiatives that have been taken by Germany since the negotiation of the Kyoto Protocol.

A priority for the United States, I believe, should be to design a straightforward system that will recognize and give credit to corporations that want to take early action to reduce greenhouse gas emissions. Put very simply, these companies need to know that reducing their emissions now won't put them at a competitive disadvantage down the line.

In addition to addressing the early action issue, the United States must start planning seriously for how it will reduce greenhouse gas emissions over the long haul. I cannot state more emphatically that what is most important now is the trying. In the United States, in Germany, and throughout the world, we need to experiment with different approaches to reducing greenhouse gas emissions-for example, by testing both national and company-specific emissions-trading regimes, or by imposing carbon taxes. We need to establish clear procedures for inventorying and verifying emission reductions, something that many in the private sector are already working on. And we must begin to build the capabilities and the institutions we will need when a full-fledged international regime does come into effect.

These will not be easy or painless goals to achieve, but the reality is that we need to achieve them. There is no escaping our responsibility to address the challenge of global climate change in an effective and, of course, an honest way. We all have a higher authority to answer to on this issue. That's right, our mothers. And we all need to work together to make them proud.

Thank you very much.

Download Transcript (in PDF format)

Syndicate content