Remarks by Eileen Claussen at the Aluminum Association 2008 Spring Meeting

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

Aluminum Association Spring 2008 Meeting
ALEXANDRIA, VA

April 22, 2008


Thank you very much. I am honored to be here at your spring meeting, and let me say you have chosen a delightful time to gather here in Washington. And it is an important day, too. Today is both Earth Day and the Pennsylvania Democratic primary election. So Americans will be planting a lot of trees today – and we may get closer to determining how to replace a Bush.

President Bush, in fact, has taken so many shots to his public approval rating in recent months that he said he feels like Hillary Clinton arriving in Bosnia in the 1990s.

And John McCain … when he was asked about the unique convergence of events happening today, said that every day is Earth Day as far as he’s concerned … and, given the way the Democrats have been going after each other, he said he wished every day could be the Pennsylvania Democratic primary.

In all seriousness, I am delighted to be here, no matter what day it is. Because it gives me a chance to address a group of industry leaders whose efforts will be crucial as we finally get serious about addressing this enormous challenge known as climate change.

What you do within your companies to reduce greenhouse gas emissions, through increased energy efficiency and process and product design improvements, will make a major contribution to the broader effort to protect the climate. Primary aluminum production, as you know better than anyone, is among the most energy-intensive industries in the nation. At last count, it was responsible for 1 percent of all U.S. energy use; and more than 3 percent of all energy use in the manufacturing sector. And the indirect contributions to climate change from that level of energy use are substantial. But aluminum production is also a major direct source of greenhouse gases – including process CO2 emissions as well as PFCs, although you have made enormous strides in reducing these emissions in recent years.

At the same time, of course, all of you know that it’s not just upstream and process emissions that have an effect on your industry’s climate footprint. It’s downstream as well. And there, your product, aluminum, actually can play a crucial role in reducing emissions from other sectors of the economy, primarily transportation. Reducing a vehicle’s weight by 10 percent yields about a 7-percent reduction in greenhouse gas emissions. So at the same time that many of you may be concerned about what’s coming down the pike in terms of government action on this issue, a comprehensive climate policy could present both real opportunities and real challenges.

Aluminum – this wonderful material that all of you produce – is uniquely malleable and adaptive. And your industry, I believe, will need to exhibit the same properties as the climate debate moves forward. You need to show that you yourselves are malleable and that you can continue to adapt your processes and your operations and your core business strategies in the search for ever-increasing reductions in emissions. Because, I am here to tell you today that the table is being set for serious domestic and international action on this issue. And, unless you want to be on the menu, it’s in your best interest to keep serving up progress – because that’s the best way to be involved in shaping solutions.

With that as an extended prologue, my main task today is to provide you with a sense of where we are right now in the domestic and international response to climate change, and why I believe we will see serious action on this issue in the next one to two years. A new international treaty may take a bit longer than this, but U.S. enactment of a national climate policy will certainly galvanize efforts toward a strong global agreement.

The Science of Climate Change

But before all of that, a quick update on climate change science. Because the science is really the basis for everything else. The reason we are even having this conversation is because the science on this issue has developed to a point where there is no longer any doubt that this problem is real, it is urgent, and it demands solutions right now. Over the last decade, the case for a skeptical, wait-and-see approach to climate change has melted faster than summer sea ice in the Arctic.

Just last month, the world was alerted that an ice shelf that was seven times the size of Manhattan had collapsed … disintegrated in a matter of days. Faster than Bear Sterns even, but in this case there was no Fed or JP Morgan standing at the ready to try and piece things back together. Scientists immediately attributed the collapse to global warming. They noted that these sorts of things are happening with increasing frequency in recent years and, in fact, we may be reaching a tipping point where many of these changes that are happening start to feed on one another and cannot be reversed.

The Nobel Prize-winning Intergovernmental Panel on Climate Change has said the warming of the climate system is – I quote – “unequivocal.” This group of more than a thousand scientists from throughout the world represents the most comprehensive source of science-based information on climate change. The IPCC’s 2007 report stated that it is certain that most of the observed warming of the past half-century is due to human influences.

Looking ahead, the IPCC affirms that climate change will accelerate unless we achieve substantial reductions in worldwide emissions of carbon dioxide and other greenhouse gases. Their projection: global temperatures will increase between 2.0 and 11.5 degrees Fahrenheit by 2100. Sea levels will rise by a foot to a foot-and-a-half or more. Many species will be lost. In addition, there is a 90-percent chance or greater that the world will see more hot extremes, heat waves and heavy precipitation events. And it is likely we will see more droughts as well, plus an increase in the intensity of tropical cyclones.

So that’s the bad news – we have a very serious problem on our hands. The good news is that people are listening. A recent Harris poll showed that 81 percent of Americans agree that the United States needs to be in the lead when it comes to controlling greenhouse gases. Eighty-one percent. That’s an important number to think about as your industry, and others, develop strategies for the future. To the extent that you are seen as part of the solution, you will have the people behind you – your customers in America and abroad. And that kind of public support and goodwill, as all of you know, is an invaluable asset as your companies and your industry move forward.

The Business Response

For a long time, many in the private sector preferred to dodge this issue. In meetings like the one you are having now, there was a great deal of hedging and denial.
But beginning in 1998, when we formed the Pew Center on Global Climate Change, we began to see major companies step out from behind this curtain of denial. One of our priorities from the start was to recruit major companies to serve as founding members of our Business Environmental Leadership Council. Companies that joined our organization early on included industry leaders like Dupont, Toyota, and Alcoa. These firms agreed to a set of principles that basically said this: we know enough about the science of climate change to justify taking action now.

Today, 10 years later, our Council includes 42 companies representing roughly $2.8 trillion in market capitalization and over 3.8 million employees. It is the largest U.S.-based association of companies committed to climate change policy and business solutions. Members come from a range of sectors, including high technology, diversified manufacturing, oil and gas, transportation, electric and gas utilities, chemicals, healthcare, insurance, financial services -- and, of course, aluminum.
So the question is: why has this Council grown? Why are all of these businesses joining in? The growth of our Council is a reflection of business leaders’ understanding that serious government action to address this issue at all levels is inevitable; it is only a matter of time. Ninety percent of the companies we polled in 2006 said they believed climate regulations were imminent in the U.S. A more recent McKinsey study revealed that more than 80% of business executives polled expected climate change regulation within 5 years.

But the problem for business is that we don’t know exactly how governments will act. And not knowing what’s on the horizon, as all of you know very well, is not good for business. Taking a seat at the table will help ensure new legislation and regulations that make sense for your industry.
Of course, there are other motivating factors for business to get involved in this issue, including mounting concerns about a patchwork of sub-national regulations. And then there is the main motivating factor that drives all business: profits. Your companies and your industry, for example, regularly tout the benefits of aluminum as a lightweight material for the transportation sector – cars and planes, as I already noted, can go farther on a given amount of fuel if they are made of aluminum. And to the extent that the transportation sector responds to climate change by using more of your product, then …. Ka-ching! Addressing climate change becomes a good thing for your businesses.

Other industries, and other companies, are recognizing the same potential for profits. GE, for example, has committed to doubling its investment in environmental technologies to $1.5 billion by 2010. That is the equivalent of starting a new Fortune 250 company focused exclusively on clean technology. Real opportunities for real profits in a world where carbon constraints become the norm. And, of course, none of this has escaped the notice of investors around the world. Wall Street in recent years has exhibited a growing interest in and affection for those companies, industries and sectors that stand to benefit in a world that finally gets serious about constraining carbon. And that is helping to drive the business response.

Now, before I go any further, I want to make a few notes about how your industry, aluminum, is responding. Because I think there are a lot of good things happening in this industry. Consider our Business Council member Alcoa, which has established a goal to reduce its greenhouse gas emissions by 25 percent from 1990 levels by the year 2010. When the company’s inert anode technology is fully commercialized, it anticipates an overall reduction of 50 percent.

Or Alcan, a company that joined us in 2005, before it was purchased by Rio Tinto, which conveniently is also a member of our Council. And Alcan has its own story to tell about reducing emissions. The original objective of the company’s TARGET program was to reduce GHG emissions by 800,000 metric tons of CO2 equivalent. But the company more than quadrupled that – reducing emissions by a remarkable 3.5 million metric tons. Today, the second phase of the TARGET program is under way and it is delivering still more reductions.

I suppose you could say that these aluminum industry leaders are thinking “outside the bauxite” when it comes to climate change. Sorry, I couldn’t resist.

And it is not just these two companies. As I said, the aluminum industry as a whole has made important strides in recent years in reducing emissions. The industry’s Voluntary Aluminum Industrial Partnership reduced PFC emissions by about 45 percent between 1990 and 2000. And industry-wide recycling continues to account for a substantial share of production – all of you should be very proud of the 1.5 billion pounds of used beverage cans that were melted in 2005. That’s a lot of Diet Cherry Vanilla Dr. Pepper empties. And it amounts to a huge level of energy savings – and reduced emissions.

U.S. Action

But the bottom line – and in business it’s all about that – is that all of the efforts I have talked about still have not contributed to an overall slowing of U.S. emissions growth. Yes, it’s great news when individual companies or industries begin to see climate change as a problem – and, for some, as an opportunity – and when they pursue voluntary actions that will reduce their contribution to the problem over time. But a global issue like climate change does not respond to voluntary actions taken here and there – in various pockets of the private sector, or in various places around the world.

Global greenhouse gas emissions continue to grow. For the United States, the Energy Information Administration says 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—scientists say we need to reduce – reduce – emissions on a global basis by as much as 80 percent from 1990 levels in the next half century. Voluntary action is a great place to start and learn, but it is not going to get us where we need to be … it won’t even get us close.

And this is why I believe the President’s announcement last week, suggesting that the United States should continue to grow its emissions until 2025, was a non-starter. From an environmental perspective, it simply does not address the problem we are dealing with. And it ignores the reality of what is happening in the business community, in the states and in Congress.

The businesses we work with at the Pew Center understand that we need mandatory policies to compel broad-based action on this issue, both here in the United States and around the world. That’s why Alcoa, Alcan and several of the other businesses on our Council have joined with the Pew Center and others in a high-profile appeal for U.S. government action to address climate change. We’ve come together as the U.S. Climate Action Partnership, and this isn’t just a blanket call for government to do something. Rather, the USCAP group has 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 group has embraced an array of other policies aimed at building a low-carbon energy economy.

When Fortune 500 CEOs take a stand for policies that in the past were tagged by private-sector leaders as extreme or unwarranted, and worse, it moves the politics on this issue to a new place. Senator John Warner, Republican of Virginia, summed up the impact of this unique coalition when some of its members appeared before a U.S. Senate committee hearing last year. “A group like this, you’ve got my attention,” he said.

And so, on Capitol Hill, after years of inaction, we see Congress finally gearing up to address global warming by requiring mandatory reductions in U.S. greenhouse gas emissions. A cap-and-trade bill from Senator Warner and his cosponsor, Joseph Lieberman, has emerged from the Senate

Environment and Public Works Committee, and is really the vehicle to watch at the moment. It would reduce U.S. emissions by 19 percent by the year 2020, and by 71 percent by 2050. Vote counters on Capitol Hill believe the bill, with some modification, could get the 60 votes needed in the Senate to beat a certain filibuster from opponents of climate legislation. In the House, Representatives John Dingell and Rick Boucher, influential moderate Democrats who lead the key committee, are working on a similar bill.

Now, I know what you’re thinking. You’re thinking the chances of climate legislation being enacted in 2008 are about the same as the chances of Hillary Clinton or Barack Obama ending their quest for superdelegates tomorrow. But I believe there are signals that President Bush might sign a cap-and-trade bill with strong bipartisan support. A number of Republican senators have made it clear that they support cap-and-trade – by voting for, sponsoring, or even coauthoring various pieces of legislation. And outside Congress, support for climate action has become even more bipartisan. Of the 25 governors who have committed their states to mandatory reductions in GHG emissions, eight are Republicans. And so the reality is that any climate bill that gets to the president's desk this year will, in fact, have significant bipartisan support, and therefore it will not be easily dismissed.

And then there is the U.S. presidential race. The three remaining candidates all support strong action on climate change – so it is going to happen one way or another in the next couple of years. I do not buy into the arguments that some advocates have made that we would be better off waiting for the next president to get a bill enacted. We have a shot – not a great one, I grant -- at getting a good climate bill this year. It would be irresponsible to pass that by, and, from my perspective, industry influence this year will be greater than in subsequent years. Furthermore, if we lose this opportunity, we will see emissions continue to rise unchecked for another year or maybe two before Congress can act again.

A final argument for enacting a climate bill in this Congress is that an important early responsibility for the next president will be to lead the world in forging a new climate treaty. Getting this done will be much easier – indeed, some would say it is the only feasible way to do it – if we have a U.S. cap-and-trade policy in place before our negotiators sit down at the table. We need only consider how a country like China will respond when the next U.S. president says in the course of these negotiations that all countries have to do their part. Unless the United States is already committed to reducing its own emissions, that kind of talk is just not going to fly.

Action in the States

At the same time that there is all of this discussion going on in Washington, it is easy to forget that the U.S. states have been strong movers on the climate issue for several years now. They aren’t just talking about it. They are designing and implementing real solutions. California is a case in point. If it were a country, California would rank 13th in the world in greenhouse gas emissions. Recognizing this, the state’s leaders have established an ambitious set of greenhouse gas emissions targets—such as reaching 1990 emission levels by 2020. Not only that, but California also has gone the next step and passed legislation, with real enforcement, to give the targets the force of law.

Of course, California is not the only state to be exercising a leadership role on this issue. There are 26 states, including large emitters like Texas, that require electric utilities to generate a specified amount of electricity from renewable sources. Seventeen states have targets for reducing their emissions.

And then there are the 23 states that are working across their borders to develop regional cap-and-trade systems through the Western Climate Initiative, the Regional Greenhouse Gas Initiative in the Northeast and Mid-Atlantic, and the Midwestern Greenhouse Gas Reduction Accord.

And it is not only state leaders who are acting. There is also local action on this issue across the United States. To date, more than 800 U.S. mayors have signed a commitment to reduce emissions in their cities. The target: a 7-percent reduction below 1990 emission levels before 2012, which not coincidentally is what the Kyoto Protocol would have required for the United States as a whole.

So, if anyone tells you there is nothing happening on this issue in the United States, I hope you will correct them. There is a great deal of activity and a great deal of commitment at the state and local levels … where leaders are developing real plans to reduce emissions. However, despite all the great things that are happening, and despite the leadership of the nation’s states and cities and businesses, U.S. emissions still are trending up not down, as I said. Which is why we need national, mandatory policies that will put the United States on an environmentally sustainable path.

International Action

And, of course, domestic action alone is not enough. We also need to commit as a nation to play an active part in crafting an effective global response to climate change. Even if the United States were finally to get serious about reducing its emissions, our actions will amount to precious little if they are not part of a wider global effort that commits all major emitting nations to do their part.

Today, there are a number of countries that are indeed taking serious action on this issue—and they deserve credit for what they are doing. The EU’s Emissions Trading System, for example, is the world’s most ambitious and far-reaching example of a cap-and-trade program. The initial program design includes limits on carbon dioxide from approximately 12,000 facilities in 27 European Union member states; it covers power plants and five major industrial sectors. Has the effort faced some challenges? Definitely. For example, the system generated excessive profits for some companies that received too many emissions credits to start with. But adjustments can and are being made to address these problems as more is learned about the system. And the fact is, the EU has established a functioning market for CO2 reductions in a relatively short period of time. Europe now has a price for CO2 that is being included in business decision-making.

Elsewhere, we see that Australia has come out in favor of a nationwide cap-and-trade system. And, Canada has adopted a regulatory framework aimed at achieving significant cuts in emissions. Even in China, we see significant progress. That country’s leaders have established a domestic target of a 20-percent reduction in energy intensity by 2010. China also has aggressively developed its renewable energy sector. It has established a goal to raise the proportion of renewable energy in the primary energy supply to 16 percent by 2020, up from 7 percent today.
But, as we all know, isolated actions on the part of individual nations, just like isolated actions by individual U.S. businesses or states, are not enough. We need a global solution, with commitments by all major emitting countries.

What kind of commitments are we talking about? Well, I will start by telling you what we are not talking about. We are not talking about having the United States ratify the Kyoto Protocol. We could not possibly meet our target at this late date. Kyoto is too politically tarnished in the United States for us to return to it, and it is unlikely that the major emitting countries in the developing world would agree to binding absolute targets for their emissions. But what they might agree to, especially if they see the United States and other developed countries adopt economy-wide emission targets, are binding commitments of another type. The major emerging economies, for example, could agree to policy commitments, such as renewable energy targets or fuel economy standards.

Or, they could participate in international sectoral agreements, agreements within a particular sector to a set of intensity targets or performance standards that become part of a binding international agreement. Already, the International Aluminum Institute has put forth voluntary objectives for your industry, such as an 80-percent reduction in PFC emissions per metric ton of aluminum produced. Making this agreement part of a broader framework could address competitiveness concerns, broaden participation among more countries, and result in significant benefits.

But whether we are talking about sectoral agreements or some other form of commitments, what’s essential is that any international commitments be measurable, reportable, and verifiable. And they must – they must -- put us on the path to stopping and reversing the growth in global emissions.
International engagement has recently drawn greater attention in Congress. Last month, the Senate Foreign Relations Committee, headed by Senators Joseph Biden and Richard Lugar, declared its intent to make international climate change negotiations a top priority. Their efforts will focus on the Bali roadmap. This plan, approved by more than 180 countries – including the United States ¬– calls for a new global climate agreement to be reached by the end of 2009.

Now, obviously, 2009 is not very far away, and I have my doubts as to whether the date can actually be met. But I am confident that if we in the United States move forward with our own mandatory emission reduction policy, we will be able to engage as a powerful and respected player on this issue at the global level. And that will increase the chances of reaching an agreement with developing and developed countries alike about the path that we must take to address this critical issue.
The world has made real progress in trying to figure out what will work to reduce emissions and protect the climate. Your industry is a case in point – from recycling to increased energy efficiency to the work that all of you are doing to reduce PFC emissions, these are important steps forward. But we have a much-longer journey ahead of us to transform the way we do business, transform the way we produce and use energy, and transform the way we think about our economy, our environment and our climate.

This nation recently commemorated the 40th anniversary of the death of Dr. Martin Luther King, Jr. Dr. King once said that the ultimate measure of a person is not “where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”
The controversy about climate change may be over, but there is no doubt that this is a time of great challenge for our nation and our world. And the measure of each of you, and of your industry and of the companies you lead, will be where you stand on one of the most urgent problems of our time – and, more importantly, what you do to address it.

I thank all of you for listening, and I look forward to your leadership on this issue in the months and years to come.

Thank you very much.