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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.

Equity and Global Climate Change Conference

Promoted in Energy Efficiency section: 
The Pew Center conference on Equity and Global Climate Change will bring together experts from a variety of disciplines and nationalities to explore how best to ensure fair and reasonable actions by all countries in addressing climate change.

April 17-18, 2001 - Washington, DC

Conference Press Release

The Pew Center conference on Equity and Global Climate Change will bring together experts from a variety of disciplines and nationalities to explore how best to ensure fair and reasonable actions by all countries in addressing climate change. Given critical differences among nations -- in their economies, their historic and projected emissions, and their vulnerability to climate change impacts -- achieving equitable international commitments is an extraordinary challenge. Speakers and panelists will examine the underlying economic, cultural, and ethical issues and how they influence this crucial debate. Through this conference, the Pew Center hopes to stimulate an ongoing international dialogue leading to the better understanding of equity concerns and solutions that all parties believe are fair.


Approaches to Equity

Equity concerns are at the very core of the climate change debate: Who bears the greatest responsibility for climate change? Who is at greatest risk? Who is best able to act? Even if we agree that equity is a goal, how do we define "equitable"? Many approaches to conceptualizing and addressing equity in the context of climate change have been advanced, including: per capita emission rights; various forms of "grandfathering;" allocating reductions according to ability to pay; sharing costs according to historic emissions; and combinations of these and other critiera. This panel will explore some of these approaches and will ask whether, ultimately, equity is more feasibly addressed through a political bargain than through a given principle or formula.

Economic Considerations

At the root of many equity concerns are stark economic realities. Countries face widely divergent costs in addressing climate change - both the direct costs of mitigation, and the opportunity costs of diverting scarce capital from other social needs. The stakes of not acting also vary widely; and those facing the greatest costs from flooding, drought and other climate change impacts may be those with the fewest resources to spare. While some developed countries are concerned about competitiveness impacts if other nations do not act, developing countries are reluctant to assume obligations that may jeopardize their economic development. This panel will explore these differing perspectives, and will examine opportunities to address economic inequities through technology transfer, capacity building, clean energy investment, and other climate change strategies.

Ethical, Moral, and Cultural Considerations

Equity concerns are also shaped by differing ethical, religious, and cultural perspectives. Some cultures and traditions place a higher priority on meeting collective needs and those of future generations. Some argue that developed countries must be willing to sacrifice the comforts of an energy-intensive lifestyle. Some hold more strongly than others to the creed of market efficiency. While these differences can exert a powerful influence on national perspectives, they are typically overshadowed by pure economic concerns. This panel will explore how these differences color the climate change debate, and how a better understanding of other cultures and traditions can lead to stronger international cooperation against climate change.

Fair and Reasonable Action: First Steps

The Kyoto Protocol attempts to address equity concerns in at least two respects: it sets binding emissions targets only for developed countries, reflecting broad agreement that it is their obligation to act first; and among developed countries, it sets differentiated targets reflecting differences in national circumstance. How equitable are these decisions? Negotiations over rules to implement Kyoto raise another set of concerns: How is fair representation on the body overseeing the Clean Development Mechanism ensured? What must developed countries do to fulfill their commitments on finance and technology transfer? This panel will examine the underlying rationale for agreed-upon measures such as differentiated targets, and explore ways to resolve other equity issues that arise within the existing climate framework.

Fair and Reasonable Action: The Path Forward

Ultimately, it will be impossible to achieve safe, stable atmospheric concentrations of greenhouse gases by addressing only developed country emissions. There is growing pressure in the United States and elsewhere for developing countries to take stronger action against climate change. Developing countries want greater recognition for efforts already underway and are unwilling to commit to stronger action, insisting that industrial countries first demonstrate real progress toward achieving their emission targets and fulfilling their commitments on finance and technology transfer. This panel will explore differing perspectives on this central issue, and consider when and how a real dialogue on developing country commitments can or should begin.

Climate Change After COP 6: The Prospects for U.S. and Global Action

Climate Change After COP 6: The Prospects for U.S. and Global Action

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

Environmental Finance Conference
Implementing JI & CDM:
Project Finance in a Carbon Economy
New York, NY

February 27, 2001

Thank you very much. It is a pleasure to be here as your keynote speaker, although I must say that I found the topic a little daunting, considering the (at least temporary) breakdown of negotiations in The Hague last November. On my way to New York from Washington, I was thinking about your gathering here to discuss the implementation of the Kyoto Protocol and trying to figure out what I could compare it to. And I thought of a few other conference topics that would appear equally problematic, if a tad optimistic at this precise moment in time. These include:

  • "Dot-Com Investments That Will Make You Rich"
  • "The Ins and Outs of Securing a Presidential Pardon" (this one is open to fugitive financiers only)
  • "U.S.-Iraq Policy: Toward Better Bilateral Relations"
  • And, last but not least, "Opportunities in the Cattle Export Business in Great Britain"

O f course, I am only joking. I believe it is important, if not essential, to continue thinking in serious ways about how to implement such Kyoto provisions as joint implementation and the Clean Development Mechanism. In my view, these mechanisms will prove essential to the success of the global effort to reduce atmospheric concentrations of greenhouse gases. And, figuring out how to make them work is a task we must be addressing with conviction right now.

That said, I would like to address three topics in my remarks today-and I hope I will also do so with conviction. The first is what happened in November in The Hague and why. The second is the prospect for progress on the climate change issue under President Bush. And, last but not least, I want to talk about the need for what I refer to as a second industrial revolution that entails an incremental and yet dramatic shift in worldwide energy use over the decades to come.

Reflections on COP 6

So let's begin by recalling those heady and propitious days last summer and fall, when a lot of people believed that the world might finally get serious about addressing the challenge of climate change at a November meeting in the Dutch capital. Nobody was expecting miracles, but there was hope that agreement could be reached on the key issues that needed to be resolved in order to allow countries to begin the process of ratifying the Kyoto Protocol. As the President of COP 6, Jan Pronk of the Netherlands, observed on the eve of the meeting:

"This is the chance for the industrialized countries to demonstrate that they take the issue of climate change very seriously."

As we all know, however, the industrialized countries missed their chance when the talks broke down over such sticking points as how to account for the role of forestry and land-use practices in keeping carbon dioxide out of the atmosphere. There was also no agreement on whether to place limits on how much of a country's emissions reductions can be achieved by actions taken abroad-the so-called supplementarity issue. Nor was there agreement on some of the critical issues involving the developing countries-such as technology transfer or funding for adaptation.

But the standoff in The Hague should not have come as a complete surprise. I know it is not considered polite to say "I told you so," but in a series of articles and speeches in the weeks and months before COP 6, I managed to raise a red flag about two of the three issues that I believe contributed to the meeting's demise. Of course, in hindsight, all three should have been perfectly obvious-a little like the instructions on the box containing a hotel shower cap: fits one head. Or, better yet, the instructions on a bag of airline peanuts: open packet, eat nuts.

But you didn't have to be nuts to see that the negotiators in The Hague were trying to do too much. This was the first red flag that I raised before the meeting. And, sure enough, when the two-week conference convened, negotiators were sweating over approximately 275 pages of text covering the full spectrum of tough political and technical issues. And the result, inevitably, was failure.

The second red flag I raised about the agenda for the meeting in The Hague was that everyone was too focused on the treaty's targets for emissions reductions and how they could be met in the 2008-2012 timetable. Countries went into the meeting knowing they had committed to reducing their emissions by a certain percentage, and what they wanted were provisions that would allow them to do this.

My point for some time has been that this approach gets it backwards. What we need to focus on is not the targets but the overall framework. And the goal should not be to structure the framework in such a way that it enables countries to meet targets to which they are already committed. Rather, it should be to create a framework that can stand the test of time-something that makes sense for both environmental and economic reasons. It may prove necessary-once that framework is fully formed-to reconsider whether the targets negotiated in 1997 are still viable. In fact, it may even make sense for the Parties to agree now that they will be prepared to revisit the targets and timetables if necessary once the framework is completed. That would free negotiators from the fixation on targets that made it so difficult to reach agreement in The Hague. I believe it was a mistake in Kyoto to set targets with no clear notion of what could be counted toward meeting them. Our goal now must be to avoid compounding that error.

Moving on to the third reason for the failure of the meeting in the Hague, I will admit that it was one I did not raise flags about. (Alas, nobody can be right 100 percent of the time). The reason was this: People simply were not prepared well enough to deal with the issues on the agenda. I suppose this could be related to the fact that negotiators were dealing with too many issues at once. But I think there is more to it than that. At The Hague, we saw a remarkable amount of confusion on the part of the negotiators about basic questions and negotiating positions. Was it possible to sequester carbon in trees and soils, and then accurately account for that sequestration, some asked? And, in a scene that was reminiscent of the War of the Roses, the members of the European Union engaged in very public spats over negotiating positions that should have been agreed well before the meeting.

The result was an ugly end to a meeting that could have provided another very important stepping stone on the path toward a successful international framework for addressing climate change. What we are left with instead is uncertainty about what happens next. As all of you know, new talks are being scheduled for late June or early July. These were originally scheduled for May but have been put off so that President Bush's administration could establish its policies and priorities.

However, my fear yet again is that it will be very difficult, if not impossible, for this new round of talks to deliver the breakthrough that some are hoping for. Right now, countries still are sorting through the rubble from the November negotiations and trying to figure out exactly what was resolved, if anything, and how. This will take some time. It also will take time for the EU to gather its wits and figure out exactly where it stands on some of these issues. My point is that the United States is not alone in having to engage in some serious soul-searching.

But the United States does face a special challenge. Right now, late June is exactly four months away, and I do not have any sense that the Bush Administration has yet had the time to devote any serious thought to the issue of climate change. (I am still waiting in vain for the state of the climate to be one of the President's "issues of the week," along with such concerns as education, tax cuts and health care. I guess you could say I am adopting a faith-based approach. But to no avail.)

Even when the President and his advisors do start formulating a position, they will need time to think it out, get reactions, present it and take other steps to build support. And, considering that this Administration's position is bound to be different than the position of its predecessor, all of this is going to take time-more time, I believe, than there is between now and June or even July. In addition, other countries will need time to digest a new position from the United States, and then to work with the Bush Administration to find common ground and reach a deal. Expecting all of this to happen in the next few months is like expecting an on-time flight out of LaGuardia. Sure, it can happen, but the facts suggest you'd be smart to plan for alternative scenarios-perhaps including overnight accommodations.

So instead of setting ourselves up for another disappointment over the summer, I say that everyone involved in this discussion has to be more realistic about what we can achieve and when. This means not rushing into a high-profile, high-stakes negotiation that is bound to fail again but exploring areas of potential agreement and chipping away, little by little, until we start seeing the form that an international framework might take. In other words, the meeting this summer should not be viewed as a decision meeting.

Prospects for Progress Under President Bush

What the future holds for the Kyoto Protocol, of course, depends to a significant degree on the actions of the United States-and, more specifically, on the new administration of President Bush. As we all know, the President stated very clearly during the presidential campaign that he believed climate change was a serious issue. He also stated very clearly that he did not support the Kyoto Protocol.

It seems to me that in addition to making the state of the climate an issue of the week (one can always hope), the new administration should undertake a very careful and thoughtful assessment of how best to deal with this issue, both globally and nationally. That the problem of climate change must be addressed is beyond question. And that it must be addressed rationally also is beyond question. Why? Because the downsides of not addressing climate change, or of addressing it in a dishonest or cavalier fashion, are far too large and too costly.

But, at the same time that there should be no illusions that we can somehow ignore the problem, no one should underestimate the complexities of the issue, nor the difficulties of reaching a strategy that will benefit both our environment and our economy and, at the same time, be politically acceptable both at home and abroad.

So let's look for a moment at some of the factors that might prompt President Bush to take a fresh look at this issue and chart a course for U.S. action.

First, there is the science. The Third Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), recently approved by scientists in Shanghai, shows more clearly than ever that a long-term global warming trend is occurring and is being driven by human actions. The IPCC now expects the global average surface temperature to rise by between 2.5 and 10 degrees Fahrenheit over the course of the 21st century, a much greater increase than that projected just five years ago, with disturbing increases in sea level rise, droughts, floods, and ecosystem destruction. The United States will not be immune from these changes. In fact, temperature increases in the United States are expected to exceed global averages. If we need a reason to act, this latest science certainly provides one.

A second factor that should cause the Bush Administration to pay attention to climate change is international diplomacy. A majority of governments around the world-led by our allies in Europe and Asia-view this issue seriously and will expect the United States to do the same. Indeed, if the international rules for reducing greenhouse gas emissions are not agreed to by the middle of 2002, President Bush will likely face some difficult moments with world leaders at the "Rio+10" meeting scheduled for July 2002 in South Africa. As with many other global issues, the United States can either lead the way in a constructive, consensus-building fashion, or it can turn its back on the world and go its own way, which would only invite other countries to challenge our leadership and national interests more vigorously.

The third factor that argues for greater attention to this issue from the White House is the logic of business and economics. While in the past, U.S. industry was uniformly opposed to seriously addressing climate change, today many leaders in the business community support the call for action. Many major companies affiliated with the Pew Center have accepted the science and have established ambitious emissions reduction targets. These include BP, Shell, DuPont, Intel, Toyota, United Technologies, and many more. In fact, I am happy to announce today that five new companies are joining the Pew Center: Trans Alta, Interface, Waste Management, California Portland, and Cummins Engine. What all of these companies have in common is that they recognize that addressing this issue will help make their businesses more efficient, more competitive and more attractive to investors over the long term. What they want is certainty about the rules under which they will operate internationally. And what they hope to see are the kind of market-oriented rules that will only come about if the United States takes an active role in the negotiations.

A Short-Term Agenda for the New Administration

What can and should President Bush and his Administration be doing to move this issue forward and address climate change in a constructive, moderate way? As I see it, the White House can take three steps over the short term:

The first step is to send a clear signal that this issue will not be ignored. During the campaign, then-Governor Bush conveyed a mixed message, saying that climate change is an important issue that deserves an active response, while arguing that we mustn't rush into unwise actions while the science is still evolving. The former message is credible and in tune with the realities of what we know about the science. As for the second message, no one would want this country or any other to rush into "unwise" actions. But act we must. And the challenge that the Bush Administration must confront-and head on-is how to take significant steps that will protect the environment in a way that will allow for a growing global economy.

The next step the President can and should take is to speed up the pace of domestic action. The President's campaign platform called for tax credits for electricity produced from renewable and alternative fuels, as well as legislation requiring electric utilities to reduce emissions of carbon dioxide. These are sound ideas, and as the 107th Congress takes up farm, energy and tax legislation, there will be additional opportunities for the President to propose creative, bi-partisan solutions.

Last but not least, the President needs to show leadership on this issue globally. Candidate Bush condemned the Kyoto Protocol as "inadequate" and "unfair" to America. But he should resist the advice of those who would have the United States walk away from the pact. A better (and more practical) approach would be to engage in the discussions with the goal of making this international agreement into one that works - for the United States, for the rest of the world, and for the global climate itself.

As the Bush Administration ponders its next moves on climate change, it can take heart in knowing that these kinds of actions will be supported by the science, by key allies across the globe, and by a growing number of leaders in business, Congress and the states.
A New Industrial Revolution

Of course, government responses to the challenge of climate change, whether undertaken domestically or internationally, will not work without the cooperation and active involvement of industry. Global climate change, in fact, calls for no less than a second industrial revolution. It will be a revolution spurred on not just by environmental concerns but by other forces as well--including new technologies, the emergence of economically viable alternative energy sources, and the relentless drive in business for new efficiencies and new sources of income and growth.

Energy industry leaders already are coming to terms with a future that will be markedly different from the industry's past. In a series of articles in The Economist earlier this month, Mark Moody-Stuart of Shell made what I consider to be a remarkable statement coming from an oil industry executive. When asked what the future holds for his company, he said: "We want to meet our customers' needs for energy, even if that means leaving hydrocarbons behind."

Of course, no one is predicting that hydrocarbons will be left behind tomorrow, but we already are seeing important shifts in the energy sector's priorities and investments. And I believe we are only in the first phase of what I see as a three-phase process-I suppose you could call it an "incremental revolution." During the first phase, companies are coming to terms with the environmental consequences of their business practices and investments. And many are taking significant steps to reduce emissions and minimize the impact of their operations on the environment. By increasing their energy efficiency, for example, companies are reducing short- and long-term costs while taking measures that, when broadly applied, will have important effects on the carbon intensity of our economy and, of course, on climate change. And, by exploring carbon sequestration and emissions trading, companies are setting themselves up to succeed in an environment where these practices will form key parts of the backbone of national and global climate regimes.

The second phase in this process is something we are seeing already; there will clearly be some overlap among the three phases of this incremental revolution. Phase Two entails farther-reaching strategies to reduce the carbon intensity of the energy sector and the economy as a whole-primarily by moving to cleaner-burning fossil fuels. We all know that natural gas demand has surged in the last decade. According to the International Energy Outlook for 2000, natural gas remains the fastest growing component of world energy consumption. Between 1997 to 2020, gas use is projected to more than double worldwide-with environmental concerns as an important driver. In addition to natural gas, I believe we will see shifts in this second phase to hydrogen as a fuel source, but primarily in those cases where the existing fossil fuel infrastructure can still be used.

This brings me to the third and final phase in the incremental revolution that will change our global energy future. And it is in this phase that the term "revolution" is, as the British would say, spot on. As I see it, the capital-intensive and carbon-intensive technologies of the 20th century will give way in Phase Three to an economy that is increasingly driven by hydrogen. But here we are likely to see not a fossil fuel infrastructure, but one that is driven mostly by renewables.

Of course, this revolution will not take place tomorrow, and it will certainly not be free. But we are beginning to see industry leaders making serous commitments to everything from solar energy to biomass to fuel cell technology. Is there a role for government in ensuring a smooth transition? Of course. In order for the transition to work, we will have to manage our short-term needs (whether they are related to energy supply, availability, price or demand) while at the same time planning thoughtfully for the future. Government can and must play an active role in that process. It is for governments to provide the objectives that we have to meet, the framework for industry to innovate, and the incentives for newer, cleaner energy supplies, all of which will be necessary as we move toward an increasingly carbon-free economy.

But let me say clearly that in discussing the long-term, I am not saying that nothing can be achieved in the short term. Rather, our short-term strategy should be to focus on such priorities as increased efficiency, increased use of cleaner-burning fuels, carbon sequestration, emissions trading and the Clean Development Mechanism-steps that make it cost-effective to take action to reduce atmospheric greenhouse gases now. We should also focus on encouraging maximum participation in any international climate regime we establish by developing realistic targets and timetables that can then be tightened as time goes on.

Then, looking ahead, we need a framework for action that will accommodate-and in many ways, encourage-the dramatic shifts in the energy sector that I have discussed. All of this will require the world's governments to make a serious commitment to collaboration, compromise and, most of all, progress.

In the same issue of The Economist that I mentioned earlier in my remarks, the magazine observes that it may take "25 or 50 years, or even a century" for hydrogen to become the world's dominant energy source. But however long it takes, according to the article, "it is clear that the world already is beginning to move beyond the age of fossil fuels and towards the hydrogen era." The article closes with four words that I will leave you with today: "Let the revolution roll."

I thank you very much for your time, and I would be delighted to answer any questions you may have.

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: Climate Change Could Cause Major Changes in U.S. Ecosystems, New Report Says

For Immediate Release :
Wednesday, December 13, 2000

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

Climate Change Could Cause Major Changes in U.S. Ecosystems, New Report Says

Washington, DC -- Global climate change will cause major changes in natural ecosystems - and the plants and animal communities that make up these ecosystems - across the United States, according to a report released today by the Pew Center on Global Climate Change.

The report describes the very real possibility that global warming will disrupt the integrity of many of the terrestrial ecosystems on which we depend - ecosystems that provide humans such valuable goods and services as foods, raw materials, recreational opportunities, clean air and water, and erosion control. The importance of ecosystems extends beyond economics and tangible benefits, with many people placing a high value on the spiritual and aesthetic role nature plays in their lives. Despite the crucial roles of terrestrial ecosystems, they are increasingly threatened by the impacts of a growing human population, through habitat destruction and air and water pollution, and now as a result of global climate change.

"This report describes how climate change is likely to profoundly alter the natural environment," said Pew Center President Eileen Claussen. "It underscores the point that domestic and international action to deal with climate change is needed sooner rather than later." The report was commissioned by the Pew Center and written by two ecologists, Dr. Jay R. Malcolm of the University of Toronto and Dr. Louis F. Pitelka of the University of Maryland Center for Environmental Science. Among the authors' conclusions:

  • As the earth warms, the distribution of terrestrial ecosystems will change as plants and animals follow the shifting climate. For example, the eastern United States will likely lose many of its deciduous forests as climate zones shift northward. Thus, sugar maples, so much a part of northeastern states such as Vermont, are likely to be replaced by oaks. Likewise, some habitats - such as those found in the high elevations in mountainous regions of the West - are likely to shrink in a warming world.
  • Both the amount and rate of anticipated warming pose threats to the nation's biological diversity. The rate of anticipated climate change is estimated to be ten times that seen in the last Ice Age. As a result, certain species may face dwindling numbers and even extinction if they are unable to migrate fast enough to keep up with the changing climate.
  • Climate change is likely to alter the quantity and quality of the various goods and services that ecosystems provide. For example, climate change is likely to affect the ability of ecosystems to filter air and water pollutants and to control soil erosion.
  • Modeling studies estimate that the productivity of plants could change little or could increase substantially. However, these productivity changes will not be uniform and some regions could see declines. While productivity may rise, so could decomposition and, with it, the release of carbon to the atmosphere.
  • The effects of climate change on ecosystems must be considered in the context of a range of human-caused impacts on ecosystems. Overall, the new threat of climate change is likely to be especially damaging for ecological communities and species that have suffered the greatest disruption from human development. Natural ecosystems already under stress because of air and water pollution will have diminished capacity to adapt to climate change. Likewise, habitat destruction and fragmentation will lessen the chances that species will successfully migrate to more suitable climates and habitats.
  • It is important to remember that ecosystems are inherently complex, and our ability to predict how ecosystems will respond to climate change is limited. This uncertainty will limit our ability to anticipate and minimize the effects of climate change on ecosystems. In order to maximize nature's own capacity to adapt, government officials and community leaders should continue to support efforts to conserve biodiversity and protect natural systems.

A complete copy of this report and other Pew Center reports can be accessed from the Pew Center's web site, www.c2es.org. About the Pew Center: The Pew Center was established in May 1998 by the Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is a nonprofit, non-partisan and independent organization dedicated to providing credible information, straight answers and innovative solutions in the effort to address global climate change. Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs, leads the Pew Center.

The Pew Center includes the Business Environmental Leadership Council, a group of large, mostly Fortune 500 corporations all working with the Pew Center to address issues related to climate change. The companies do not contribute financially to the Pew Center; it is solely supported by contributions from charitable foundations.

Press Release: Pew Center Report Urges Reliance on Strong National Programs

For Immediate Release:
November 15, 2000, 10:00 a.m.

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

"Meaningful" Compliance System: A Key Test for Global Climate Negotiators
Pew Center Report Urges Reliance on Strong National Programs

Washington, DC - The success and credibility of any global climate agreement will depend in large measure on whether it has provisions to ensure "meaningful compliance," according to a paper issued today by the Pew Center on Global Climate Change.

As Parties to the Kyoto Protocol gather in The Hague, November 13-24, in an effort to finalize rules for implementing the treaty, a central issue is how to guarantee that nations comply with their commitments to reduce greenhouse gas emissions. This presents a complex challenge because the economic and social behaviors that drive anthropogenic greenhouse gas emissions are linked to so many facets of modern life. Another concern is the nature of multilateral agreements, where compliance is more often a matter of will than of compulsion.

"Traditionally, international agreements have had weak or ineffective compliance systems because of sovereignty concerns," said Eileen Claussen, President of the Pew Center on Global Climate Change. "There are ways, however, to encourage meaningful compliance so that reduction targets are actually met by the broadest number of Parties."

"The importance of countries actually complying with their emissions targets cannot be overstated," added Claussen. Furthermore, "the damages from non-compliance-even if later remedied-can be a loss of the trust and good faith that underpins international agreements. The approach to compliance described in this report is preferable to ensuring compliance by making the rules weaker."

National Programs at the Core of Meeting International Commitments

The new Pew Center report was authored by two experts, one in the field of international compliance and enforcement-Eric Dannenmaier, Director of the North-South Center Environmental Law Program-and the other in economics-Isaac Cohen, President of INVERWAY, LLC and former Director of the Washington Office of the UN Economic Commission on Latin America and the Caribbean. The report examines some of the principles and strategies that can help ensure compliance with the international climate change treaty. The report concludes that:

  • National compliance systems should be promoted as a principal means to ensure compliance with the Kyoto Protocol or any future climate change agreement and should seek to balance market-based instruments with strong enforcement;
  • National compliance with international climate change agreements must be verifiable to ensure credibility, and monitoring and verifying compliance with the Kyoto Protocol can benefit significantly from integrating existing national compliance systems into the international system; and
  • Broad participation in any climate change regime is as important as meeting the commitments of the agreements themselves; the Kyoto Mechanisms-International Emissions Trading, Joint Implementation, and the Clean Development Mechanism-can play an important role in boosting both participation and compliance.

A complete copy of these and other Pew Center reports can be accessed from the Pew Center's web site, www.c2es.org.

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

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

Promoting Meaningful Compliance with Climate Change Commitments

Download Full Report

Promoting Meaningful Compliance with Climate Change Commitments

Prepared for the Pew Center on Global Climate Change
November 2000

Eric Dannenmaier, North-South Center, Environmental Law Program
Isaac Cohen, INVERWAY, LLC

Press Release

Download Entire Report (pdf)


Eileen Claussen, President, Pew Center on Global Climate Change

The ultimate success and credibility of the Kyoto Protocol to the United Nations Framework Convention on Climate Change, or any future climate agreement, will depend on whether most, if not all, Parties meet their greenhouse gas emission reduction commitments. A critical factor in achieving this goal is having a system that is able to identify, sanction, and also deter non-compliance. Traditionally, international agreements have had weak or ineffective compliance systems because of sovereignty concerns. There are, however, means outside the compliance regime of the Protocol to work toward similar outcomes.

The Pew Center has commissioned this report to provide insights on several factors that are often overlooked in the debate on compliance: the role of national compliance systems; national and international monitoring and verification; and the willingness of Parties to participate in the climate change regime. These three factors can significantly contribute to achieving a meaningful and effective compliance system. The report concludes that:

  • National compliance systems should be promoted as a means to ensure compliance with the Kyoto Protocol or any future climate change agreement and should seek to balance market-based instruments with strong enforcement;
  • National compliance with international climate change agreements must be verifiable to ensure credibility, and monitoring and verifying compliance with the Kyoto Protocol can benefit significantly from integrating existing national compliance systems into the international system; and
  • Broad participation in any climate change regime is as important as meeting the commitments of the agreements themselves; the Kyoto Mechanisms can play an important role in boosting both participation and compliance.

The importance of Parties actually complying with their targets cannot be overstated. While this report outlines benefits from having flexibility and balance in compliance regimes, the damage from non-compliance — even if later remedied — can be a loss of the trust and good faith that underpins international agreements. We prefer the approach to compliance described in this report rather than ensuring compliance by making the rules weaker.

The Pew Center and the authors appreciate the valuable input and thoughtful comments of Robert Nordhaus, Kyle Danish, Glenn Wiser, Alistair Lucas, and Thomas Husted. The authors would also like to thank Gabriela Donini, Adriana Faria, Maria Junco, and Tricia Choe for their research assistance.

Executive Summary

As Parties to the UN Framework Convention on Climate Change hammer out the details of Kyoto Protocol implementation, a central issue has been how to guarantee compliance with the commitments being made to reduce greenhouse gas (GHG) emissions. Clearly, the promises of the Framework Convention and the Protocol cannot produce desired results unless the pledges are met.

Yet meeting those pledges is a complex task because the economic and social behaviors that drive anthropogenic GHG emissions occur across a broad array of sectors and reach almost every facet of modern life. The ability to assure compliance with GHG emission reduction commitments is constrained by the inherent nature of the commitments — focused on environmental results rather than observable behaviors — and by the nature of multilateral environmental accords, where compliance is more often a matter of will than compulsion.

Despite these constraints, progress under multilateral climate change regimes requires that emission reduction commitments be fully met, at a domestic level, by the broadest number of Parties. In short, the success and credibility of the Kyoto Protocol, or any future climate accord, will depend upon meaningful compliance. This report explores the importance of meaningful compliance in the context of climate change and examines some of the principles and strategies that can help reach that goal.

Recognizing that the compliance regime under the Kyoto Protocol is still the subject of debate and that rules and institutions are still being designed internationally and domestically, the report does not speak expressly to this debate, nor offer guidance on underlying policies and measures to implement the Protocol. It focuses instead on three compliance concerns that the authors believe are fundamental to any meaningful regime and may have special priority for climate change. The report explores how meaningful compliance can be advanced where:

  • National compliance systems are promoted, consistent with domestic priorities and legal tradition, as a core strategy to meet international commitments;
  • Monitoring and verification are made routine and credible through cooperative effort and integration with national systems; and
  • Participation in the Kyoto Protocol, and in efforts to meet broader climate change policy goals, is encouraged among the broadest possible range of states.

T hese factors may not be sufficient to guarantee the ultimate success of an international compliance climate change framework but, the authors suggest, they are necessary to make any real progress.

Examining the first of these concerns, the report looks to compliance regimes that begin at home — on the domestic policy front — albeit with cooperation and multilateral support where needed. The authors reason that the role of states as regulators — translating their international climate change commitments to domestic action — is critical. States are more capable than multilateral institutions of adapting policy choices to their national needs and priorities, and better able to claim jurisdiction over relevant entities where necessary to compel attention to those choices. Concerns about sovereignty that complicate international compliance and limit international institutions can be minimized when compliance efforts are undertaken in a national context under the rules of the prevailing legal system.

Examining relevant national models, the authors find that legal frameworks that balance supportive and adaptive tools with corrective measures can promote compliance domestically. The report highlights successful frameworks that have achieved this balance while establishing a regulatory baseline of minimum standards and giving compliance institutions the flexibility to obtain environmentally sound results. The report also examines how the choice of consequences other than penalties can be used to promote compliance, and how the allocation of penalties, when collected, can be shaped to serve the objectives of GHG emissions reductions more directly.

The authors review the role of voluntary compliance programs and conclude that they may be important supplements to, but not substitutes for, enforceable targets and government oversight. They also conclude that self-assessment and reporting can significantly increase cost-efficiency, and that incentives, including steps to minimize liability for self-reported problems, might be useful in promoting a greater use of self-auditing programs.

The authors also review the fundamental role that civil society can play in promoting effective compliance at a national level, and explore how expanding this role through access to information, policy formulation, and compliance proceedings can help achieve GHG emissions reduction goals.

Taking their analysis of national strategies back into the context of the Framework Convention and the Kyoto Protocol, the authors argue that monitoring and verifying compliance with climate change commitments are critical to assuring the integration of climate commitments into national systems. Yet they note that such oversight will be uniquely challenging because emissions will be estimated, not directly measured, and because implementation strategies will vary greatly.

In light of these challenges, the report outlines principles and strategies for effective monitoring and verification and discusses their relevance in the climate change context. The report examines how direct inspections and monitoring, transparency and openness, independent study and verification, redundancy, and false-reporting deterrence can serve as oversight tools, adding certainty and credibility to compliance assurance.

The authors also highlight reliance on international and regional cooperation — already at the heart of the Framework Convention and the Kyoto Protocol — as a basis for collecting and verifying credible data. Research, information exchange, data gathering, and scientific exchanges envisioned by the Parties to promote the general goals of the accords can also be used to support performance monitoring and verification by building trust and allowing access to compliance data and performance issues on a real-time basis. This cooperative approach may also help uncover concerns before they lead to systemic failures, and thus promote corrective action even as performance is monitored.

The report explores the importance of using national compliance systems as data sources for multilateral monitoring, and integrating the work of national agencies with international compliance and verification institutions. The authors suggest that the international emissions reporting process will gain credibility where estimations are drawn as directly as possible from domestic systems rather than a separate process designed solely for the purposes of the Kyoto Protocol. Efficiencies and accuracy can also be realized where domestic compliance institutions play a direct role as national focal points for GHG emissions reporting and verification.

Finally, the authors examine an issue not always tied to the compliance debate — the question of how to promote participation of Parties in the climate change regime. If meaningful compliance is to achieve real environmental results, some attention must be paid to the number of countries actually willing to pursue those results. This is particularly true of the Kyoto Protocol Annex B commitments, where success is defined as an aggregate average of emissions reductions. The Protocol, almost by definition, cannot be effective if only a handful of states accept and observe its conditions. In essence, a regime that promotes national participation as well as national performance can help assure the Protocol's long-term success.

Thus, the authors examine how a climate change compliance regime might be designed to be compelling to participants even as it compels performance. They suggest that nationally distinct compliance systems, tied to an integrated and cooperative international monitoring effort, can promote greater participation of Parties in the climate change regime — through the Framework Convention, the Kyoto Protocol and beyond.

In sum, the authors' analysis of these three separate but related themes of national compliance systems, monitoring and verification, and participation lead to the following principal findings:

  1. Meaningful compliance with climate change commitments can best be achieved where promises made internationally are embraced domestically (promoting behavioral change within communities whose actions are most likely to achieve results), and where participation is maximized across the broadest possible range of states.
  2. National compliance systems should be promoted as a core strategy for assuring compliance with the international climate change regime because states are more capable of making policy choices suited to their national needs and priorities, and better able to claim jurisdiction over relevant entities where necessary to compel attention to those choices.
  3. Effective national compliance systems tend to balance and combine market-based mechanisms and incentives with regulatory models suited to domestic priorities — emphasizing supportive and adaptive measures, but leading to corrective and punitive responses where necessary.
  4. Monitoring and verifying compliance will be substantially aided by using the cooperative mechanisms of the Framework Convention and the Kyoto Protocol in part to oversee and complement national data gathering and emissions estimation, and by integrating existing national compliance mechanisms and institutions into the international system.
  5. Broad state participation in climate change regimes may be as important as national performance, and any meaningful compliance system should seek to encourage participation even as it discourages non-compliance.
Eric Dannenmaier
Isaac Cohen

Press Release: New Report Explores Ways to Encourage Consumers To Buy Energy-Efficient Home Appliances

For Immediate Release:
October 31, 2000

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

New Report Explores Ways to Encourage Consumers To Buy Energy-Efficient Home Appliances

Washington, DC - Public policies to encourage turnover of aging home appliances and purchases of more efficient models could help reduce the emissions linked to global warming, according to a new report released by the Pew Center on Global Climate Change.

"The economics are generally attractive for consumers to upgrade to energy-efficient models when they replace old or broken appliances," said Eileen Claussen, President of the Pew Center on Global Climate Change. "But without targeted public policies, consumers may be unaware of the potential cost savings and environmental benefits of doing so."

"This important Pew Center report illustrates how the use of energy-efficient appliances can help combat climate change," said Jeff Fettig, President and CEO, Whirlpool Corporation. "At Whirlpool, we believe that sound policy can stimulate companies to produce more energy-efficient products and encourage consumers to buy them."

"At Maytag, the extraordinary consumer acceptance of our Neptune washer provides clear evidence that consumers will purchase environmentally friendly appliances if those products also provide superior performance," said Lawrence J. Blanford, President, Major Appliance Division, Maytag Corporation. "Consumer education programs, such as the recent Boston washer study conducted by the Department of Energy and Maytag, bring the message to consumers that they and the nation benefit when they replace their older, less efficient appliance with a newer, high efficiency model."

Lessons On What Works, What Doesn't

The report, entitled "Global Warming and Appliances: Increasing Consumer Participation in Reducing Greenhouse Gases," was written by two leading experts in the field: Everett Shorey of Shorey Consulting, Inc. and Tom Eckman of the Northwest Power Planning Council.

The paper frames the policy issues by identifying the major home appliances that require the most electricity, such as refrigerators, clothes washers, and room air conditioners. Then it analyzes the economic ramifications for consumers of various appliance purchase options. Next it identifies important consumer characteristics to be considered at different stages in the appliance purchase process. Finally, it reviews past attempts to influence consumer choice through public policy initiatives and suggests how new initiatives could be targeted more effectively.

Experience from these past programs has demonstrated that:
  • Well crafted programs including rebates, publicity, and assistance in disposing of old appliances appear to motivate consumers to replace refrigerators before the end of the expected life of the appliance. It is likely that the refrigerator experience can be generalized to other appliances.
  • There is little or no evidence that consumer tax credits are effective in influencing a significant number of consumers to change their purchasing behavior.
  • Energy labels and the US EPA's Energy Star logo are good indicators of cost-effective and energy-efficient appliances, but the labels in themselves are insufficient to cause substantial change in consumer purchasing practices.

The more successful programs offer insights that should drive the development of any future programs:

  • It is much easier to influence consumers who are actively engaged in appliance purchases than to influence the general public.
  • Retail appliance salespeople have significant influence on consumer choice. Incentives aimed at the salesperson, coupled with simple sales tools, can steer consumers in the direction of energy-efficient appliances.
  • Direct financial incentives for consumers may not be necessary.
Continuation of Solutions Series

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

A complete copy of these and other Pew Center reports can be accessed from the Pew Center's web site, www.c2es.org.

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

The Kyoto Mechanisms and Global Climate Change

The Kyoto Mechanisms and Global Climate Change: Coordination Issues and Domestic Policies

Prepared for the Pew Center on Global Climate Change
September 2000

Erik Haites, Margaree Consultants Inc.
Malik Amin Aslam, ENVORK Research And Development Organisation

Press Release

Download Entire Report (pdf)

Executive Summary

The Kyoto Protocol sets greenhouse gas emissions limits for 2008-2012 for 38 developed coun-tries. Developing countries have no emissions limits. The Protocol also creates three "mechanisms" that enable countries to reduce the cost of meeting their emissions limits. The nations of the world are now negotiating the detailed rules for implementing the Protocol, including the three Kyoto Mechanisms.

A number of countries have made specific proposals to restrict the use of the Mechanisms to achieve environmental or equity objectives. Other countries are arguing for an unrestrictive approach to improve economic efficiency. In addition, the lack of integration among the three Mechanisms may inadvertently restrict or bias their use. Finally, the extent to which countries may avail themselves of the Mechanisms depends both on the rules for the Mechanisms and on the domestic policies adopted by the developed countries to meet their commitments.

This report evaluates proposed rules for implementing the Kyoto Mechanisms in terms of their implications for equity, environmental integrity, and economic efficiency, and discusses coordination of domestic policies with the Kyoto Mechanisms. The authors conclude that:

The Kyoto Mechanisms have the potential to dramatically reduce the costs of meeting the Kyoto commitments. The Kyoto Protocol allows nations to fulfill part of their emissions reduction obligations by purchasing emissions reductions from other nations. Because greenhouse gases (GHG) lead to global effects, it does not matter, from an environmental perspective, where GHG reductions occur. However, because countries and businesses face widely differing control costs, it matters greatly from an economic perspective where GHG reductions occur. Hundreds of analyses using a wide array of economic models agree that the costs of controlling GHG emissions are significantly lower if emissions trading is permitted than if each nation has to meet its emission reduction responsibilities domestically. The broader the trade possibilities, the lower the costs of control.

The rules should allow substitution among the different Mechanisms. Some countries have proposed limiting substitution (fungibility) among the three Mechanisms. Others argue that the Protocol does not allow full fungibility. To limit such substitution, the rules governing use of the Mechanisms would have to be very restrictive. Even then countries could develop means to circumvent the restrictions. It would be better to simply allow substitution among the Mechanisms.

The rules for International Emissions Trading should allow "legal entities" (emitters, emissions brokers, etc.) to participate. Legal entities should be allowed to participate in emissions trading, just as they are allowed to participate in Joint Implementation, the Clean Development Mechanism, and international trading of other goods and services. If governments rather than legal entities trade, the potential efficiency gains of trading cannot be realized because governments do not know the compliance costs faced by the emitters. If the international rules don't allow legal entities to participate, individual governments could circumvent those rules, if they wish, by establishing internationally tradable "obligations to transfer." Rather than encourage the development of complex legal devices, countries should simply agree to allow legal entities to participate in emissions trading.

Lack of harmonization among the three Mechanisms may inadvertently restrict their use. There will be differences in design among the Mechanisms because their purposes vary. For example, only one of the three Mechanisms is designed to promote sustainable development in developing countries. However, an important objective of each of the Mechanisms is to allow legal entities and nations to use the most cost-effective means available to comply with their domestic and international obligations. Differences in rules among Mechanisms that are unrelated to differences in their purposes reduce economic efficiency and should be minimized to the extent possible.

Significant penalties for non-compliance and effective enforcement of those penalties are crucial to the environmental integrity of emissions trading. If the penalties for non-compliance with national emissions limitation commitments are relatively weak, emissions trading enables a country to benefit financially through non-compliance. Such behavior reduces the value of the allowances held by governments and legal entities. Liability proposals seek to limit the extent of such non-compliance by limiting sales to allowances expected to be surplus to the seller's compliance needs. Liability proposals differ in their environmental effectiveness, their economic efficiency, and their impact on the timing of transactions. Negotiators should adopt rules that are maximally effective in encouraging compliance with minimal increase in cost or environmental risk.

The Mechanisms are most amenable to use by countries that adopt domestic cap and trade systems. Countries will need to implement domestic policies to control emissions by different sources if they are to meet their emissions limitation obligations. The cost of compliance with domestic policies can be minimized by giving sources access to the Kyoto Mechanisms to the extent allowed by the international rules. Use of the Mechanisms is easiest to structure for participants in a domestic cap and trade system. However, the Mechanisms could be used, albeit with some difficulty, by countries that adopt emissions taxes or that specify the means of compliance through some types of regulations or negotiated agreements.

Erik Haites
Malik Amin Aslam
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