Working Toward a New Framework on Tackling Climate Change

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[courtesy of ACUS]

As prepared

Good morning, thank you for turning out early for this discussion. It is very exciting to be here at the Atlantic Council, where Fred Kempe and his team are leading a remarkable renaissance in one of our premier institutions focused on strengthening our transatlantic Alliance and partnerships.

And it is emblematic of this renaissance that we're here not only when the subject is NATO, but today, for example, to talk about climate change.

Few issues compete with climate change as one of those topics where the United States and Europe agree so much, yet understand each other so little. So today, two days ahead of the Major Economies Meeting called by President Bush here in Washington, I thought this would be a good opportunity to dispel some myths, to talk about how the U.S. and Europe actually agree a great deal on climate change issues, and to begin to chart out where we think we go from here.

First, let's start with some basics. Europeans and Americans are both concerned about the growth in greenhouse emissions and the impact their accumulation in our atmosphere can have. We both realize that economic growth is essential to the well being of our citizens. Yet we also realize that economic growth without changes in our economies only increases our output of greenhouse gases. The inevitable conclusion we have both reached independently is that we need to break the linkage between economic growth and rising greenhouse emissions.

In other words, you don't think that reversing your economic growth and human development achieved over decades is the way to solve the climate-change conundrum. Nor that the developing world should stop growing and improving the lives of its populations to avoid producing greenhouse gases. Well, neither do we.

And yet we do agree that this is a problem we have got to tackle.

This is why I am so pleased that the Atlantic Council invited us together for a serious discussion on the very important issues of reducing greenhouse gas emissions, and building energy independence. And I do mean discussion. I am going to speak, but I also want to hear from you.

I want to make four broad points:

• The first is that there is a myth out there about the U.S. that we must debunk. Our government needs to do so, for sure. But we all need also need to get past the stereotypes. We must all deal with realities.

• My second point is that the U.S. is doing a lot on climate change, and I want to quickly review U.S. research and development, as well as investment, in alternative fuel sources. What are we doing?

• We need to know the what, but we also need results, so my third topic will be How are we doing? Investment numbers by themselves don't suffice. That's input. The world needs to know how we are measuring up-the input. In all metrics, especially the all-important one of emissions intensity, we are doing well.

• Fourth and last will be the where, as in, where are we going? As George Carlin has pointed out, "there is no present. There's only the immediate future and the recent past." Well folks, the future is here. The administration is getting ready for it with a major conference that starts this week in this very city.

The Myth

First let's deal with the myth. You've all heard it before. It holds that the United States does not care about climate change, that we're just one big, gas-belching nation of polluters without scruples. Like all myths, this one needs a central character, and so the new mythical figure is the "Ungreen American" - a character that combines the naivety of the Quiet American with the crassness of the Ugly American.

Having such a myth comes in handy, because it produces an easy scapegoat - someone else to blame - and thus eases some of the guilty feelings the rest of us might have. It allows one to think that, even if nobody is perfect on climate change, "at least we're not as bad as those awful Americans" - or so the thinking seems to go.

And it is easy to see how this myth gained currency. We were, until recently, the world's biggest emitter of greenhouse gases. According to some studies, we no longer are. And we did not support the Kyoto Protocol, which in Europe became synonymous with "doing something" about climate change.

But the fact that we were the largest emitter was a direct result of the fact that we were - and remain - the world's largest economy. With 5 percent of humanity, we produce 25 percent of global wealth. Our greenhouse gas emissions track with our economic activity, as one would expect.

And the fact that we are not part of the Kyoto Protocol does not mean that we are "doing nothing" on climate change. As I'll describe in a few moments, we are doing a lot.

So this myth - powerful as it may be - just doesn't stand up to serious scrutiny.

The facts are that the United States cares a great deal about climate change, is actively taking and promoting steps to reduce greenhouse gas emissions and is working together with the major economies of the world to develop a post-Kyoto framework for cutting emissions. For anyone who took comfort in the myth of America as Dr. Evil, this is an "inconvenient truth."

It's time for the United States, Europe, developing economies - all of us - to get past the myths and any possible finger-pointing, move on, and deal with the challenge of climate change as real partners.

What is the U.S. Doing?

For shattering myths, there is no better way to do so than with data that simply tells the real story. So let's quickly move to my second point: what are we doing?

One quick and handy piece of data is that the United States leads the world in the research and development of cutting-edge technologies which, ultimately, we all will depend upon to solve the problem of climate change. Since 2001, we have spent on the order of $37 billion on climate change science and technology.

And that's just the federal government. In our country the federal government is but one actor. It sets some of the rules, to be sure. But as you know, compared to Europe, we have a rather decentralized government, and a relatively less regulated economy. Our country and the economy are so vast that what happens outside of the federal government is what really determines where our country goes.

States, from California to New England, have always served as a laboratory for innovation - remember welfare reform? - and they have taken a variety of different approaches on climate change. They all make up part of the fabric of U.S. innovation and contributions to the issue of climate change.

An area that often gets left out of the narrative about U.S. efforts is the role the private sector plays. As they say here in Washington, if you want to know where the action is, follow the money. So if you want to know where the solutions to the 21^st century challenge of climate change might lie, look where the big investors are putting their cash.

The truth is, our investment bankers report that there is a huge second wave of investment in green technology. The first one was in the 1980s, which produced a certain level of technology development. That wave ebbed after some time. Now, we're seeing a second wave of massive investment into newer, cleaner technologies. And this wave is proving larger and more immediately profitable than the first one.

It is very revealing that that the hard money guys and gals - the ones who are in it not because they have a sense of mission, but to make money - they see investment in clean technology as a profitable thing to do. That means this is real.

A venture capitalist from my home town of Philadelphia told me that venture capitalists expect a return on their investment in clean technology startups in about two to five years. That is, they expect to make up the money they put in, after which time everything is profit, in a few dozen months. Very few industries can boast of such a quick turnaround.

This speaks to the great demand out there for products that will conserve energy or produce clean energy-and massively reduce greenhouse emissions. We are searching for a solution to climate change that does not demand a trade-off between growth and lower emissions.

As this venture capitalist told me, this is not altruism. This is not people going out to make the world a better place. This is people who are saying, "How do I increase efficiency, so the inputs cost less, so I can grow a successful business?" Or, "How do I have a process that is going to be more successful in its execution, so that I can out-compete old-technology competitors?"

Once we have harnessed the stimulus of self-interest, once we have enlisted the market system in our search for a cleaner environment, you know we are well on our way to a solution.

One of the obvious reasons for the sudden increase in demand for alternative energy is the high price of oil and gas. People simply want to get away from fossil fuels.

Add to that the fact that the prices of alternative sources of energy have been falling steadily in absolute terms since the 1980s - and it increases the effect.

All of this amounts to very good news, because in the United States-and also in the world-if anything is going to change, the private sector has to drive it.

If we enumerate the likely sources of alternative energy, nuclear power would have to be included in any short list. It is an essential part of energy security and any realistic climate change solution. This is why our government is working with the private sector on several initiatives.

The United States has already spent $1.1 billion on a program to help private industry obtain licenses for new power plants that could be operational by 2014. We are also working on a project to develop nuclear fuel that is proliferation-resistant, and on an initiative to develop the next generation of nuclear power plants, which will be safer, economical and, again, proliferation-resistant. As I said, there are handouts with more details.

We all know that hydrogen is a promising source of renewable energy for the future, which produces no dangerous waste, and no greenhouse gases. And the U.S. government and private sector is investing heavily to develop marketable hydrogen technology.

But something people don't talk about quite as often is that there is only a limited supply of hydrogen in the world. So another U.S.-funded program is the "Nuclear Hydrogen Initiative," which aims to develop technologies that use nuclear reactors to produce hydrogen.

And because the only closed environment is the world environment, we are sharing our green discoveries and inventions with developing countries whenever we can. There are a number of initiatives where we are bringing our public-private mindset to the rest of the world.

One is the Asia-Pacific Partnership on Clean Development and Climate, which goes by APP. Through APP, we share new and emerging technology solutions - including clean coal, alternative transport fuels, renewable energy sources, and efficiency technologies - solutions that promise a global energy system that is more secure and more climate-friendly.

The APP founding partners are Australia, China, India, Japan, Korea, and the United States, countries accounting for about half of the world's population and more than half of the world's economy and energy use.

Another initiative is the Methane-to-Markets Partnership, which is bringing cost-effective, methane-capture technologies to developing countries. The U.S. has pledged up to $53 million in funding to support the work of this partnership. Our domestic methane programs have been shown to work, resulting in U.S. 2005 methane emissions being 11% below 1990 levels, so we want to share our experience.

On biofuels, we have an initiative to make the production of cellulosic ethanol from corn and other organic materials available as a competitive energy alternative by 2012.

And President Bush announced in his 2007 State of the Union Address the "Twenty in Ten" plan to reduce U.S. gasoline usage by 20 percent in 10 years. By cutting gasoline usage, this initiative will also significantly reduce the growth in greenhouse gas emissions from cars and light trucks.

All these efforts are helping us move toward a long-term path to stabilizing atmospheric concentrations of greenhouse gases. They are also helping to ensure secure, reliable, affordable, and clean energy to power economic growth and development across the globe.

So when people look at U.S. approaches on climate change and greenhouse gas emissions, I would urge them to put aside for a moment the grand targets, and the signatures on a treaty, and look instead at what is happening inside the United States every day - in concrete private sector investments and government programs that will actually reduce emissions - indeed, are already reducing carbon dioxide emissions - they will get a different picture.

Now, I've mostly been speaking about developing technologies that will reduce future emissions. But what about the present? What about America's record thus far? Let's now turn to my third point, how are we doing?

How Are We Doing?

Answer: not bad. Despite all the advances in technology thus far, it is still very hard, to see an actual decrease in emissions when both your economy and population are growing. But we in the United States have come close.

According to UNFCC data, from 2000-2005, our GHG emissions increased by less than 1.6%. Yet our economy grew by 12%, or about $2 trillion - larger than the economy of Italy. Yet greenhouse gas emissions rose less than 1.6%.

During the same time, our population grew by 5.3%, or 15 million people - adding more than the combined populations of Sweden and Denmark to the U.S. population. Yet greenhouse gas emissions rose less than 1.6%.

2006 was a particularly important year: Estimates show for 2006 that our economy grew 2.9%, but CO2 emissions actually decreased 1.3%. This is key. Because it means we are starting to break the link between economic growth, and CO2 growth.

Now you're probably asking, OK - how does that compare with others? What was the performance of the EU-27, who care so much about climate change? According to the same data source, the United Nations Framework Convention on Climate Change, from 2000-2005 EU-27 emissions increased 1.5% -- almost the same as the United States, though Europe experienced a slower rate of economic and population growth.

So growth in absolute emissions was about the same in percentage terms. But there is another way to measure what is really happening - which relates emissions to economic output. That is by measuring the greenhouse gas intensity of an economy, which is the term of art for greenhouse emissions per unit of GDP.

As our economy has soared, our emissions have risen only slightly. Thus we have reduced the greenhouse gas intensity of the U.S. economy - by 8.5 percent from 2000 to 2005. That is a good result.

Back in 2001, President Bush set a national goal for reducing the greenhouse gas intensity of the U.S. economy by 18 percent by 2012. We are well on track to meeting and surpassing that goal.

Europe's greenhouse gas intensity begins at a lower level than America's. There are many reasons for this, but important among them are that Europe had some major, one-off changes in its economy in the 1990's - such as switching from brown coal to Russian natural gas in Central Europe and Germany, and from coal to North Sea gas in the UK.

Like the U.S., Europe's economy is growing faster than its greenhouse gas emissions, so its greenhouse gas intensity is also falling, but at a slower rate than the United States. From 2000-2004, Europe's greenhouse gas intensity fell by 4.5 percent.

And let me say that it isn't surprising that the U.S. and Europe should have comparable data. We both have the same concerns and share the common objectives of reducing emissions. We're trying to do the same thing.

Now, why are we talking about greenhouse gas intensity, rather than absolute emissions? Isn't that just some Administration gimmick for cooking the numbers? No.

Greenhouse gas intensity is important because it gets at the heart of the issue we need to tackle, if we're going to deal with climate change in the long-term - breaking the link between economic activity and the production of greenhouse gases.

Think of it this way: There are only three ways to lower your national emissions.

• You can reduce your economic activity, and thus reduce emissions by a corresponding amount;
  
  
• You can shift parts of your economy to other countries, so they show up on someone else's books, not yours (think about the movement of manufacturing jobs from Europe or America to China and India); or
  
  
• You can change the way your economy works by using alternative fuels and technologies, so that it produces fewer emissions for the same or even greater levels of economic output. In other words, breaking the link between economic output and greenhouse gas emissions.

The only solution that makes any sense for us, or for developing countries that still need greater economic growth and human development, is the last one.

Some people actually advocate the first one - cutting our economies - but they are radicals. There is a steep price to pay for reducing economic growth, a price paid by reducing human welfare.

The second "solution" - movement of industries from country x to country y - happens all the time. Usually, it happens just because of cost competitiveness. But add to that greenhouse gas caps, and it can add to the factors that make it cost effective to leave a developed country and open up shop - often without emissions caps and with lower standards - in another country. This may look good on the developed country's books, but it may actually be worse for global emissions - because after all, it goes into the same atmosphere. This "solution" probably accounts for about 10 percent of reported declines in emissions, which are in fact no decline at all.

The third solution - the real one - is to break the link between economic growth and greenhouse gas emissions. You can grow - add jobs and human development - and also be green, all at the same time.

And the way to measure our progress in this effort is by measuring changes in the greenhouse gas intensity of our economy. That's why were obsessed with greenhouse gas intensity. It's not a gimmick.

I hope I've now established in your minds that in terms of real action on climate change - not just talk - the United States is doing as much, or more, than just about anybody - and the proof is in the numbers.

The world's climate system is warming, and human activity has played a part. The United States is committed to slowing and stopping greenhouse gas emissions, and if possible reversing the accumulation of greenhouse gases in the atmosphere. We have made tremendous investments aimed at reducing the growth of emissions both at home and abroad.

Where Are We Going?

But we all know that so far, this is not enough. So, and now we move to my final point, where do we go from here?

To answer that question, we need to consider other factors:

The U.S. and the EU together make up less than half the world's greenhouse gas output, and that share is falling. Our emissions intensity is already falling, and in the not too distant future, our absolute levels of emissions will probably fall as well.

Meanwhile, the rest of the world's absolute levels of emissions, and its share of global emissions, are rising dramatically. China, with an economy one-sixth the size of the United States, by some estimates now exceeds the United States in greenhouse gas emissions. And I say this not to criticize China. We all applaud China's rapid economic growth and rising living standards for its population. But what this figure illustrates is the dimensions of the challenge we face. To tackle climate change successfully, we need to engage rest of the world - which produces most of the world's current emissions - and to do so on the basis of supporting the developing world's economic growth, but with lower greenhouse gas intensity.

That is why President Bush has called the Major Economies Meeting on climate change and energy security in Washington on September 27 and 28. Attending will be the world's major economies, including those inside Kyoto and significantly those outside. Represented will be China, Russia, India, Brazil, Indonesia, Mexico, Korea, Australia and the EU, among others. Together they account for around 80 percent of global GDP and of global emissions.

This meeting is intended to kick off a process to develop a new post-2012 energy security and climate change framework by the end of 2008. Agreement among the major economies on a way forward will ultimately benefit all nations and contribute to a global agreement under the UN Framework Convention on Climate Change by 2009.

Under the President's proposal, countries would work to:

• set, by the end of next year, a long-term global goal for greenhouse gas reductions;
  
  
• establish midterm national targets, and programs that reflect their own mix of energy sources and future energy needs;
  
  
• bring together industry leaders from different sectors of our economies, such as power generation and alternative fuels and transportation to form working groups that will find new ways to share clean energy technology and best practices;
  
  
• Ensure a strong and transparent system for measuring performance.

All of this work both at home and abroad and with government and private sector partners has provided the foundation for the U.S. to work internationally to achieve a post-2012 framework on climate change and energy security.

I have spoken to you today for some time and maybe I should bring these remarks to a close. I have made three or four main points here, that I would like to reiterate:

• There is a myth out there about the U.S. Don't buy it.
  
  
• Instead, tune in to what the federal government, the states, and our private sector are actually doing.
  
  
• When you hear people talking about lowering emissions on a national basis, realize right away that there are only three ways to do that: slow down your economy; export your emissions or learn to grow in a cleaner manner.
  
  
• The U.S. has chosen the third way: we are trying to break the linkage between economic growth and greenhouse gas emissions. And we are making real progress.
  
  
• The Administration is engaged internationally - or should I say, "multilaterally" - with the world, trying to bring major economies into a post 2012 energy security and climate framework. We want to move past the finger-pointing of the past, and get to specific, concerted, truly global efforts to change the way our economies work - to support the dual goals of improving human development and reducing human impact on climate.

These are our objectives. We are eager to see them advanced at the Major Economies Meeting here in Washington two says from now.

Thank you very much for your attention. You've been a great audience.