Can Technology Transform the Climate Debate?

CAN TECHNOLOGY TRANSFORM THE CLIMATE DEBATE?

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

EXXONMOBIL LONGER RANGE RESEARCH MEETING, MAY 16, 2007

PAULSBORO, NEW JERSEY



Thank you very much.   It is a privilege to be here at your longer-range research meeting. I must admit that I generally steer clear of events whose titles include the words “longer” and “meeting.”  But in your case, I am happy to say I made an exception.

I know that all of you have been busy all week in these meetings—and I am sure you haven’t had much time to keep up with the news.   So I thought I would start my remarks today by telling you a few things that have been happening in the outside world: 

  • First, scientists have discovered still more new evidence of global warming: after an exhaustive study, they have confirmed that M&Ms now melt in your hand.
  • The President, when asked to comment about this finding, said he prefers Skittles.  

With that out of the way, let me say again how honored I am to be here.   When I was told that I would be one of two external plenary speakers for your internal technology advances meeting … well, let’s just say I am internally grateful.  And I hope that any internal technology advances you are working on with respect to climate change become external before very long. 

The reason I say this is because climate change is a problem in desperate need of innovative solutions—the kind of solutions you are working on every day.  

The title of my remarks is “Can Technology Transform the Climate Debate?”   But I could just as easily use the title, “Can the ClimateDebate (and Climate Policy) Transform Technology?” And my answer to both is a resounding “Yes.” We cannot change the debate without the technologies to address the problem. And without the right policies, we will not see technology development and deployment proceed with the urgency that is required.

So let me briefly deal with the first of these questions, where you really know more than I do, and then proceed to the second question, where I hope I can provide some insights.

What kinds of technologies do we need to make a real difference in our ability to address the challenge of climate change? Well, all of you know as well as I do that we need new and better technologies across the board. But I like to think about the world’s technology needs in terms of key sectors. And, with respect to climate change, there are three: the power sector, transportation, and buildings.

In the power sector, which accounts for the largest share of our (and the world’s) greenhouse gas emissions, we have a number of specific challenges. We need to show that carbon capture and storage can work and be affordable; and we need to get renewables to a point where they are competitive on cost. In transportation, we need to work hard on engines and fuels, while at the same time devoting more energy (pun intended) to potential breakthrough advances like hydrogen and fuel cells. And, in buildings, it’s about taking energy efficiency to the next level, and making it easier and more feasible for people to consider on-site power generation using renewables and other low-carbon sources.

We have seen a certain amount of progress in all of these areas, but it’s been largely hit-or-miss. So let’s consider just one example, carbon capture and storage, or CCS, which I understand you’re doing a fair amount of work on yourselves. Carbon Capture and Storage (CCS) is the key enabling technology for a future in which we can continue to use our vast coal resources and also protect the climate. CCS involves the separation of CO2 from other gases emitted when fuels are combusted or gasified and the injection of the CO2 deep underground into geological formations. CCS is still under development, but many experts are optimistic about its advancement. The United States has the geological capacity to store the emissions from its coal–fired plants in depleted oil and gas reservoirs for several decades. Capacity in other geological reservoirs is estimated to be in the hundreds of billions of tons (500 billion tonnes of capacity), enough to store current levels of domestic emissions for over 300 years.

However, at current rates of technology progress and deployment, CCS will not be utilized by power companies at a meaningful level for many decades. We at the Pew Center believe we must accelerate the development of this critical technology. We are exploring a number of options for making this happen. One option would entail demonstrating CCS at a number of commercial coal-based electric generation plants.

While one could pick any number, we have focused on two possible size: A smaller-scale program involving 10 commercial-scale demonstrations, or a program of 30 such demonstrations. The total cost of the demos would be $10 to $30 billion for 10 to 30 plants. This could be funded, for example, by a Trust Fund created by very modest (a hundredth of a cent or less per kwh) fee on electricity generation. The smaller program would build confidence and experience with the technologies and related regulations both within industry and among ordinary citizens; and would provide real-world cost and reliability information. The larger program would be more likely to actually bring down the costs of these technologies, which would have significant national economic advantages if these technologies are to be widely used, as will be necessary if we are going to both avoid serious negative impacts from climate change and to continue to use fossil fuels for a large part of our electricity.

So simply waiting around for these technologies to make their way from the laboratory into mainstream use is not an option. We don’t have the luxury to sit and watch this process evolve ever-so-slowly, like we’re watching American Idol week after week to see who the ultimate winner is. We need to speed the process along. Without picking winners ourselves, we need to enact policies that provide the incentives and that create the climate in which new technologies can succeed.

The climate change problem is simply too urgent, too consequential and too big to do this any other way. ExxonMobil Research and Engineering has been a part of the IPCC process, so all of you know the facts by now: 11 of the 12 warmest years on record have occurred since 1995. Ice sheets are melting. We’ve seen a fourfold increase in major wildfires. And this is just the start of it. Looking ahead, the recent IPCC report projected that global temperatures will rise by between 3.2 and 7.2 degrees Fahrenheit by 2100, and sea levels will rise as much as a foot to a foot-and-a-half. In addition, there is a 90-percent or greater chance that the world will see more hot extremes, heat waves and heavy precipitation events. And it is likely that we will see more droughts as well.

The IPCC is now on record saying, and I quote, that “warming of the climate system is unequivocal.” The group also states that there is a 90-percent-or-greater chance that lion’s share of the increases in temperature we are seeing are a result of increasing concentrations of greenhouse gases from human sources.

All of the scientific evidence sends a clear message, and it is this: if left unabated, climate change will have tremendous negative consequences for our country and the world. And, to solve it, we need to spur a global technology revolution—and we need to do it quickly. For business and government leaders alike, that means acknowledging and understanding the risks, while also seizing the opportunities that climate change presents to think differently about the future of our businesses, our communities and our world.

Risks and opportunities. They are what drive business decision-making every day. And therefore, I don’t think it’s an accident that business leaders are in many cases leading the charge for climate solutions. Nine years ago, the Pew Center established the Business Environmental Leadership Council. The idea was to bring together a group of leading companies who agreed with us, very publicly, that enough was known about the science of climate change to justify taking action to address it.

Now remember: this was a time when most major businesses still looked at climate change as a fringe concern. The perception in business circles—and political circles too—was that serious action was decades away, if indeed it would happen at all. And yet a small group of business leaders were brave enough to join with us at the Pew Center to say the time was right to do something.

Our Council, which began with 13 companies, is now the largest U.S.-based association of corporations focused on advancing solutions to climate change. It includes 43 companies with 3.8 million employees worldwide and a combined market value of over $2.8 trillion. Members are a who’s who of U.S. corporate leadership, from Alcoa and GE to IBM and Intel, PG&E and many more.

Of course, the members of our Council are not the only business leaders who are embracing strong action on this issue. In all sectors of the economy, there are companies and CEOs who are reducing emissions and calling for broader action to reduce emissions. And the reason they’re doing this, as I said, is because they understand the risks and the opportunities that climate change presents.

Let’s start with the risks. These businesses that are out in front on this issue have seen the science, and they understand that our lives, our environment, and our national security – they are all at risk from climate change.

And these businesses also understand something else. They understand that climate change poses real risks to their operations. According to the global insurance giant, Allianz, climate change already is increasing the potential for property damage at a rate of between 2 and 4 percent each year.

Just last week, super-investor Warren Buffett said that climate change – and I quote – could “materially change” the probability of catastrophes, increasing both the frequency and the intensity of storms. Citing the risks to Berkshire Hathaway’s catastrophe reinsurance operations, he said the firm would be charging more for coverage. Because of global climate change, he said “it would be crazy” to keep the firm’s rates at the same level as before.

And that just covers the risk to the insurance industry. Tourism, agriculture, finance, real estate, offshore oil and gas exploration … all of these industries (and more) face serious and compelling risks. And consider the risks for electric utilities and other businesses that do nothing to address this issue now—and then are forced to play a costly game of catch-up down the road as governments finally (and inevitably) get serious about reducing emissions.

The Energy Information Administration says U.S. greenhouse gas emissions in 2005 were 17 percent higher than they were in 1990. Eighty-three percent of the total in 2005 consisted of carbon dioxide from the use of fossil fuels. This simply cannot continue—and business leaders increasingly understand this. They understand that climate change is a real problem, and that regulation is inevitable. They understand that they had better be ready to operate in a world of carbon constraints.

According to the group CERES, investors filed 42 shareholder resolutions on the climate issue as part of the 2007 proxy season. This was nearly double the amount of resolutions filed three years ago, and ExxonMobil was on the list of companies that were the targets. The filers of these resolutions included state and city pension funds, foundations, socially responsible investment firms, and religious pension funds. Altogether, they represented more than $200 billion in assets, so these aren’t your average board meeting gadflies. And an important focus of their resolutions was risk disclosure – in other words, the shareholders simply wanted to know what these companies were doing to prepare for looming constraints on their emissions.

Again, people see government regulation as inevitable. It’s going to happen – it is just a matter of when. Last October, the Pew Center released a report based on a survey of 31 members of our Business Environmental Leadership Council. In the survey, 90 percent of these companies said they believe that government regulation is coming. Seventeen percent, in fact, said regulation would take effect before 2010, and 67 percent said it would happen between 2010 and 2015. And remember: this survey was taken before the shift in congressional leadership in 2006.

So business leaders – and investors too -- understand that this train is rolling down the tracks. And, rather than trying to throw something in front of it, many leading businesses have made the strategic decision that they want to get on board and help shape the policies that are going to affect how they do business for years to come. Because not being ready is a serious risk.

There is also serious risk in not knowing what’s coming down the tracks at all. Consider this quote: “Uncertainty about regulations, both for 2008-2012 and beyond 2012, creates a higher level of risk for companies. In Europe and Canada, for example, concerns are growing regarding companies’ willingness to invest in energy-intensive activities … The uncertainty about future regulations raises questions about the longer-term viability of such investments.” End quote.

It sounds like part of a Pew Center report. But this is your company, ExxonMobil, talking about climate-related risks to its operations and the need for more certainty in government policies so that it can plan ahead. You can find that document on the ExxonMobil website. It’s called “Tomorrow’s Energy.”

Now, from the risks that climate change poses for business to the opportunities. There’s a little U.S.-based company you may have heard of called GE … and GE has done a remarkable thing. It has committed to doubling its investment in environmental technologies to $1.5 billion by 2010. This is the equivalent of starting a new Fortune 250 company focused exclusively on clean technology. Is GE doing this for PR purposes? Not only. No, they’re really doing it because they see enormous opportunities in developing and marketing the clean-energy and energy-efficiency technologies of the future.

And GE is not alone. In the energy business, ExxonMobil and other quote-unquote “oil” companies are investing billions in alternative energies and other climate-friendly technologies—not out of the goodness of their corporate hearts but because they see real opportunities for profits and growth.

Climate concerns have initiated a wave of new investments in the technologies that will help to reduce emissions in the decades ahead. Consider this:

  • In the first quarter of this year, venture capital investing in so-called “cleantech” industries in North America and Europe totaled $903 million, a jump of 42 percent from the year before.
  • In 2005, Goldman Sachs bought one of the largest wind power developers in the United States and led financing for a $60 million fund for development of rooftop solar systems. Later that year, the firm committed up to $1 billion more for renewable energy and energy efficiency projects.
  • And the largest public pension fund in the United States, CalPERS, has teamed up with California’s teachers retirement system to dedicate more than $500 million to seed alternative energy businesses.

Clearly, a growing number of businesses and a growing number of investors see a growing number of opportunities in developing the energy technologies that are going to help us finally get a handle on the climate problem. But still, the current level of investment and the current level of activity is not enough. Emissions continue to grow by leaps and bounds—even as scientists are telling us with almost unanimous certainty that our current course will take us to a very dangerous place.

And so this is where the question I really wanted to answer comes in. We need mandatory policies that will light a fire under what’s happening now to address this issue, policies that will take us to another level of action and commitment. We need policies that will slow, stop and reverse our emissions, policies that send a clear signal that reducing greenhouse gas emissions will be rewarded in the marketplace. And we need policies that will speed up the process by which new low-carbon technologies are developed and deployed.

Now, I am sure that many of you are thinking this all sounds wonderful and good. But what are the chances of these kinds of policies actually making it into law? And, if you are skeptical, I understand. Under Democratic and Republican leaders alike, our nation has not exactly had a record of strong action on this issue.

But times have changed. I believe we have reached both a turning point and a tipping point in the policy debate on this issue. The turning point has come in large part from the science—people now accept that this is an open-and-shut case. They accept that we have a very serious problem on our hands, and they’re ready to consider solutions.

The turning point also has come from the actions of state leaders on this issue. Businesses are not the only ones who are stepping up to the climate problem and trying to shape solutions. At the state level, governors and other officials are taking action on their own, they’re starting to explore what works to reduce emissions, and they are showing that it’s politically possible to do this: you can adopt serious policies to reduce emissions without putting yourself at grave political risk, and without throwing down roadblocks to continued economic growth.

Consider just a few examples of what states are doing. In February, the governors of California and four other western states joined forces to set a regional target for greenhouse gas emissions. By August 2008, the states will establish a market-based system to enable companies and industries to meet the target as cost-effectively as possible.

In addition to the western governors’ agreement, there is the agreement among 10 Northeastern and Mid-Atlantic states (including New Jersey) to create their own emissions trading system. Known as RGGI, it is aimed at reducing carbon dioxide emissions from power plants in the region.

In addition to joining together in these regional efforts, states are acting on their own to reduce emissions. To date, 14 U.S. states have adopted their own statewide targets for capping and, ultimately, reducing their greenhouse gas emissions. The District of Columbia and twenty-three states, including large emitters like Texas and California, have required that electric utilities generate a specified amount of electricity from renewable sources. And there are countless other things states are doing.

And then there is California. Not content with establishing an ambitious set of greenhouse gas emissions targets—such as 1990 levels by 2020—California has gone the next step and passed legislation, with real enforcement, to give the targets the force of law. California also has taken steps to begin regulating carbon dioxide emissions from cars and trucks.

So this is a major turning point: California and all of these other states actually are doing something to protect the climate. Under Republican and Democratic leaders alike, they are embracing real action to reduce emissions—not because it’s the politically fashionable thing to do but because, like the business leaders I have talked about, they understand the risks. And they also see the opportunities for their states. By embracing renewable fuels and other technologies, states are carving out a niche for themselves in the new-energy economy of the 21st century.

So if that’s the turning point, then what’s the tipping point? Well, the tipping point, I believe, happened earlier this year. That’s when several members of our Business Environmental Leadership Council joined with the Pew Center and others in a high-profile appeal for U.S. government action to address climate change. The group is known as the U.S. Climate Action Partnership (USCAP for short), and this wasn’t just a PR move. Rather, the USCAP group issued a specific cap-and-trade proposal with specific targets and timetables—a real plan of action to slow, stop and reverse U.S. emissions. In addition to cap and trade, the USCAP group embraced an array of other policies aimed at building a low-carbon energy economy.

As of last week, the USCAP group includes 26 members, including major businesses, from General Motors and Dow Chemical to Alcoa, GE and PG&E; and major NGOs, including not only the Pew Center but also the Natural Resources Defense Council, the National Wildlife Federation and others. The company partners have total revenues of $1.7 trillion and a collective workforce of more than 2 million in every U.S. state. And the reason I say this is a tipping point is because this unique, nonpartisan collaboration has sent a clear message to lawmakers—and that message is this: America needs national policies to address the climate problem, and we need them ASAP.

But don’t just take my word that this is a tipping point. Others are saying so as well. At a hearing in February, Senator John Warner of Virginia, who sits on the Environment and Public Works Committee, paid tribute to USCAP's role in helping to bring the issue of climate change into what he referred to as the “big leagues.” He added, "When I see such an extraordinary cross-section of America's free-enterprise system, together with the environmental groups, come and form a group like this, you've got my attention.”

What types of policies does USCAP recommend? First and foremost, we are urging our nation’s leaders to enact policies for mandatory reductions of greenhouse gas emissions from major emitting sectors. That includes large stationary sources such as power plants, as well as transportation and energy use in commercial and residential buildings. The cornerstone of this economy-wide approach would be a cap-and-trade program.

Cap-and-trade, as you know, is a policy that requires emissions reductions while allowing companies to trade emission credits. The most important benefit of this approach: it provides a price signal for greenhouse gases. This price signal, in turn, will stimulate investment and innovation in the new technologies we need.

The USCAP partners recommend that Congress adopt specific short- and mid-term emission reduction targets for our nation. Within five years after what we refer to as the “rapid enactment” of mandatory legislation, USCAP says emission levels should be at 100 to 105 percent of where they are today. After ten years, they should be at 90 to 100 percent. After 15 years, the target would be 70 to 90 percent of today’s emissions.

USCAP also recommends a “target zone,” or aspirational goal, that is 20 to 40 percent of today’s emission levels by 2050. In other words, by 2050, we believe greenhouse gas emissions levels should be cut by 60 to 80 percent from where they are today.

Now remember who is saying this—together with the Pew Center and the other NGO partners, these are some of the largest companies in the world, companies that are major sources of greenhouse gas emissions. And the report that this coalition produced together was just the start of it. All of the partners in this coalition are committed to working together to turn their recommendations into legislative reality.

Although there have been business-NGO coalitions on environmental issues before, none to date has had the impact on key audiences—policymakers, the public, and other business people—that USCAP appears to be having, based what's we’ve seen over the past few weeks. We have shown Congress that there is a consensus emerging in the business community that the time is right for federal climate legislation. While there are still voices opposed to reasonable action, it is increasingly clear that these opponents are out of step and out of touch.

So just in the last few months, we have seen both turning points and a major tipping point in the climate debate. And together with the change in power on Capitol Hill last year (which could be considered another tipping point), these developments have brought Congress much closer to real action to begin to rein in U.S. emissions.

Already this year, there have been more than 65 hearings on the climate issue on Capitol Hill—serious, substantive hearings convened to help members of Congress draft mandatory climate legislation. And 106 bills that either directly concern or mention climate change have been introduced. The leadership of the House has made it clear that they want to pass legislation as soon as possible. And the Speaker of the House and the Senate Majority Leader have both said that, after Iraq, climate change is their first priority.

And there is additional political pressure for solutions due to the 2008 Presidential contest. On the Democratic side, you have a number of candidates who have pledged to make climate change an important part of their platforms. Among the Republicans, there is U.S. Senator John McCain, who co-wrote the first cap-and-trade bill in the U.S. Congress way back in 2003.

Given the changing politics on this issue, it is plausible that the United States could have a mandatory climate policy in place by 2008, and it’s likely we will have such a policy by 2010.

But, again, a mandatory cap-and-trade policy, no matter how ambitious or how broad its scope, is not the only policy we need. In the same way that there is no single technology fix to the climate problem, there is no single policy fix either. We need technology and research incentives. We need policies to ensure that we can adapt to the level of climate change that is already built into the atmospheric system. We need specific policies aimed at specific sectors of the economy, from transportation and energy to agriculture. And we also need to join all these other policies with a commitment to re-engage in the international negotiations on this issue.

Climate change, as we all know, is a global problem—and, therefore, it requires global action. Even if we were to embrace the most aggressive program imaginable to reduce the United States’ contribution to climate change, global energy use will continue to surge and climate change will remain a significant threat. We cannot protect the climate without a global framework that enlists all countries to do their part to reduce emissions, and that provides poorer countries with the support they need to do so.

All of you know about the Kyoto Protocol. This is the international agreement that sets specific targets for developed countries to reduce their greenhouse emissions by the year 2012. President Bush rejected Kyoto early in his first Administration—and so the United States is not a part of it. Australia also opted out. And, without those two countries, the Protocol covers only about one-third of global emissions. What’s more, even if all the countries that are part of Kyoto meet their targets, which is unlikely, global emissions in 2012 will still be 30 percent higher than they were when the Kyoto Protocol was signed in 1997. Clearly, that’s not good enough.

International talks have begun on what to do after 2012, when Kyoto’s current targets expire. And there is only one way forward in my view: the United States is going to have to drop its go-it-alone attitude and be a part of these discussions. Because if the world’s largest emitter were to step up and say we are ready to make a deal, then China and other emerging economies might also be willing to enter the negotiations in a substantive way. And we could potentially see an agreement that committed all major economies to action.

At the Pew Center, we’ve done a great deal of work on how to structure an international climate agreement that is fair and effective and politically palatable for everyone. And we believe you can do this in a way where everyone has binding commitments. They’re not necessarily the same type of commitments, but they are commitments. And they ensure that everyone is a part of the solution, including developing and developed countries alike.

Again, this is not solely the view of the Pew Center. The members of the USCAP also agreed that the United States has to make international engagement on this issue a priority. And the companies that are part of the Pew Center’s Business Environmental Leadership Council have always said that the U.S. must lead the global climate fight.

I want to close today by asking my opening question again: Can technology transform the climate debate? I believe that it already has. As I said, we have seen some progress in developing some of the key technologies—enough progress, in fact, to convince policymakers and others that there are solutions out there, that this is do-able but only if we ramp things up in a big way. And I hope I have offered some clues about how the climate debate (and climate policy) have the potential to transform technology as well.

I hope that I have also left you with a better sense of the passion for solutions and the level of commitment I am seeing among business leaders today with respect to climate change. The companies we are working with at the Pew Center believe very strongly that, given the risks and the opportunities, it is in their interest—and in our nation’s interest as well—to act on this issue in serious and substantive ways. And these business leaders now have a seat at the table as Congress is shaping solutions.

A few years back, one of our nation’s top leaders said this when he was asked about U.S. action on climate change: he said that those who think they are vying for a seat at the table are mistaken – because there is no table. He was saying there was no place to discuss what we needed to do about this issue because, in his view, nothing needed to be discussed.

Well, there is certainly a table now. And not only does this table exist, but today we are bringing in many more chairs and making the table even bigger as more and more business leaders gather round. I will say it again: we have reached a tipping point—and we’ve seen some remarkable turning points as well. And what they’re all pointing to are real changes in both policy and technology.

Again, I thank all of you for the important work you are doing to find solutions to the climate problem. And I encourage all of you to pull up a chair as the debate continues. This is a table where there is always room for more.

Thank you very much.