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.