The Center for Climate and Energy Solutions seeks to inform the design and implementation of federal policies that will significantly reduce greenhouse gas emissions. Drawing from its extensive peer-reviewed published works, in-house policy analyses, and tracking of current legislative proposals, the Center provides research, analysis, and recommendations to policymakers in Congress and the Executive Branch. Read More

What is Cap and Trade?

A cap-and-trade system is one of a variety of policy tools to reduce the greenhouse gas emissions responsible for climate change. A cap-and-trade program sets a clear limit on greenhouse gas emissions and minimizes the costs of achieving this target. By creating a market, and a price, for emission reductions, cap and trade offers an environmentally effective and economically efficient response to climate change.

Ultimately, cap-and-trade programs offer opportunities for the most cost-effective emissions reductions. Many challenging issues must be addressed before initiating the program. Once established though, a well-designed cap-and-trade market is relatively easy to implement, can achieve emissions reductions goals in a cost-effective manner, and drives low-greenhouse gas innovation.

Resources accessible on this page help explain what cap and trade is and how it works to address the climate change challenge:

Hearings of the 111th Congress

Competitiveness and Engaging Developing Countries

Promoted in Energy Efficiency section: 

Response of the Pew Center on Global Climate Change to the House Energy and Commerce Committee's Climate Change Legislation Design White Paper: Competitiveness Concerns/Engaging Developing Countries

The Center commends the Committee for initiating this examination of options for addressing competitiveness and developing country engagement, in the context of domestic climate change legislation, and welcomes the opportunity to provide input on these critical issues. This submission offers a general perspective on these issues and responses to the questions posed by the Committee. 


The issues of competitiveness and developing country engagement are closely related, and some policy approaches that might be incorporated into domestic climate change legislation could, to some degree, address both concerns simultaneously.  However, it is important that these two issues be disentangled and that each be considered in its own right, both in order to understand their full characteristics and dynamics, and to identify policy options that may address one but not the other.  Further, it is important to consider whether a particular policy approach that appears to hold promise in addressing one concern may complicate or undermine efforts to address the other. 

Read the complete response (pdf)

Eileen Claussen Remarks at Pew Center State-Federal Workshop

Speech by Eileen Claussen, President, Pew Center on Global Climate Change
Pew Center State and Federal Workshop

February 25, 2008

On behalf of the Pew Center on Global Climate Change and the Pew Center on the States, I’d like to welcome you to our conference: Innovative Approaches to Climate Change: A State-Federal Workshop.  I welcome the opportunity to be with all of you and kick-off this very timely conference that will examine the specific roles of Washington and the states in addressing the urgent challenge of global climate change. 

As most of you know, what is happening on this issue right now is this: In the absence of federal action, states have taken the lead in designing regulatory approaches to reduce the greenhouse gas emissions that cause climate change.   And while it is good that the states are acting - it does not mean the federal government is irrelevant. In fact, both Washington and the states have specific and important roles to play.  And I will spend a few minutes this morning discussing what these different yet complementary roles look like and mean. 

But first, let’s examine why states are acting.  I think there are three reasons:  risks, opportunities and authority.  States are very close to what is happening - they see the risks that climate change poses to their states – not just higher temperatures and heat waves, but more coastal flooding, more intense rainfall, higher levels of drought, increases in the number and intensity of wildfires, and more.  But many states also see opportunities in responding proactively to climate change, including developing new industries in alternative energy, applying information technology to buildings to improve energy efficiency, and improving the quality of life for their citizens through smarter growth. 

States also recognize that they have real authority to reduce emissions.  They are empowered to take action. States can promote clean electricity and energy efficiency with policy tools such as net metering, green pricing, and public benefit funds. States have authority to adopt building efficiency codes, which can have a major impact when you consider that energy use in buildings produces about 43 percent of U.S. carbon dioxide emissions. States also have great control over smart growth policies and transportation policies aimed at reducing emissions from cars and trucks.  These are examples of things that fall within a state’s authority and in many instances, outside the authority of the federal government. 

But what about the federal government?  Washington most assuredly has been absent from the effort to reduce U.S. emissions, as I have said.  But there are signs this will change, probably in the next couple of years.  And so, when the federal government finally chooses to act, is there a risk that it might come in and supercede all the good and thoughtful work of the states?

I think not.  I think the question of federal vs. state action on climate change is not a question of either/or.  My thesis is that the states can do some things (indeed they are better suited to do some things) and Washington can do other things that only Washington can do. And I think there is more than enough responsibility and hard work to go around.

For example, certain actions, if they are taken nationally, can be more cost-effective. And we also have to keep in mind that there is no guarantee that all states would act individually. In order to reduce emissions of greenhouse gases, and to do so both cost-effectively and to the levels scientists say are necessary, I do believe we need the federal government to step up to the plate at the same time that the states are doing their part.

One of the things that Washington can and should do is to create a national cap-and-trade program to reduce greenhouse gas emissions.  Cap-and-trade has been embraced by business and political leaders from both parties as the best and most cost-effective way to achieve real, specified reductions in emissions.  But cap-and-trade works best when it covers many emission sources. 

The more states, or the more countries, that are part of the system, the more you can achieve efficiencies of scale and the more you can lower the cost of reducing emissions.   This is why many states are reaching across their borders to establish regional cap-and-trade programs.  They understand that the economics of cap-and-trade get better when more states and more communities are involved.  But if regional approaches are better than going state-by-state, it is also true that a national approach is better than doing this on a region-by-region basis.

Ultimately, we need a national cap-and-trade program like the one making its way through the U.S. Senate. This plan aims to reduce emissions across the country and levels the playing field for businesses in all 50 states. It ensures that we’re able to take full advantage (as a nation) of the cheapest emission reductions we can find. 
Another thing that only the federal government can do is negotiate and enter into international agreements on climate change. At the federal level, the United States needs to commit to play an active part in crafting an effective global response to this problem.  We have not been playing a constructive role in this process – and that has to stop.

International negotiators, including the U.S., have agreed to a process aimed at producing a new global climate treaty by the end of 2009. This is an extremely ambitious goal, but one worth pursuing. Clearly, we need a global agreement as soon as possible that includes binding commitments from the world's largest economies.  And a global agreement that creates a worldwide market for emission reductions will help lower the global costs of achieving our emission reduction goals.    

Negotiating such an agreement is clearly a federal government responsibility … and it is a responsibility we will carry out more effectively if we commit as soon as possible to a national program of reducing emissions.  Right now, emerging economies and major sources of emissions like China and India are hiding behind U.S. inaction on this issue. U.S. leadership, in the form of mandatory emission limits at home coupled with a strong push for binding international commitments, would set the stage for effective global action – and, ultimately, real progress in reducing emissions around the world. 

Does this mean the states should step aside and cede the leadership role on the climate issue to Washington?  No. The states can and should keep exploring ways to leverage their unique authorities in areas from energy regulation to building codes, smart-growth planning and more.  States are doing important and valuable work in all of these areas, and that must continue at the same time that the federal government begins to fulfill its role in the partnership.

In closing, I want to remind you of the vision of Justice Louis Brandeis.  He saw the U.S. states as “laboratories of democracy” where policy innovations could take hold and perhaps provide models for other states, and for our national government as well.

And I honestly believe we would not be where we are today in the climate debate – on the verge of adopting a national cap-and-trade program – if many of the states had not acted first to adopt their own targets and to pursue cross-border emission trading regimes.  

The U.S. states are acting in the best traditions of federalism by advancing an array of solutions to climate change that address their specific concerns and that take advantage of their unique responsibilities in our federalist system of government.  Today, the challenge is to create a more balanced state and federal partnership – a partnership that promises to bring much-needed certainty to the question of how we as a nation are going to address the most critical environmental issue of our time.

Innovative Approaches to Climate Change: A State and Federal Workshop

Promoted in Energy Efficiency section: 
The Pew Center on Global Climate Change, in collaboration with the Pew Center on the States, hosted a two-day workshop focused on state and federal action in response to climate change.

On February 25 and 26, 2008, the Pew Center on Global Climate Change, in collaboration with the Pew Center on the States, hosted a workshop focused on state and federal action in response to climate change. The event brought together legislative staff and officials from both the state and federal levels to share their experience developing climate policies, and to discuss the appropriate roles of each level of government in implementing future national policy. Participants explored how federal policy might be informed by, and interact with, existing state efforts.

Two new publications were released at the workshop as part of the Pew Center on Global Climate Change Climate Change 101 Series:

NEW: Climate Change 101: Adaptation (Updated - January 2009)
NEW: Climate Change 101: Cap-and-Trade (Updated - January 2009)

In addition, a new publication in the Pew Center's Coal Initiative Series was also released:

NEW: State Options for Low-Carbon Coal Policy

Based in part on the results of this workshop, the Pew Center released a new report in June 2008:

NEW: Toward a Constructive Dialogue on Federal and State Roles in U.S. Climate Change Policy


Innovative Approaches to Climate Change: A State and Federal Workshop
Eileen Claussen & Gov. Bill Richardson

Speaker and panelist presentations can be viewed by clicking on the presenter's name below.

Monday, February 25, 2008

Opening Address:

Insights from National Association of Clean Air Agencies Dialogue:

  • Doug Scott, Director, Illinois Environmental Protection Agency

Panel 1: Cap-and-Trade Design, Session 1

Moderator: Vicki Arroyo, Director of Policy Analysis, Pew Center on Global Climate Change


  • Janice Adair, Special Assistant to the Director, Washington State Department of Ecology
  • Lisa Jackson, Commissioner, New Jersey Department of Environmental Protection
  • David McIntosh, Legislative Assistant, Office of Senator Joseph Lieberman (I-CT)
  • Damien Meadows, Deputy Head of Unit, DG Environment, European Commission

Panel 2: Cap-and-Trade Design, Session 2

Watch this panel discussion on

Moderator: Janet Peace, Senior Economist, Pew Center on Global Climate Change


  • Michael Gibbs, Assistant Secretary for Climate Change, California Environmental Protection Agency
  • Christopher Sherry, Research Scientist, New Jersey Department of Environmental Protection
  • Damien Meadows, Deputy Head of Unit, DG Environment, European Commission
  • Edith Thompson, Legislative Assistant, Office of Congressman Wayne Gilchrest (R-MD)

Lunch Keynote Speaker:

Panel 3: Transportation - Low-Carbon Fuels and Vehicles

Moderator: Tom Peterson, President and CEO, Center for Climate Strategies


  • George Crombie, Secretary, Vermont Agency of Natural Resources
  • Chris Miller, Senior Policy Advisor, Office of Senator Harry Reid (D-NV)
  • David Crane, Special Advisor for Jobs and Economic Growth, Office of California Governor Arnold Schwarzenegger
  • Roya Stanley, Director, Iowa Office of Energy Independence

Panel 4: Electricity

Moderator: Steve Brick, Program Manager, The Joyce Foundation


  • Leon Lowery, Majority Staff, Senate Energy and Natural Resources Committee
  • Richard Opper, Director, Montana Department of Environmental Quality
  • Jeanne Fox, President, New Jersey Board of Public Utilities
  • Richard Cowart, Director, Regulatory Assistance Project

Dinner Keynote Speaker:

  • Erik Olson, Deputy Staff Director & General Counsel, Majority Staff, Senate Committee on Environment & Public Works

Tuesday, February 26, 2008

Breakfast Keynote Speaker:

  • Governor Tim Pawlenty, Minnesota

Panel 5: Smart Growth and Vehicle Miles Traveled

Moderator: Doug Foy, Policy Advisor, Pew Center on the States


Keynote Speaker:

  • Senator John F. Kerry, Massachusetts

Panel 6: Adaptation

Moderator: Joel Smith, Vice President, Stratus Consulting Inc.


  • Larry Hartig, Commissioner, Alaska Department of Environmental Conservation
  • Stephen Adams, Staff Director, Governor's Action Team on Energy and Climate Change, Florida
  • Robert Twilley, Professor, Department of Oceanography and Coastal Sciences, Louisiana State University
  • David Van't Hof, Sustainability Advisor, Office of Oregon Governor Ted Kulongoski

Panel 7: Respective State and Federal Roles in Climate Policy

Moderator: Judi Greenwald, Director of Innovative Solutions, Pew Center on Global Climate Change


  • Sarah Cottrell, Energy and Environmental Policy Advisor, Office of New Mexico Governor Bill Richardson
  • George Givens, Principal Legislative Analyst/Attorney, North Carolina General Assembly
  • Franz Litz, Senior Fellow, World Resources Institute
  • Brad Moore, Commissioner, Minnesota Pollution Control Agency

About U.S. Federal

The Center for Climate and Energy Solutions (C2ES) seeks to inform the design and implementation of federal policies that will significantly reduce greenhouse gas (GHG) emissions, and promote clean energy. Drawing from its extensive peer-reviewed published works, in-house analyses on the design of climate change policies and clean energy policies, and tracking of current legislative proposals, the Center provides research, analysis, and recommendations to policymakers in both Congress and the Executive Branch.

The Center regularly meets with members of the federal Administration, U.S. Senate, and House of Representatives and their staff to discuss climate science, impacts, economics, policy, regulation, and legislation. C2ES also holds widely-attended Capitol Hill briefings on these topics, often bringing in experts from academia, business, and government to provide a broad range of perspectives.


The Center for Climate and Energy Solutions seeks to inform the design and implementation of federal policies that will significantly reduce greenhouse gas emissions. Drawing from its extensive peer-reviewed published works, in-house policy analyses, and tracking of regulations and legislative proposals, the Center provides research, analysis, and recommendations to policymakers in Congress and the Executive Branch. Read More

Table Summary of Cap-and-Trade Proposed Legislation (01-2008)


Scope of Coverage

2010-2019 Cap

2020-2029 Cap

2030-2050 Cap


Offsets and Other Cost Controls

Early Action

Technology and Misc.

S. 2191 – 10/18/2007
Lieberman-Warner Climate Security Act of 2008
Version passed 11-8 by the Senate Environment & Public Works Committee on December 5, 2007

All 6 GHGs
Economy-wide, “hybrid” – upstream for transport fuels & natural gas; downstream for large coal users; separate cap for HFC consumption

2005 level in 2012

15% below 2005 level in 2020



70% below 2005 level in 2050

Increasing auction: 26.5% in 2012 (includes 5% early auction), rising to 69.5% from 2031- 2050
Some sector allocations are specified including: 19% to power plants and 10% to manufacturers (transitions to zero in 2031), 11% to states, 9% to load serving entities (LSEs), and others
5% set-aside for domestic agriculture and forestry

15% limit on use of domestic offsets
15% limit on use of international emission allowances
Borrowing up to 15% per company
Creates Carbon Market Efficiency Board to monitor the trading market and implement specific cost relief measures, including increased borrowing and use of offsets

5% of allowances for early action in 2012, phasing to zero in 2017

Bonus allocations for carbon capture and storage
Funds and incentives for technology, adaptation, & mitigating effects on poor
Cap-and-trade system performance and targets subject to 3-year NAS review

S. 1766 – 7/11/2007
Low Carbon Economy Act

All 6 GHGs
Economy-wide, “hybrid” – upstream for natural gas & petroleum; downstream for coal

2012 level in 2012

2006 level in 2020

1990 level in 2030
President may set long-term target =60% below 2006 level by 2050 contingent upon international effort

Increasing auction: 24% from 2012-2017, rising to 53% in 2030
Some sector allocations are specified including: 9% to states, 53% to industry declining 2%/year starting in 2017
5% set-aside of allowances for agricultural

Provides certain initial categories including bio sequestration and industrial offsets
President may implement use of international offsets subject to 10% limit
$12/ton CO2e “technology accelerator payment” (i.e., safety valve) starting in 2012 and increasing 5%/year above inflation
Allows banking

From 2012-2020, 1% of allowances allocated to those registering GHG reductions prior to enactment

Bonus allocation for carbon capture and storage
Funds and incentives for technology R&D
Target subject to 5-year review of new science and actions by other nations

S.280 – 1/12/2007
Climate Stewardship and Innovation Act

All 6 GHGs
Economy-wide, “hybrid” – upstream for transportation sector; downstream for electric utilities & large sources

2004 level in 2012

1990 level in 2020

20% below 1990 level in 2030
60% below 1990 level in 2050

Administrator determines allocation/auction split; considering consumer impact, competitiveness, etc.

30% limit on use of international credits and domestic reduction or sequestration offsets  
Borrowing for 5-year periods with interest

Credit for reductions before 2012
Early actors may use offsets to meet 40% of reductions

Funds and incentives for tech R&D, efficiency adaptation, mitigating effects on poor

S.309 – 1/16/2007
Global Warming Pollution Reduction Act

All 6 GHGs
Economy-wide, point of regulation not specified

2010 level in 2010
2%/year reduction from 2010-2020

1990 level in 2020

27% below 1990 level in 2030
53% below 1990 level in 2040
80% below 1990 level in 2050

Cap and trade permitted but not required. Allocation criteria include transition assistance and consumer impacts

Includes provision for offsets generated from biological sequestration
“Technology-indexed stop price” freezes cap if prices high relative to tech options

Program may recognize early reductions made under state or local laws

Standards for vehicles, power plants, efficiency, renewables, certain categories of bio sequestration

S.485 –  2/1/2007
Global Warming Reduction Act

All 6 GHGs
Economy-wide, point of regulation not specified

2010 level in 2010

1990 level in 2020
2.5%/year reduction from 2020-2029

3.5% year reduction from 2030-2050
62% below 1990 level in 2050

Determined by the President; requires unspecified amount of allowances to be auctioned

Includes provision for offsets generated from biological sequestration  

Goal to “recognize and reward early reductions”

Funds for tech. R&D, consumer impacts, adaptation
Standards for vehicles, efficiency, & renewables

H.R. 620 – 1/22/2007
Climate Stewardship Act

All 6 GHGs
Economy-wide, “hybrid” – upstream for transportation sector; downstream for electric utilities & large sources

2004 level in 2012

1990 level in 2020

22% below 1990 level in 2030
70% below 1990 level in 2050

Administrator determines allocation/auction split; considering consumer impact, competitiveness, etc.

15% limit on use of international credits and domestic reduction or sequestration offsets
Borrowing for 5-year periods with interest

Credit for reductions before 2012
Early actors may use offsets to meet 35% of reductions

Funds and incentives for tech R&D, efficiency adaptation, mitigating effects on poor

H.R.1590 – 3/20/2007
Safe Climate Act of 2007

All 6 GHGs
Economy-wide, point of regulation not specified

2009 level in 2010
2%/year reduction from 2011-2020

1990 levels in 2020
5%/year reduction from 2020-2029

5% year reduction from 2030-2050
80% below 1990 levels in 2050

Determined by the President; requires unspecified amount of  allowances to be auctioned

Not specified

Goal to “recognize and reward early reductions”

Standards for vehicles, efficiency, renewables

Statement: 2008 State of the Union Response


Statement of Eileen Claussen
President, Pew Center on Global Climate Change

January 28, 2008

President Bush’s proposal tonight to invest $2 billion to deploy clean energy technologies in developing countries is a step in the right direction. A fair and effective global response to climate change is possible only with strong support from industrialized countries. But compared to the level of investment needed, and the $10 billion pledged two days ago by Japan, the president’s proposal appears modest at best.

The White House must go much further if it wants to be seen as a leader on climate action. At home, the president should work with Congress to enact a mandatory cap-and-trade bill to significantly reduce U.S. emissions. Abroad, the United States must sit down with other countries and negotiate binding international commitments. The so-called national commitments the administration is advocating would be little more than promises, providing no assurance that China, India, and other countries would hold up their end of the bargain.

American business and the American public are calling for mandatory federal action on climate change. At the major economies meeting later this week, other governments will be asking how the White House plans to deliver on its promises. President Bush should seize these opportunities to demonstrate that he is indeed prepared to meet the challenge of climate change.

Congressional Testimony of Elliot Diringer - International Climate Change Negotiations

January 24, 2008

Submitted to the United States Senate,
Committee on Foreign Relations

January 24, 2008

International Climate Change Negotiations:
Bali and the Path Toward a Post-2012 Climate Treaty

Mr. Chairman, Senator Lugar, and members of the committee, thank you for the opportunity to testify on the recent Bali climate change negotiations and the path toward a post-2012 climate treaty. My name is Elliot Diringer, and I am the Director of International Strategies for the Pew Center on Global Climate Change.

The Pew Center on Global Climate Change is an independent non-profit, non-partisan organization dedicated to advancing practical and effective policies to address global climate change. Our work is informed by our Business Environmental Leadership Council (BELC), a group of 44 major companies, most in the Fortune 500, which work with the Center to educate opinion leaders on climate change risks, challenges, and solutions.

Mr. Chairman, I would like to commend you and the members of this committee for convening this hearing today. Over the past year, the U.S. Congress has for the first time engaged in a genuine debate over how – not if, but how – the United States should address global climate change. So far, this debate has focused primarily on questions of domestic climate policy. This is a critical first step. But as you know, meeting the challenge of climate change requires global solutions as well, and these are possible only with strong leadership from the United States. The U.S. Senate has a vital role in mobilizing and setting the terms of U.S. engagement in the global climate effort. This committee, with your leadership, can ensure the Senate is well prepared to fulfill that responsibility. We are very encouraged that you are initiating this process with this hearing today.

In my testimony, I would like to address four topics. First, I will offer our perspective on the post-2012 international climate framework – both what it must achieve, and how it should be structured. Second, I will assess the recently agreed Bali Roadmap and the opportunities it presents. Third, I will outline key steps the United States must take to seize these opportunities. Finally, I will suggest a diplomatic strategy working within and outside the U.N. negotiating process, and the potential role of the Bush administration’s major economies initiative.

My key points are as follows:

  • A post-2012 international climate treaty must establish binding international commitments for all the major economies. However, the form of commitment can vary. While the United States and other developed countries should commit to absolute economy-wide emission targets, other forms such as policy-based commitments are appropriate for the major emerging economies.
  • The Bali Roadmap represents an historic turning point in the international climate negotiations. By not excluding the possibility of developing country commitments, it for the first time offers the prospect of a fair, effective, and comprehensive post-2012 agreement.
  • To ensure the Bali Roadmap’s success, the United States must: move as quickly as possible to enact mandatory domestic limits on U.S. emissions; declare unambiguously its willingness to negotiate a binding international commitment; and outline the support it will provide to developing countries if they, too, assume reasonable commitments.
  • In addition, the United States should mount a major diplomatic initiative, working both bilaterally and multilaterally to clarify and advance the negotiating agenda and find common ground. The administration’s major economies process could lay important groundwork with agreement on elements such as a long-term climate goal and an international technology fund.

1) The Post-2012 International Climate Framework Must Be Flexible but Binding

The Pew Center’s perspective on the post-2012 climate framework reflects not only our own detailed analysis but also the collective views of an impressive group of policymakers and stakeholders from around the world. As part of our effort to help build consensus on these issues, we convened the Climate Dialogue at Pocantico, a group of 25 individuals from government, business, and civil society in 15 key countries, participating in their personal capacities. The group included senior policymakers from Australia, Brazil, Britain, Canada, China, Germany, India, Japan, Mexico, and the United States. It also included senior executives from companies in several key sectors, including Alcoa, BP, DuPont, Exelon, Eskom (the largest electric utility in Africa), Rio Tinto, and Toyota. The group’s consensus report was released in late 2005 at an event in this room hosted by Senators Biden and Lugar. Since that time, we have produced a number of analyses further elaborating on the Pocantico recommendations. I would like to highlight several key points.

Engaging All Major Economies – First, the post-2012 framework must engage all of the world’s major economies. Twenty-five countries account for about 85 percent of global greenhouse gas emissions. These same countries also account for about 75 percent of global population and 90 percent of global GDP. The participation of all the major economies is obviously critical from an environmental perspective, as all must take sustained action if we are to achieve the steep reductions in emissions needed in the coming decades to avert dangerous climate change. But the participation of all major economies is critical from a political perspective as well. All have concerns about fairness and competitiveness, and for that reason, none can sustain an ambitious effort against climate change without confidence that the others are contributing their fair share. We must agree to proceed together.

The Need for Flexibility – At the same time, we must recognize the tremendous diversity among the major economies. This group includes industrialized countries, developing countries, and economies in transition. Their per capita emissions, and their per capita incomes, range by a factor of 18. The post-2012 framework must provide flexibility for these widely varying national circumstances. As the kinds of policies that can address climate change in ways consistent with other national priorities will vary from country to country, it also must accommodate different national strategies. To achieve broad participation, a post-2012 treaty must allow for variation both in the nature of countries’ commitments and in the timeframes within which these commitments must be fulfilled.

The Need for Binding Commitments – Allowing diverse approaches does not mean that each country should be entirely free to decide for itself how it will contribute to the global effort. The failure of most developed countries to reduce their emissions as pledged in the U.S.-ratified U.N. Framework Convention on Climate Change demonstrates the inadequacy of a voluntary approach. A strong effort – one adequate to the challenge – will be possible only if national contributions are integrated in a common framework and reflected in binding international commitments. As I stated earlier, countries will deliver their best efforts only if they are confident that their counterparts and competitors also are putting forward their fair share of effort. To establish that confidence, there must be some measure of accountability at the international level, and that is best achieved through binding international commitments. If countries are accountable only to themselves, we will not achieve the critical mass of effort needed to deter global warming.

Multiple Commitment Types – A country’s commitment should be of a form appropriate to its level of responsibility and capacity and its national circumstances. For the United States and other developed countries, we believe the appropriate form of commitment is a binding absolute economy-wide emissions target. The United States was the first to advocate the use of targets and emissions trading to address climate change, based on its success in combating acid rain. This market-based approach also is reflected in most of the major bills before Congress aimed at limiting and reducing U.S. emissions. Within the international framework, stronger absolute targets for developed countries are absolutely critical to drive emission reduction and to sustain and strengthen the emerging greenhouse gas market.

We must accept, however, that China, India, and other developing countries are very unlikely to commit at this stage to binding economy-wide emission limits. With standards of living just a fraction of our own, they are fearful of jeopardizing their growing economies, and will have to be persuaded by the example of developed countries that a cap on emissions is not a cap on growth. For now, economy-wide targets are also technically impractical for most developing countries: to accept a binding target, a country must be able to reliably quantify its current emissions and project its future emissions, a capacity that few if any have.

As an alternative to binding economy-wide targets, developing countries could be encouraged to make policy-based commitments. Under this approach, countries would commit to undertake national policies that would moderate or reduce their emissions, without being bound to an economy-wide emissions limit. These commitments could be tailored to national circumstances and build directly on domestic policies. China, for example, has domestic energy efficiency targets, renewable energy goals, and auto fuel economy standards, and some version of these could be put forward as international commitments. Tropical forest countries could commit to policies to reduce deforestation. To be credible and effective, policy-based commitments would need to be measurable and binding, with mechanisms to ensure monitoring and compliance.

A third potential element of the post-2012 framework is sectoral agreements, in which governments commit to targets, standards, or other measures to reduce emissions from a given sector, rather than economy-wide. In energy-intensive industries whose goods trade globally – the sectors most vulnerable to potential competitiveness impacts from carbon constraints – sectoral agreements can ensure a more level playing field. Sectoral agreements also may be a practical way to engage developing countries not yet prepared to take on economy-wide commitments. Sectoral approaches are being explored by global industry groups in the aluminum and cement sectors. We believe they also are worth exploring in sectors such as power and transportation, where competitiveness is less of a concern but large-scale emission reduction efforts are most urgent.

In addition to these different types of emission reduction commitments, the post-2012 framework must address technology, finance and adaptation. On technology and finance, it could include two types of agreements: the first, for joint research and development of “breakthrough” technologies with long investment horizons; the second, to broaden access to existing and new technologies by addressing finance, intellectual property rights, and other issues impeding the flow of low-carbon technologies to developing countries. On adaptation, the top priority within the climate framework should be assistance to those countries most vulnerable to climate change for national adaptation planning and implementation. But broader efforts to reduce climate vulnerability also should be integrated across the full range of bilateral and multilateral development support.

I would emphasize again the need to integrate these elements in a coherent framework. An ad hoc agglomeration of nationally defined programs will not produce the level of effort that is needed. Strong global action requires binding international commitments negotiated and agreed as a package. The framework must be flexible enough to accommodate different types of commitments, and reciprocal enough to achieve a strong, sustained level of effort.

2) The Bali Roadmap is an Opportunity for a Fair, Effective Post-2012 Framework

I would like to turn now to the Bali Roadmap adopted by governments at the UN Climate Change Conference last month in Bali. In our judgment, the Bali Roadmap initiates a process that, for the first time ever, offers the prospect of a comprehensive international climate framework of the type I have just described. The process is far less than ideal. However, we believe it is the best that could have been achieved given present political constraints – the first and foremost of these being the unwillingness to date of the Bush administration to negotiate a binding international commitment.

The Bali Roadmap in actuality encompasses two parallel negotiating processes. The first of these was launched two years ago under the Kyoto Protocol. Its aim is to negotiate post-2012 commitments for those countries that presently have binding targets under the protocol. As these countries are highly unlikely to assume new commitments on their own, however, a parallel process was needed to engage the United States and developing countries in the post-2012 negotiations. This second process, under the U.N. Framework Convention on Climate Change, was launched in Bali and is called the Bali Action Plan. Although these two processes are not formally linked, the expectation is that they will converge in a comprehensive agreement in 2009, with some commitments established under the Kyoto Protocol and others under the Framework Convention.

In our analysis, the ideal outcome in Bali would have been a negotiating mandate clearly specifying the types of commitments to be negotiated by different groups of countries. The Bali Action Plan, by contrast, is very loosely framed. With respect to mitigation, it calls for “measurable, reportable and verifiable” actions on the part of both developed and developing countries. In the case of developed countries, it speaks of “mitigation commitments or actions,” and identifies emission targets as one option. In the case of developing countries, it speaks of “mitigation actions,” not commitments, “supported and enabled by technology, financing and capacity-building.” The Action Plan specifically identifies sectoral approaches and measures to reduce deforestation as potential mitigation elements. It also calls for the post-2012 agreement to include provisions addressing adaptation, technology, and finance and investment.

In sum, the Bali Action Plan identifies the full set of issues that must be addressed but leaves entirely open the nature of the actions or commitments to be negotiated by any country or group of countries. In this sense, the Bali Roadmap puts no country on the hook for anything. At the same time, however, it lets no country off the hook either. This, in fact, is what is most significant about the Bali agreement. The 1995 Berlin Mandate, which launched the negotiations leading to the Kyoto Protocol, explicitly excluded the possibility of new commitments for developing countries. Up until the Bali conference, developing countries had steadfastly maintained that posture. The Bali Action Plan does not expressly contemplate binding commitments for developing countries; with the United States not yet prepared to negotiate such commitments, developed countries can not reasonably be expected to. But the Bali Action Plan does not explicitly exclude the question of developing country commitments either. This presents a significant opening, one the United States must capitalize on if we are to achieve a fair and effective post-2012 agreement.

Under the Bali Roadmap, this agreement is to be reached at the 15th conference of the Framework Convention parties in Copenhagen in late 2009. We believe that, even under the best of circumstances, this is an extraordinarily ambitious timeline. The reality is that negotiations will not begin in earnest until the United States is prepared to negotiate a binding commitment. Without a change in policy by the Bush administration, this can occur only when a new president takes office in January 2009. Even then, it will likely take the incoming administration a matter of months to appoint senior officials and develop a formal negotiating position. That will leave precious little time to meet the Bali deadline. We believe that as the deadline approaches, parties should revisit and revise it if necessary to allow time for a successful negotiation and avert what would be perceived as a dramatic failure at the Copenhagen conference.

3) U.S. Leadership at Home and Abroad is Key to the Bali Roadmap’s Success

I now would like to outline steps that the United States can take to ensure that the Bali Roadmap leads to a fair, effective, and durable post-2012 agreement.

The success of the Bali Roadmap depends ultimately on the willingness of each of the world’s major economies to assume and fulfill a binding commitment commensurate with its responsibilities and its capabilities. The willingness of other countries to assume such commitments will depend in large measure on the willingness of the United States. As the world’s largest economy and largest historic emitter, the United States has a singular responsibility not only to reduce its own emissions but also to lead the international community in forging an effective global response. To date, the United States has failed to deliver on either score. In our view, the United States must do three things to reverse this record and set the stage for a post-2012 agreement.

First, Congress and the President must move as quickly as possible to enact mandatory domestic legislation to limit and reduce U.S. greenhouse gas emissions. As a founding member of the U.S. Climate Action Partnership, or USCAP, the Pew Center strongly supports the establishment of a cap-and-trade system as the centerpiece of a mandatory federal program with the goal of reducing U.S. emissions 60 to 80 percent by 2050. We are very encouraged by the progress achieved in the Senate toward enactment of such a program, and are fully committed to working with you and your colleagues towards that end. Domestically, a mandatory market-based program will stimulate technology development and deployment and give U.S. businesses the certainty and incentives they need to reduce emissions as cost-effectively as possible. Internationally, a mandatory domestic target will enable the United States to negotiate with greater confidence and credibility. Having resolved what it is prepared to do at home, the United States will know far better what it is prepared to deliver abroad. And, having taken concrete action to meet its responsibilities, it can more credibly call on other countries to fulfill theirs.

Second, the United States must state clearly and unambiguously that it is prepared to negotiate a binding international commitment. As long as that remains in question, other countries will have a legitimate excuse to avoid negotiating commitments of their own. As I stated earlier, we believe that the United States’ commitment, and those of other developed countries, should be in the form of a binding absolute economy-wide emissions targets.

Third, the United States should make clear the type of support it is prepared to offer developing countries if they, too, assume appropriate commitments. Once we have demonstrated a willingness to reduce our own emissions and assume a binding international commitment, it will be reasonable for us to expect that major emerging economies such as China assume commitments as well. However, it also will be reasonable for these countries to expect that we and other industrialized nations will assist them in fulfilling their commitments. This is in part a matter of fairness, given our greater historic contribution to climate change and our greater capacity to address it. Indeed, we and other industrialized countries agreed in the Framework Convention to assist developing countries in their efforts to address climate change, and the Bali Roadmap identifies such support as an essential element of a post-2012 agreement. However, providing such support is also very much in our self-interest, as we will bear the consequences if developing countries fail to act.

Support can be provided both on a bilateral basis and as part of a post-2012 agreement. A domestic cap-and-trade program, for instance, could allow for crediting of emission reductions in developing countries; additional incentives could be conditioned on the acceptance by developing countries of reasonable international commitments. Congress also could provide tax and other export incentives to support the adoption of U.S. clean energy technologies. A post-2012 agreement could establish an international financing mechanism and address issues such as intellectual property rights. Determining the appropriate forms and level of support requires a far better understanding of developing countries’ needs and the barriers to achieving them. To the degree feasible, however, we believe that support for developing country efforts should take the form of market-based incentives that leverage private financial flows.

As I noted earlier, the Bali Roadmap presents an unprecedented opening to engage developing countries more deeply in the climate effort. To seize this opportunity, the United States must come forward with an offer that fairly addresses the legitimate needs of developing countries, while being realistic about the nature and level of commitment that can be expected in return.

4) Reaching Agreement Requires a Major U.S. Diplomatic Initiative

We believe that these three steps by the United States – enacting mandatory domestic emission limits, declaring a willingness to negotiate a binding commitment, and offering a package of incentives for developing country action – are essential preconditions for a comprehensive post-2012 climate agreement. But these steps must be accompanied by vigorous and sustained U.S. diplomacy both within and outside the U.N. negotiating process.

Within the U.N. process, the new Ad Hoc Working Group established by the Bali Action Plan must now agree on how it will take up the complex set of issues before it. Despite the tight deadline, it will not be feasible for the parties to go directly to negotiating commitments. First, they must come to a firmer common understanding of the central issues and the options for addressing them. Key among these are different commitment types and their potentials, specific technology needs, and financing mechanisms. The United States should fully engage in the Working Group process and help ensure that it focuses on the right issues in the right order.

Simultaneously, the United States should engage in intensive bilateral diplomacy to better understand the perspectives of other key countries and to seek common ground for a comprehensive agreement. Within the negotiations, issues often are debated only in general terms. To fully understand the concrete needs and concerns of other countries, it is better to engage them one on one. Trust and understanding developed on a bilateral basis will make a comprehensive agreement far more feasible.

The United States also can work outside the formal negotiating process to promote consensus among the group of major economies. The participants in the Pocantico dialogue I described earlier were among the first to urge a high-level dialogue among major economies as a prelude to formal post-2012 negotiations. The goal of the administration’s major economies initiative is to reach consensus among these key countries in 2008 as a basis for a global U.N. agreement in 2009. However, the administration brings to this initiative a specific vision of the post-2012 framework – one based on nationally defined programs, rather than binding international commitments. There was little indication at the first major economies meeting in September that other countries support this approach. Still, by aiming for agreement on discrete elements, rather than a comprehensive approach, the initiative could in the months remaining make a significant contribution. In particular, if the major economies were to achieve consensus on a long-term climate goal, or on an international technology fund, as the president has proposed, these could serve as important elements of the post-2012 agreement envisioned in the Bali Roadmap.

To summarize, I believe the Bali Roadmap presents an historic opportunity to mobilize an effective multilateral response to climate change, and it is incumbent upon the United States to lead both at home and abroad to ensure its success. I again commend the Committee for bringing the attention of the Senate to bear on these critical issues, and I thank you for the opportunity to present our views. I would be happy to answer your questions.

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