An Overview of Greenhouse Gas Emissions Verification Issues

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An Overview of Greenhouse Gas Emissions Verification Issues

Prepared for the Pew Center on Global Climate Change
October 2001

Christopher P. Loreti, Scot A. Foster, and Jane E. Obbagy
Arthur D. Little, Inc., Cambridge, Massachusetts

Press Release

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Foreword Eileen Claussen, President, Pew Center on Global Climate Change

The need for information on how to count, track, and verify greenhouse gas emissions has never been greater. Many of the world’s nations are working toward international, national, and subnational regimes for reducing emissions. These efforts have been accompanied by a growing number of corporate targets to reduce greenhouse gas emissions, as well as the emergence of a greenhouse gas trading market. To ensure that the numbers on which governments determine compliance, and on which companies stake their finances and reputations, are real, greenhouse gas emissions verification is critical.

In this Pew Center report, authors Christopher Loreti, Scot Foster, and Jane Obbagy of Arthur D. Little, Inc. describe the evolving approaches to corporate greenhouse gas emissions verification. They identify factors that drive verification activities and suggest a number of principles that organizations should consider when verifying greenhouse gas emissions, with an eye toward the experiences of the firms, governments, and non-governmental organizations that have been involved in verification activities.

This report builds on An Overview of Greenhouse Gas Emissions Inventory Issues which the Pew Center released last year, and which offered a set of principles for conducting greenhouse gas inventories. Both of these reports are part of the Solutions series, which is aimed at providing individuals and organizations with tools to evaluate and reduce their contributions to climate change.

The authors and the Pew Center would like to thank the companies featured in this report for sharing their experiences and perspectives, and acknowledge the members of the Center’s Business Environmental Leadership Council, as well as Jean-Bernard Carrasco of the Australian Greenhouse Office, Nick Hughes of BP, and Janet Ranganathan of the World Resources Institute for their review and advice on a previous draft of this report.

Executive Summary

The growing number of companies that inventory greenhouse gas (GHG) emissions, implement emissions reductions projects and targets, and trade GHG emissions reductions has generated increasing interest in emissions verification. Stakeholders in the corporate, governmental, and non-governmental sectors recognize the need for complete, credible, and accurate information about GHG emissions and emissions reductions. To address this issue, some government bodies have developed standards for verifying GHG emissions for specific programs. More general approaches to verifying emissions are just beginning to evolve, however, as uniform approaches to inventorying and reporting GHG emissions are not yet fully established.

This paper describes the evolving approaches to corporate GHG emissions verification. The authors discuss the experiences of leading firms that inventory and verify GHG emissions, the approaches to verification embodied in various GHG programs sponsored by governments and non-governmental organizations, and the factors that drive verification. They also review general verification issues, including who should verify, what should be verified, and when verification should occur.

This paper builds on an earlier publication of the Pew Center on Global Climate Change, An Overview of Greenhouse Gas Emissions Inventory Issues (Loreti et al., 2000). Much of the content is the result of discussions with the Pew Center’s Business Environmental Leadership Council, a survey of leading corporations on approaches to GHG emissions verification, a review of the current literature on corporate GHG emissions verification, discussions with representatives from governmental and non-governmental organizations involved in GHG emissions issues, and prior experience of Arthur D. Little, Inc. in environmental auditing and GHG verification.

Just as there are multiple purposes and methods for performing emissions inventories, there are a variety of reasons for verifying emissions inventories and a range of approaches to verification. However, the authors’ review of the work to date on GHG emissions verification suggests several principles for any firm that conducts a GHG emissions inventory:

  1. Conduct your inventory as if it is going to be verified, regardless of whether your organization is planning to verify it. Rigorous reporting, emissions estimation, and data management systems will facilitate any future verification. Indeed, these systems will make it possible to conduct third-party verification of today’s emissions in the future should it become necessary, for example, to establish a baseline or obtain credit for early emissions reductions.

  2. Be clear on the purpose of verification. Verification can be conducted for many reasons and the results of verification performed for one purpose may not be applicable to another. Be sure that all stakeholders who rely on the verification result will be satisfied with the scope and methods of the verification.

 3. Choose your verifiers carefully. Be sure the individuals conducting the verification understand your organization, its type of business, and its emissions. The verifiers’ knowledge and experience are more important than the type of organization they are from. If the verification is performed as part of an established GHG reporting or reduction program, be sure the verifiers you choose have the qualifications that that program requires.

 4. Learn from your verification experience. Organizations will maximize the value of the verification if they use it to improve their inventory process, improve the reliability of reported information, and facilitate future verification. When hiring third-party verifiers, be sure that they provide specific recommendations for improving your organization’s GHG inventory.

About the Author

Christopher P. Loreti
Arthur D. Little, Inc., Cambridge, MA

Christopher P. Loreti is a Senior Manager in the Global Environment and Risk practice of Arthur D. Little, Inc., and the author of two Center reports, An Overview of Greenhouse Gas Emissions Inventory Issues, and An Overview of Greenhouse Gas Emissions Verification Issues. Since joining Arthur D. Little in 1985, his work has focused on the assessment of the release, fate, and transport of pollutants in the environment. He has conducted numerous air pollutant emission inventories for conventional and toxic air pollutants and greenhouse gases. He has co-authored reports examining trends in Canadian emissions of selected greenhouse gases and technologies to reduce these emissions, economic instruments for reducing U.S. emissions of carbon dioxide, and the potential for electric vehicles to reduce emissions of greenhouse gases and conventional air pollutants in Hong Kong. Mr. Loreti holds an M.S. in Technology and Human Affairs from the Department of Engineering and Policy at Washington University and B.S. degrees in Chemical Engineering and Environmental Engineering from Northwestern University.

Christopher P. Loreti
Jane E. Obbagy
Scot A. Foster

Climate Change: A Strategy for the Future

Climate Change: A Strategy for the Future

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

Honors Colloquium on a Just and Sustainable Future
University of Rhode Island

September 25, 2001

I am very happy to have the opportunity to address this honors colloquium, and I want to pay tribute to the faculty, staff, and students here at the University of Rhode Island's Sustainable Communities Initiative for trying to come to terms with a very serious question-and that is, how do we create a just and sustainable future?

This, of course, is an extraordinary time, and a just and sustainable future may seem very far away as we ponder the horrific events of two weeks past. Usually, when I give a speech, I try to begin with some humor, and I do this because I think it is important that we not take ourselves, or our specific issues and interests, too seriously. But I think the events of September 11th have cast an enormous shadow over all of us-and, with it, a sadness and a seriousness of purpose that we cannot escape. And so I ask you, for the next short while at least, and for longer if you can, to be thoughtful about the issue of climate change, because it, too, requires us to be serious and reflective and determined about what we need to do to make the world a safer place.

In talking about climate change today, I want to touch first on the science - and, more specifically, on the ever-solidifying scientific consensus that this is a very serious problem that demands very serious action. I'd like to talk broadly about the challenge we face, and the ways in which many in the business community are rising to that challenge. I'll turn then to the essential role of government - both internationally and here in the United States. And, finally, I will suggest how we might forge a common path forward that is sustainable, just, and fair to all.

Our goal must be to facilitate the arrival of a second industrial revolution. And this means doing all we can to accelerate the development of new technologies that will move us closer to a low-carbon world economy.

The Science of Climate Change: A Few Observations

Let us focus first on the science of climate change. The Intergovernmental Panel on Climate Change (or IPCC) is a body created by the United Nations to reach scientific consensus about the magnitude and nature of the climate problem. In its "Third Assessment Report," approved in January of this year, the IPCC said it now expects the global average surface temperature to rise by between 2.5 and 10 degrees Fahrenheit over the course of the 21st century. This is a much greater increase than projected just five years ago. Even at the low end of the projection, the warming trend is expected to cause significant problems-more sea level rise, droughts and floods; increasingly violent storms; damage to our ecosystems; effects on the availability of water; and impacts on our forests and agriculture. And the higher-end projections of 10 degrees or more could prove catastrophic. Studies from the IPCC and others also confirm that greenhouse gases produced by human activities, mainly the burning of fossil fuels, are the principal cause of the continuing warming trend.

These findings were confirmed in June by a panel of the National Academy of Sciences, put together at the request of President Bush, and including some scientists who had previously expressed skepticism about the nature and pace of global climate change. The NAS report also affirms that temperatures at the Earth's surface already are rising and that the warming trend has intensified in the last 20 years.

What will be the impact of climate change here in Rhode Island? While it is hard to pinpoint impacts on a state-by-state basis, it is fair to say that Rhode Islanders-and, indeed, all New Englanders-will see temperatures rise, along with significant increases in precipitation. Fragile coastal ecosystems could be at risk as global sea levels rise, barrier reef islands are inundated, and we see an increase in the frequency and severity of storms-as scientists expect we will. Sea-level rise also could lead to flooding of low-lying property, loss of coastal wetlands, erosion of beaches, saltwater contamination of drinking water, and damage to low-lying roads, causeways, and bridges. Agricultural production will surely be affected both here and elsewhere because of warmer temperatures, less soil moisture, and other climate change-related problems. And the possibility of health problems, including increases in heat-related illnesses, cannot be discounted.

The bottom line is that if we need a reason to act on this issue, the latest science certainly provides one. The fact that there is uncertainty about exactly how much temperatures will rise or what the precise effects will be should be expected. Both the IPCC and the NAS have identified a number of critical research challenges that need to be addressed in the coming years. But, increasingly, the science tells us we would be irresponsible not to take the threat of climate change very seriously.

A Second Industrial Revolution

How, then, do we address this threat? How do we avert the many risks that the scientific community is warning us about? Quite obviously, we must reduce our emissions of the greenhouse gases that are contributing to climate change. And to do that, we must launch a new industrial revolution.

This will be a revolution characterized more than anything else by a growing reliance on low-carbon and even no-carbon energy sources to power the world's continuing economic development and growth. We must embrace the possibility of "decarbonizing" our economies. At the same time, we must also be realistic about what can be done and in what time frame. Before you start to think of me as a latter-day Pangloss, let me assure you that I am fully aware that all countries will continue to use petroleum and coal for many years to come. The challenge with respect to these traditional fuel sources will be to promote ever-increasing levels of efficiency in their transmission and use at the same time as we are working to develop and deploy cleaner energy sources for the future. Coal currently accounts for 24 percent of the United States' total primary energy supply-and a remarkable 57 percent of China's. Even if these numbers edge downward-as they are already doing with the introduction of increasing numbers of natural gas-fired power plants-the predominance of coal in the worldwide energy mix means we need to find and embrace cleaner-burning ways of using it. And we need to think seriously about sequestering coal-related carbon dioxide emissions.

But these types of steps clearly will not be enough. The bottom line is that we need new technologies to meet the energy and environmental challenges we face. To effectively address climate change, we need to lower carbon intensity (that is, the amount of carbon we emit per unit of GDP); we need to become more energy efficient, so that we use less energy to achieve the same results; we need to promote carbon sequestration, so that the carbon we do emit does not enter the atmosphere and affect the climate; and we must find ways to limit emissions of non-CO2 greenhouse gases. This will require fundamentally new technologies, as well as dramatic improvements in existing ones. New, less carbon-intensive ways of producing, distributing, and using energy will be essential. The redesign of industrial processes, consumer products, and agricultural technologies and practices will also be critical.

These changes need not take place overnight. They can be introduced over decades as we turn over our existing capital stocks and establish new infrastructure. But we must begin making the investments needed to usher in this new industrial revolution, and we must begin making those investments now.

Industry Takes the Lead

Many businesses, in fact, already are taking important steps to address climate change. About half of the 36 companies that are part of the Pew Center's Business Environmental Leadership Council have set specific, quantitative targets to reduce their greenhouse gas emissions, and others are working toward establishing these objectives. Consider DuPont, a corporation that is well on its way to achieving its goal of reducing greenhouse gas emissions by 65 percent before 2010, relative to 1990 levels. Or Baxter International, which is committed to improving its energy efficiency by 30 percent below 1996 levels by 2005. Or IBM, which has committed to having 90 to 100 percent of its new model computers meet Energy Star criteria for energy efficiency.

Other companies, too, are making process and efficiency improvements that are yielding real reductions in emissions. The energy company Enron, for example, reduced its greenhouse gas emissions by controlling leaks in its natural gas pipelines. And TransAlta Corporation improved its energy efficiency by about 4 percent when it upgraded old, less efficient turbines and other systems.

In addition to these types of steps, some companies are investing in dramatic changes to their production processes. Alcoa, for example, is developing a new technology for smelting aluminum that, if successful, will allow the company to reduce its greenhouse gas emissions to half their 1990 levels over the next nine years. Similarly, Shell aims to achieve its greenhouse gas reduction target by revamping its disposal of the waste gases resulting from oil and gas production, even as it puts increasing emphasis on renewable energy sources.

The States are Moving

We are also beginning to see real movement on this issue from a number of states. On August 28th of this year, the New England Governors and Eastern Canadian premiers approved a comprehensive Climate Change Action Plan at their annual meeting. This plan includes goals of returning the levels of greenhouse gas emissions to 1990 levels by 2010, reducing them to 10% below that level by 2020, and putting in place a process to review, adjust and add new goals.

The state of New Jersey is hoping to reduce its levels of greenhouse gases by 3.5% from 1990 levels by 2005. The state of Oregon has put in place carbon dioxide standards for new power plants. The state of Massachusetts is regulating its highest emitting power plants, and expects to see significant reductions in emissions by 2008. And many others are experimenting and beginning to implement different approaches to addressing the climate change issue.

The Role of Federal Government Action

All of these are important developments-and they show how increasing numbers of leading companies and states see a clear interest both in reducing their emissions and in helping to shape the energy economy of the future. But voluntary actions undertaken on a largely random basis by some members of the business community or by a small handful of states are not enough. In the United States, we have had voluntary efforts in place for much of the past decade, and still we have seen a dramatic rise in emissions - almost 12 percent over 1990 levels.

In the end, there is little incentive for any company or state to undertake real action unless, ultimately, all do-and unless all are in some manner held accountable. Markets, of course, will be instrumental in mobilizing the necessary resources and know-how. Market-based strategies such as emissions trading will also help deliver emissions reductions at the lowest possible cost. But markets can move us in the right direction only if they are given the right signals. It is our national government's job to send the right signals.

Government can and must play a critical role in establishing the ground rules for the energy economy of the future. Because this is a global problem that must eventually be solved globally, it means sending global signals and establishing mandatory global frameworks for action, because each country must be assured that others will act too. And it means, in turn, the adoption of mandatory programs on a country-by-country basis. What truly matters, of course, is what individual countries and individual businesses do to reduce their individual contributions to this problem. And there is no substitute for actually requiring countries and businesses to reduce emissions, because it is in the process of trying to meet clear objectives that innovation will flourish.

The Significance of the "Kyoto Compromise"

Is government rising to the challenge? Looking first to the international arena, we see that the world community-minus one very important player-has at long last agreed on a set of first steps to address climate change.

As all of you know, over the summer in Bonn, Germany, 178 nations reached a tentative compromise on the rules that will allow the Kyoto Protocol to enter into force. The Kyoto Protocol, of course is the agreement first negotiated in 1997 that requires developed countries to reduce or limit their emissions of greenhouse in relation to 1990 levels, with different countries agreeing to different targets.

In addition to establishing targets, the Kyoto Protocol outlines how countries can achieve them-for example, by making emission reductions at home, by trading emission credits with others, and by using "sinks" such as farms and forests to remove carbon from the atmosphere. Although many of the details on how these mechanisms will work still need to be decided, the compromise reached in Bonn will likely provide countries with a high degree of flexibility in how they use these various strategies. And this, I believe, is a very important and positive development, because it will permit countries and businesses to meet their objectives in the most cost-effective ways.

But the Kyoto Protocol is just a first step on what will be a long march to a less carbon-intensive world. Its initial targets for emission reductions take us only to the 2008-2012 period, and they represent just a very small down payment on the level of reductions that scientists say we must achieve in order to have a real effect on mitigating climate change.

It is also important to note that the ultimate impact of the Kyoto Protocol will be severely limited by the United States government's decision not to be a party to the agreement. The Bush Administration has said repeatedly that it believes Kyoto is fatally flawed and not acceptable to the United States. Granted, the Protocol does have its problems-it is, after all, an agreement of approximately 180 countries with differing aspirations, differing economies, and differing views of the environment. But I believe that the other nations of the world, in agreeing to a compromise solution in Bonn, decided to send a message to the United States that an imperfect agreement is better than none-and that we cannot wait any longer to begin working together to solve the most important environmental issue facing the world today.

The Kyoto compromise very clearly does not amount to a solution to the problem of climate change. Rather, it is a first, strong statement of purpose and will to deal with this problem. And, therefore, it is an essential and historic step.

Launching Domestic Efforts in the U.S.

And what of the United States? Interestingly, in the same way that the Bush Administration's rejection of Kyoto seems to have galvanized international support for the Protocol, it appears to have generated new momentum on Capitol Hill to finally begin tackling the challenge of climate change. It is too early to know how the tragic events of September 11 will affect this and so many other vital issues in the months ahead. But prior to those events, there were strong indications that Congress was more prepared than ever to begin building the programs needed to reduce greenhouse gas emissions here in the United States.

It is important to note that this new support comes from both sides of the aisle. Perhaps the biggest sign of a "changing climate" in Congress is legislation introduced by Senator Robert Byrd of coal-producing West Virginia and Senator Ted Stevens of oil-producing Alaska. In addition to providing money for technology research, the Senators' bill would require the President to develop a climate change strategy aimed at stabilizing greenhouse gas concentrations in the atmosphere. Senators John McCain and Joseph Lieberman - another bipartisan team - are going even further. They have announced that they plan to introduce major legislation to require greenhouse gas reductions throughout the economy under an emissions trading system - a proven way to cut emissions cost-effectively, and one that we strongly support.

What are some of the other key elements of a serious domestic program? We need, first and foremost, an energy policy that is climate-friendly. We need policies to deal with energy-using products, such as automobiles and appliances, so that they use fuel more efficiently and are compatible with different, non-fossil fuels. And we need a technology policy that will speed our development and diffusion of new technologies.

None of this will happen overnight. But there is good reason to believe that as we approach the mid-term congressional elections next year, and the presidential election in 2004, the prospects will grow only stronger. And as the United States begins to demonstrate real effort to curb its own emissions, it can credibly reenter the international dialogue and work more closely with other nations to chart a common path forward.

Which leads me to the "strategy for the future" that is mentioned in the title of my remarks. The strategy, in my view, is to insure that the Kyoto Protocol stays on the road to ratification and entry into force, while the United States begins to pursue good-faith domestic efforts to reduce its greenhouse gas emissions. To the extent that U.S. efforts are compatible with the Kyoto framework-and I hope they will be compatible-then the world can still hold out hope that the two roads will eventually merge, yielding a truly global plan of action.

Resolving the Equity Issue

Achieving that global strategy, however, will mean coming to terms with an issue that has loomed over the climate debate from the start, but has yet to be faced head-on - and that is the issue of fairness. For as the title of your colloquium, "A Just and Sustainable Future," rightly suggests, this is not about sustainability alone, but justice as well. Indeed, it is hard to imagine a future that is truly sustainable unless it is also fair and just.

From Rio in 1992 through Kyoto in 1997 and up to the most recent round of negotiations in Bonn, the international climate talks have proceeded on the basis of a common understanding: developed countries must act first. This bargain of sorts - which obligates one group of countries to act with the understanding that the other group will follow - acknowledges the fundamental inequities presented by climate change. It is an undeniable fact that developed countries account for the vast majority of the greenhouse gases put in the atmosphere over the past century, and that their per capita emissions are many times those of developing countries. (The United States, for example, contributed nearly a third of worldwide emissions last century and continues to produce roughly a quarter of global emissions with only 4 percent of the world's population.)

But historic responsibility for climate change is just one piece of the equity equation. It is also undeniable that those least responsible, the developing countries, face a disproportionate share of the impacts of global warming - from flooding to disease to famine - while having fewer resources with which to cope.

So while many in the United States, including President Bush, fault Kyoto for letting developing countries off the hook, I believe it is only fair that the developed countries act first. But I also believe that, in time, the developing countries must act too. Indeed, the emission reduction efforts finally getting underway in the industrial world will be pointless unless developing countries agree in some way to restrain the rapid rise in their own emissions.

It is important to recognize the steps already being taken by developing countries. Measures such as market reforms and energy efficiency improvements, while more often motivated by concerns other than climate change, are, in fact, resulting in significant emissions savings. China, for example, cut carbon dioxide emissions by more than 10 percent over the last five years. But far more effort is needed. In a series of reports looking at electric power in developing countries, the Pew Center found that emissions from that sector alone will triple by 2020 under a business-as-usual scenario. However, we also found that efficiency improvements and the introduction of low-emission technologies could cut this increase in half while maintaining economic growth. Once again, technology is absolutely critical.

Arriving at a truly global strategy, then, will require a fundamental rethinking of the approach taken so far. The straightforward targets set by Kyoto - cutting each country's emissions by an agreed percentage - will hopefully succeed in starting industrialized countries on the right path. But a framework that encompasses both developed and developing countries, and fairly apportions responsibility among them, will have to be more sophisticated. It will have to accommodate the legitimate desire of developing countries to raise their living standards. It will have to recognize that different countries face very different challenges - for developed countries, the challenge is converting from the existing energy infrastructure to a clean one, while for developing countries, it is much more a matter of building the infrastructure right in the first place. An effective global strategy also will have to mobilize the flow of technology, know-how and resources from wealthier nations so that poorer countries are in a position to keep up their end of the bargain. In that sense, our challenge is to ensure not only that the new industrial revolution is launched, but also that its fruits are shared quickly and fairly.

These are my thoughts on where we stand in our effort to spare future generations the grave risks of an overheated planet. Enormous challenges lie ahead. But there are promising signs, both internationally and here in the United States, that we are at last mustering the will to begin confronting them. We must seize on that momentum, and keep moving forward. Thank you.

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Press Release: Three More Companies Join The Fight Against Climate Change

For Immediate Release:  
June 28, 2001

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

Three More Companies Join The Fight Against Climate Change

Washington, D.C.—Three more companies are joining the Pew Center's Business Environmental Leadership Council (BELC), in another sign of industry commitment to reduce the greenhouse gas emissions that contribute to climate change. The new BELC members are:

  • Cinergy Corp. of Cincinnati, OH, one of the leading diversified energy companies in the United States;
  • Deutsche Telekom of Bonn, Germany, and New York, NY, Europe's largest telecommunications company; and
  • John Hancock Financial Services of Boston, MA, one of the largest insurance and investment companies in the United States.

T hese three companies will join 33 others that already comprise the BELC, bringing the total to 36. Just last month, London-based Rio Tinto, one of the world largest mining companies, became the first mining company to join the environmental leadership council.

"While the governments of the world are continuing to talk about global climate change, these companies are taking action," said Eileen Claussen, President of the Pew Center on Global Climate Change. "Like the other members of the BELC, they believe the costs of inaction are greater than the costs of taking steps to protect future generations. And they are coming up with cost-effective, pro-growth solutions that all governments, including our own, should recognize as a basis for domestic and international policy decisions."

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.

The corporations that compose the BELC include various Fortune 500 companies, and represent a diverse group of industries including energy, chemicals, metal, consumer appliances 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; Rio Tinto; Rohm and Haas; Royal/Dutch Shell; Sunoco; Toyota; TransAlta Corp.; United Technologies; Weyerhaeuser, Whirlpool and Wisconsin Energy Corporation.

For more information about global climate change and the activities of the Pew Center and the BELC companies, visit


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.

Making Collaboration a Matter of Course: A New Approach to Environmental Policy Making

Making Collaboration a Matter of Course: A New Approach to Environmental Policy Making

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

Society of Environmental Professionals Meeting
Washington, DC

June 25, 2001

Thank you very much. It is a pleasure to be here with a group of environmental professionals from around the country. And I must say I am glad you have all gathered here in Washington. Judging from what's been going on over the last several months—and, indeed, over the last several years—this town could certainly use a few more environmental professionals.

Allow me to begin my remarks with a little bit of equal-opportunity criticism of the two political parties' approaches to these issues. In the White House, it seems we have an administration that believes environmental policy-making consists entirely of deciding which of the environmental policies of the previous administration to keep in place, and which to unceremoniously send away to the local landfill. And, among the Democrats on Capitol Hill, the idea seems to be to charge an enormously high political "tipping fee" for the dumping of established policies, regardless of their merit.
I suppose you could sum up the Bush administration's approach to environmental policy by using the EPA's three R's for managing solid waste: reduce, reuse and recycle. As in, reduce environmental regulation while reusing and recycling proposals from the past. The Democrats, meanwhile, have their own three-R strategy for dealing with the environment and other issues: recruit recalcitrant Republicans.
Seriously, all of you are to be commended for your commitment to the environment and for advocating on behalf of sound and responsible environmental policies. In my remarks today, I would like to talk a little bit about how sound and responsible policies can and should be crafted in a world that is very different from the one that greeted the heyday of U.S. environmental policy making in the 1970s. And I want to tell you a little bit about how two organizations I am affiliated with—the Pew Oceans Commission and the Pew Center on Global Climate Change—are trying to adopt a new, cross-sector approach to getting things done.
But first a little history. My own career as an environmental professional began in the 1970s, when I joined the staff of the Environmental Protection Agency. I worked at EPA for more than 20 years and dealt with issues from hazardous waste and energy efficiency to acid rain and the depletion of the ozone layer. And let me assure you that this was a real education for someone whose academic degrees are in English literature.
From EPA I moved onto the National Security Council and then the Department of State, where I was responsible for developing and implementing policy on such international issues as climate change, chemicals, fisheries and wildlife conservation, and more. I left the Clinton Administration in mid-1997, created the Pew Center on Global Climate Change in 1998 and, in 2000, helped launch the Pew Oceans Commission.
The reason I offer you this quick resume is not because I am looking for a job, although I can provide references if you would like. Rather, I simply want to make the point that I have been in the environmental policy arena very literally since the first Earth Day. And, in that time, I have had the opportunity to gain an up-close-and-personal view of the U.S. government's role in these issues. It all began when federal policy makers carved out a very assertive and, in many respects, unilateralist role for Washington in the protection of our natural environment.
This role was spelled out very clearly in the National Environmental Policy Act of 1969. This is the law in which Congress boldly declared its intent to "create and maintain conditions under which man and nature can exist in productive harmony," and to "assure for all Americans safe, healthful, productive, esthetically and culturally pleasing surroundings." (Sort of the chicken in every pot approach to environmental policy.)
During the 1970s, our national policymakers took this vision of strong government action on the environment and made it real. NEPA and the creation of the Environmental Protection Agency were just the start of it. There was the Clean Air Act of 1970, the Clean Water Act of 1972, the Safe Drinking Water Act of 1974, and much more.
Former New York Times reporter Philip Shabecoff, in his recent book about American environmentalism, Earth Rising, had this to say about environmental policy making in the 1970s:

"In its totality, the explosion of congressional activism that produced these landmark environmental statutes must be considered one of the great legislative achievements in the nation's history."

And, as we all know, it was an explosion of activism that produced very real results—two-thirds of the nation's waters now safe for fishing and swimming, up from one-third in 1970; dramatic improvements in air quality due to reductions in carbon monoxide, lead, ozone, particulates and other pollutants.
In spite of these successes, however, government began to see its role a little differently as the years went by. Rather than requiring the best available control technologies and adopting a prescriptive approach to environmental protection, we began to see a still-strong government experimenting with the notion of setting objectives and then allowing industry and the market to figure out how best to meet them.
A perfect example of this performance-based approach was the Acid Rain Program created under the Clean Air Act Amendments of 1990. These provisions require significant reductions in emissions of sulfur dioxide and nitrogen oxides from electric utilities, but the law set out to accomplish this objective in a new way.
Rather than saying here's what the utilities have to do, the implementing regulations established a cap on national emissions while allocating pollution allowances to individual sources for trading. The results are now well known: in the first year of compliance in 1995, U.S. SO2 emissions dropped by a very impressive 3 million tons. And there have been even greater improvements in the years since, along with sharp declines in acid deposition. Perhaps most importantly, the costs of the new requirements have been far lower than anticipated. The acid rain cost projections were estimated at over $900 per ton. They are now selling for less than $150.
A flexible, market-based approach to reducing emissions was not the only innovation we tried under the Acid Rain Program. To successfully implement the program, EPA followed the guidelines of the Federal Advisory Committee Act and established an Acid Rain Advisory Committee. This group included 44 individuals representing a wide range of organizations and interests, from large and small utilities to environmental organizations and state air agencies.
Bear in mind that this was not a window-dressing committee. It actually did a lot of good, hard work. Over a six-month period, this group (and I chaired it) became actively involved in formulating solutions to problems and offering critiques of various regulatory options. Not only did this ensure that potential problems were identified early on, but it also helped smooth the way for implementation of the new rules. The reason: there was a cadre of individuals who already were very familiar with the program and the thinking behind it, and who were committed to making it work.
So over the years our government has moved from prescribing what industry should do, to establishing performance standards for industry to meet, to beginning to involve stakeholders directly in the formulation of new policies and regulations. When you dig beneath the surface, however, the success of the Acid Rain Advisory Committee is the exception to the rule. All too often, our government's outreach to industry and other sectors is doomed from the start because these partnerships and collaborations often lack a clear sense of mission and goals. They also often lack a clear definition of roles and responsibilities. Adding to the problem, government entities are notoriously reluctant to relinquish control of the policy process to others. And this, I believe, must change.
My point is that environmental threats such as rising levels of greenhouse gas emissions, the deteriorating health of our oceans, and the wasteful destruction of natural resources will pose serious and mounting problems for both the United States and the world in the decades ahead. And we will not be able to deal effectively with these problems without a better system of environmental governance—governance that includes an active and appropriate role not just for government but for business, nongovernmental organizations, scientists, citizens and others.
The world is very different today than it was in the 1970s—this despite the recent return of such 70s icons as Charlie's Angels, Fleetwood Mac, bell-bottoms and the entire administration of President Gerald R. Ford. It is even a different world today than it was in the early 1990s, at least with respect to the power and capacity of government to unilaterally shape the nation's environmental policies.
So what has changed? The answer is a number of things, starting with the government itself. Between 1968 and 2000, the United States had a divided government for all but six years—and, as of last month, it was divided yet again. While in the 1970s you saw a unique consensus emerge among Republicans and Democrats alike around the importance of strong action on the environment, today the issue is much more partisan in nature—and the result is a lack of sustained leadership. Like many other issues in today's highly competitive political arena, the environment is used far too often as a way to score political points—and not often enough as a way to bring Americans together behind an agenda for action.
At the same time that environmental issues have become more polarized and politicized, we also have seen a devolution of authority away from the federal government and towards the states and localities. This happened in part because the environmental laws enacted in the 1970s were designed to build capacity at the state level. And the fact is, they did precisely that. Devolution has not necessarily meant less environmental protection. But it has meant that the states are increasingly interested in adapting national objectives to individual state circumstances. And the result is a patchwork of policies, some of them stronger than others and all of them serving as a collective reminder that Washington is no longer the policy making force it once was on the environment.
Among the other factors that have contributed to Washington's declining capacity to make and enforce strong environmental policy are budgetary pressures that are sure to persist in the wake of the tax cut approved by Congress in May. And then there is the state of environmental science. Recent years have seen the emergence of a sizeable body of scientific consensus supporting the need for action to address most of the environmental problems we face. Nevertheless, as time has gone on, our ability to understand the uncertainties in the science has also improved.
And this has meant a tendency in the political arena to focus on uncertainties rather than certainties—making it difficult for policy makers to take strong or effective action on these issues. The unfortunate result is that science—which is the necessary underpinning for action—too often is employed in the cause of those who wish to take no action at all.
At the same time that we have seen our government become weaker and more inclined to inaction on the environment, we have seen nongovernmental organizations become ever-stronger. The 1997 Mine Ban Treaty, to cite one example, was largely the product of NGOs throughout the world coming together around a common concern and persuading world governments to take action. In the environmental arena, we have seen nongovernmental organizations enter the mainstream of society. Twenty or thirty years ago, these groups essentially operated on the fringe of politics and governance, advocating for sound environmental laws and suing the government to make sure that the laws were implemented. Today, however, these groups have developed into sophisticated and, dare I say it, "corporate" organizations that act not only as advocates but as lawyers, communicators, educators, and policy analysts.
These changes in the not-for-profit sector have been accompanied—perhaps not coincidentally—by a growing sensitivity to environmental concerns in the private sector. Many businesses in the United States and throughout the world no longer view environmental concerns as a threat to their very existence. Rather, progressive business leaders (and not all business leaders are progressive) accept that something must be done to address these concerns, and they understand that the smartest approach for industry is to help shape solutions instead of having solutions imposed by others.
Both independently and in response to pressure from government, NGOs and the communities where they operate, many companies have now embedded social and environmental ethics into their management structures. This makes the blatant disregard of the environment far more difficult, and it opens the door to a more constructive role for the private sector in identifying and solving environmental problems.
So there you have it. Our government is weaker, NGOs are stronger, and industry is more attuned to the environmental consequences of its actions. Looking at these trends, and coupling them with the ease of modern communications and the growth of the internet, you start to see the outlines of a new approach to environmental policy making.
Some have argued for greater self—policing by the private sector-based on the belief that it is in industry's best interests to deal aggressively and responsibly with these issues. But I am talking about something different. I am talking about a governance model that requires a heightened level of interaction and cooperation among government, NGOs, industry and others—an approach that draws on everybody's strengths, interests and expertise to forge solutions that everybody can support.
Can this approach work to achieve progress on other issues from cleaning up our air and water to reducing the risks of climate change and protecting the health of the oceans? My answer is yes. At the Pew Oceans Commission, we have sought to assemble government, fishing industry and NGO representatives—together with scientists, economists and others—to recommend a series of policy measures designed to restore and sustain the health of the marine environment. This is a bipartisan, multi-sector group that includes members from all of the coastal regions of the nation, as well as federal, state and local governmental perspectives.
And we are not stopping there in our efforts to reflect a truly national, cross-sector consensus on these issues. In a continuing set of workshops and other convenings throughout the country, we are inviting the public to share its concerns about ocean issues. And we are hearing from local commercial fishers, business people from tourism and agriculture, and regional officials and scientists about ways to improve ocean management and conservation.
The result of all this will be a set of policy recommendations that we will present to Congress in 2002. Our intention is for these recommendations to be substantive, bold and visionary rather than a watered-down list appealing to the lowest common denominator. And we believe that by working through these issues together, with all of the stakeholders at the table, we will make a real and substantive contribution while raising the profile of ocean issues among the American public.
At the same time that the Pew Oceans Commission is applying a new governance model to the making of ocean policy, the Pew Center on Global Climate Change is reaching out in different and more targeted ways. We now have 33 major companies that are part of the Pew Center's Business Environmental Leadership Council. This is a group of industry leaders who have come together based on the belief that we know enough about the science of climate change to begin taking concrete steps now to reduce emissions of greenhouse gases. And that is precisely what these companies are doing — they are reducing their emissions, some very substantially, and they are playing a constructive role in the domestic and international policy debates on this issue.
In addition to working with our Business Environmental Leadership Council, the Pew Center is collaborating with top scientists and other experts to produce authoritative analyses of the environmental impacts of climate change, as well as the economics and the public policy issues involved. And, we are working with government representatives and other NGOs, both here in the United States and throughout the world, in an effort both to move the dialogue on this issue forward and to forge innovative policy solutions.
The more I work at both of these efforts—the Pew Oceans Commission and the Pew Center on Global Climate Change—the more I am convinced that very little can be accomplished today in the environmental policy arena without the active participation and support of businesses, NGOs, scientists and others. And one of the principal reasons for this is the sheer size and complexity of the environmental agenda today.
Think about it. Included among the issues that demand the attention of government, industry, NGOs and others is a wide range of topics that touch on virtually every aspect of our relationship with the natural environment. On a global scale, we're seeing problems and potential crises involving the atmosphere, oceans and biodiversity. And, at the national and regional levels, the issues include everything from air and water pollution to water and land use issues, toxics, the destruction of forests, and more.

To see how the prevailing model of environmental governance is not delivering the results we need, one has only to take a cursory look at where things stand today on the two issues that are currently the focus of my work.
First there is the issue of climate change. Most of the world's best scientists now agree that the global climate is changing in important and alarming ways, and that these changes have serious consequences for the environment and human life. But we have yet to show that sustainable international and national regimes for mitigating climate change can get off the ground.
With respect to the actions of the current Administration, allow me to state very clearly that it does no good to flat-out reject one approach to this issue—and, equally important, an approach that reflects years of hard work and consensus building among the world's governments—before considering what a better approach might be. That said, our inability to develop a responsible and thoughtful national policy on the issue of climate change is a problem that dates to well before the current President. While the Clinton administration agreed to a tough emissions reduction target in Kyoto, Japan, in 1997, it never put forward anything approaching the kind of domestic strategy that would be required to meet it.
And then there are the oceans. Overfished and polluted, our seas are in trouble. Approximately 70 percent of commercially important fish stocks are fully or over-exploited. And every year, 27 million tons of fish, marine mammals and birds are caught unintentionally and thrown back dead or dying into the sea. We have several pieces of national legislation addressing these issues, and a handful of institutions and treaties are in place at both the regional and global levels. But none of these efforts has yet been able to respond effectively to the problems of unsustainable fishing practices, pollution, and other threats to ocean ecosystems and marine life.
So the bottom line is this: what we have done until now is not working to address the environmental problems of today. Despite high-profile events such as the 1992 Earth Summit, and despite such groundbreaking achievements as the Clean Air and Clean Water Acts and the Montreal Protocol, our environment is still very much at risk. And what needs to happen now is for all of us to come together—governments, businesses, NGOs and others—and to form new collaborations, new models of environmental governance.
What are the ingredients that will make these collaborations successful? Let me list a few. First, we need a vision of where we are going and where we must go. Second, all the major stakeholders have to believe that the problem is real and needs to be addressed. Third, those who do good voluntarily shouldn't be penalized if doing good becomes mandatory down the line. Fourth, all the players have to be willing to take risks. Fifth, business has to put what it knows on the table, since the private sector generally has the most useful information. And, last but not least, NGOs have to buck the heat and say that compromise is acceptable.
In closing, I would like to tell you all a joke I recently heard. A Little League baseball game is under way, and one of the coaches pulls one of his young players aside to ask a question.
"Do you understand what cooperation is? What a team is?" the coach asks.
The little girl nods in the affirmative.
The coach then asks another question: "Do you understand that what matters is whether we win together as a team?"
The little girl nods yes.
"Do you understand," the coach continues, "that when a strike is called, or you're out at first, you don't argue or curse or attack the umpire. Do you understand all that?"
Again the little girls nods yes.
"Good," says the coach. "Now go over there and explain it to your mother."
Just like that little girl and her mother, all of us in the environmental arena need to understand anew what cooperation means and what it means to work together as a team. There is no other way, I believe, to achieve true progress in meeting the many environmental challenges we face today.
Thank you very much.

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

# # #

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.

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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

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

"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

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

Press Release

Download Entire Report (pdf)


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
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