7th IETA Forum on the State of the Greenhouse Gas Market

REMARKS BY EILEEN CLAUSSEN, PRESIDENT, PEW CENTER ON GLOBAL CLIMATE CHANGE 

7th IETA FORUM ON THE STATE OF THE GREENHOUSE GAS MARKET
WASHINGTON, DC 

September 27, 2007  

Thank you very much.  I am honored to be a part of IETA’s very impressive program.  I was looking over the schedule for your three days here in Washington, and it’s really quite remarkable.  The program here, and the success of this event, is just one more tribute to Andrei’s leadership of this great organization—he has steered IETA to a leadership role on the climate issue, and I wish him all the best in his new position.   

Not only is the program very substantive and strong, but IETA seems to have a superior sense of timing, too.  This forum is taking place at a truly amazing moment— a blizzard of climate activity and meetings, a flood of proposals for domestic and international action, the melting away of industry resistance. Scientists say to expect more extreme weather as a result of climate change, and it appears it’s already here.   

And even though the China Olympics don’t start until next summer, we already have an Olympics competition going on as countries lay out their climate plans.    

  • Most countries, it appears, plan to compete in the biathlon – growing their economies while limiting emissions growth.
     
  • Then there is the synchronized swimming event, where the countries of the EU will try to align their climate activities without the whole thing turning into a freestyle contest. 
     
  • And the United States, under the current Administration, is favored in the stationary target-shooting event.  This, of course, is an event where you don’t really have to move from where you are now, but you make an awful lot of noise.  And, of course, participation is entirely voluntary.  We’ve actually become quite good at this here in America.   

Seriously, this is a remarkable moment.  Consider all of the other climate change-related events going on.  Of course, we had the Secretary General’s sessions at the United Nations in New York at the start of the week, and right now, also here in Washington, there is President Bush’s meeting of major economies.  In addition to these, there are all kinds of conferences and meetings: the Pew Center did two, the U.N. Foundation is doing one; the Brookings Institution did one.  And there is also the annual meeting in New York on the Clinton Global Initiative, which includes a very substantive track on energy and climate change.   

And, of course, these events follow fast on the heels of the Vienna climate change talks in August, and it is not long before the very important U.N. Climate Change Conference in Bali, where I hope we will see real progress toward an effective, post-2012 framework for international action.   

I mention all of these other events because things are heating up on this issue in more ways than one.  And progress, I believe, will depend on finding a way to bring people together and forge practical and effective climate solutions that can draw broad support.  This is what I call the “sensible center.” 

Now, I am sure all of you are familiar with Google maps.  This is where you go online and you get detailed directions by typing in a starting and an ending address.  Well, today, I’d like to borrow the Google maps approach and see if it can help us find our way to the sensible center, if it can provide some insights on how to get to the place where all of us (or at least most of us) want to go.  

So first we need a starting address—and that’s easy enough.  Let’s look at where things stand right now on this issue.  And that means starting where every conversation about climate change must begin: with the science.  All of us are familiar with the latest findings from the IPCC.  “Warming of the climate system is unequivocal,” they tell us.  They also talk about a 90-percent-or-greater chance that we (humanity) are the cause of this—and a 90-percent-or-greater chance that the world will see more hot extremes, heat waves and heavy precipitation events. 

Just last week, we learned that Arctic sea ice is now at its smallest recorded extent.  There is simply no denying any more that our climate is changing, and that human activities are largely to blame. 

But, despite the science, despite knowing we have a very serious problem on our hands, we continue to burn coal at an alarming rate—China alone is building a new coal-fired power plant every week to 10 days.  The world continues to consume 83 million barrels of oil per day.  Here in the United States, we continue to debate back-and-forth about how to address this issue as a nation—Should we do cap-and-trade?  Carbon tax?  Voluntary approaches only?  And, at the global level, we continue to wander about in this no-man’s land we’ve created between Kyoto’s short-term targets and what comes next.   

All of this is part of our starting address—where we are now as we consider how to get to the place where we ultimately want to go.  However, there are also signs of hope, signs of progress.  Here in the United States, for example, we see an increasing number of states taking independent action to establish targets, experiment with trading, and otherwise reduce their contribution to the climate problem.

  • California, as you all know, has an ambitious set of enforceable emission targets, and the state also is a part of the Western Climate Initiative, together with five other western states and the provinces of British Columbia and Manitoba, all are committed to agreeing on the design of a cap-and-trade program by next August.
     
  • The Regional Greenhouse Gas Initiative, including 10 Northeastern and Mid-Atlantic states, aims to get going in 2009.  Right now, the states are working on adopting the model rule and setting up auctioning and allocation.
     
  • And think of Florida’s ambitious program and the 25 states with renewable portfolio mandates.

At the same time that we see these states taking the initiative, we see members of Congress putting forward very serious proposals (with bipartisan support) aimed at limiting emissions at the national level.  We have had more than 120 hearings on climate change since January, and we have numerous bipartisan bills on the table and emerging.   We are clearly on our way here in the United States—and our journey is aided, in large part, by corporate leaders embracing climate policies that in the past would have been universally condemned by U.S. industry.   

So this is our starting address.  And it is honestly a mixed-bag kind of a place.  A place where we are not doing nearly enough to address this looming crisis, but where there are these signs of hope.  Which brings us to the next question: Where do we want to go from here?  What is our ending address? And our ending address, I believe, is a destination we all can agree on.  That place may not have an exact zip code or street number, but we can describe it in enough detail, I believe, to get a solid set of directions.   

It is a place where the United States and other major emitting countries are--each and every one of them--doing their part to protect the climate.  It is a place where the world is united in pursuing the goal of the U.N. Framework Convention on Climate Change, which was signed by the United States and 190 other nations—nearly every nation on this earth.  And that goal is to “avoid dangerous anthropogenic (or human-cased) interference with the climate system.” 

As I said, the interesting thing about this place we want to get to is that there is no real dispute about it.  It’s how to get there that’s in dispute.  The only thing I can compare it to is going on a trip with your family and agreeing that you want to get to, say, Florida but disagreeing on the best route to take to get there.  And so you have to go to that all-purpose, neutral resource, Google, to find out.  At the Pew Center, we like to think of ourselves as providing the Google map toward practical climate solutions (and this will be my only sponsored link!). 

So what would this Google map tell us about how to get to this place where we want to go, now that we have plugged in our starting and ending addresses?  Well, finding the best route is not an easy task because there are a lot of people throwing out different directions to a climate solution.  And, if we were to follow many of these directions, we would either veer way off course or, more likely, never reach our destination at all. 

These directions tend to fall into opposite extremes.  For example, some call for a mandatory, worldwide cap on greenhouse gas emissions with trading, where every major economy accepts a binding emissions target.  Sounds great but it’s a political non-starter. At the other extreme, many people want the world to join hands and unite around an “aspirational goal” – such as an X percent reduction in global emissions by 2050.  Don’t get me wrong: having an aspirational goal is not a bad thing.  But if aspiration is all you’ve got, well, all you’ve got is aspiration.  Under these proposals, no one is required to do much of anything.  We might all feel good for having this goal but the lack of clear commitments would result in more of the same: a little movement that barely brings us closer to where we need to go.     

The same opposing directions appear when the talk turns to emissions trading.  Some say let’s give away all the allowances; others say auction all of them.  Some say allow offsets for all projects that could conceivably reduce emissions.  Others say don’t give credit for any offsets.  

We know, based on Europe’s experience this past year, that we need a price on carbon that is high enough to give firms a reason to invest in new climate-friendly technologies.  Yet we see proposals that talk about limiting that price to something that will motivate very little innovation.  

Well, there’s another direction we can go—there is a route we can take that avoids all of these detours, and that takes us to our destination.  It involves taking what is useful from all of these highways and by-ways, making the necessary compromises, and following a route that lets us go as fast as we can, and as directly as we can.  For example, we can embrace an aspirational goal but we must back it up with international commitments that are binding but flexible.  And, we can design a cap-and-trade program based on a hard-nosed look at what will be both economically viable and environmentally effective.    

It’s not about aiming low, but rather about abandoning the impossible.     

FOR EXAMPLE: It’s great to talk about the potential of voluntary approaches to reduce emissions, but history has shown that while they do deliver something, they don’t deliver the level of reductions we need.  In the same way, it is pure fancy right now to expect developing countries to agree to binding limits on their emissions.  It actually makes things harder when we lay out these expectations, because when developing countries refuse to join in the global effort because of a perception that they are being asked to do too much, then we lose the United States and others as well. 

And so we need to look for the best route—both domestically and at the global level.  Here in the United States, this means pushing ahead with plans for a cap-and-trade system.  I know there has been some commentary recently about the relative merits of cap-and-trade vs. a carbon tax.  But, once again, the thing we need to look at is what’s actually do-able, what gets us to the place we want to go, and what will actually pass?   

Anyone who thinks this Congress or the next will come close to passing a substantial new tax (even if it is offset by other tax reductions and even if it is designed to achieve the very important goal of reducing U.S. emissions) … well, I have some 20-year-old carbon offsets to sell you.  What’s more, the notion that designing a carbon tax is somehow simpler than designing a cap-and-trade program is simply not true.  It’s just as complex.  Plus, to top it all off, there is no environmental certainty in a tax – you enact it, and you have to wait and see what the effect will be, and you need to adjust it and keep adjusting it to get the effect you want. 

With cap-and-trade, there’s certainty in what the cap will be—and, as a result, you know how much of a reduction in emissions you can expect.   

What are the chances of cap-and-trade legislation passing the Congress?  Well, I will tell you one thing.  The chances improved in a big way when companies such as GE, Caterpillar, Chrysler, Duke, and DuPont all became part of the U.S. Climate Action Partnership.  The USCAP plan would reduce U.S. emissions by 10 to 30 percent within 15 years, and by 60 to 80 percent before 2050.  And, with a whole host of America’s leading companies behind it, I believe USCAP has been, and will continue to be, a significant game-changer.  In fact, I feel confident that I can predict here today that enactment of a cap-and-trade measure is still plausible in 2008, and almost inevitable by the end of 2010.  

Looking internationally, we see the same need for cool-headed, practical answers to the climate problem.  The same need to find the sensible center.   Looking at things in this way, we can see that the post-Kyoto framework must have two essential features.  First, it must be based on binding international commitments; and second, it must be flexible in the sense that countries should be able to take on different types of commitments. 

Why commitments?  Because it’s the best and maybe the only way to deliver the level of effort needed to significantly reduce global emissions.  Without commitments, countries can’t be confident that others are contributing their fair share to the global effort.  And without that confidence, it’s hard for any one country to sustain an ambitious climate effort.  

Why different kinds of commitments?  Because countries are different – very different.  Among the major economies, you have developed countries, developing countries, and economies in transition.  Their per capita emissions range by a factor of 14; their per capita incomes by a factor of 18.  The kinds of policies that work for some won’t work for others.  It’s not one-size-fits-all.   

So the post-2012 framework has to integrate different approaches.  Binding emissions targets make sense for developed countries.  But, as I said, it’s naïve to think that China, India, and the other emerging economies are going to agree to them anytime soon.  Still, we need some form of commitment from those countries, so we have to be open to other possibilities.  One possibility is policy-based commitments.  A country like China, for instance, already has some ambitious national policies: an energy intensity goal, renewable energy targets, and fuel economy standards for cars that are stronger than those here in the U.S.  What if China were to commit to fully implementing those policies in a binding international treaty?  What’s key, I think, is that the commitment be credible, quantifiable, and verifiable.   

This, again, is the sensible center … we need a new set of multilateral commitments.  New kinds of commitments.  Which brings us to the other major climate meeting here in Washington this week – the major economies meeting.  What are we to make of it?   

Well, one thing to be said for it is that it brings together the right group of countries.  But what’s the real objective here?  The administration has said its goal is to get a consensus among the major economies by the end of 2008 – just as the president’s about to leave office – contributing to a global deal under the U.N. convention in 2009.  What kind of deal are they hoping to set up? 

From all appearances, a very weak one.  Just about the only thing the Administration thinks countries need to agree on is an aspirational long-term goal.  And, as I have said, that’s not enough.   

The best way to judge the value of the major economies meeting this week is whether it moves us toward or away from a new set of multilateral commitments.  In other words, does it move us toward the sensible center, or not?  That should, in fact, be the test of everything we do on the climate issue in the months ahead.  

I know that some of us are better at following directions than others, but this is one time when we cannot afford to get lost.  By staying on course to the sensible center, we can begin the long-overdue work of figuring out how to reduce domestic and international emissions as cost-effectively as possible — and in ways that deliver real results for the climate.   

We’re just pulling out of the driveway right now, so fasten your seatbelts.  It’s going to be a long and interesting ride.  Thank you very much.