International Energy Security and Accelerating Innovation and Deployment of New Energy Technology

As Prepared

Thank you, Nick, for your introduction. I appreciate the invitation by British American Business to speak here today. It's a pleasure to join this panel of distinguished experts.

This inaugural conference aims to highlight and strengthen the world's leading bilateral business relationship between the United Kingdom and the United States, and I am glad that the conference organizers have chosen "energy security and viable alternatives to fossil fuels" as one of the important subjects for discussion.

The Energy Challenge

Ensuring a sound energy future is one of the most critical challenges facing the world today. Energy concerns fundamentally impact and shape global perspectives on security, diplomacy, development, and climate change.

The global scale of our energy challenge means that we need to work together, government-to-government, business-to-business, as well as in public-and-private partnership in order: (1) to seize new opportunities to develop cleaner and more efficient sources of energy and (2) to ensure that the world's growing demand for energy resources is met by an open, secure, and cooperative energy marketplace.

U.S. Secretary of State Condoleezza Rice has long recognized the importance that energy issues play in U.S. foreign policy, and, last year, she took additional steps to strengthen policy formulation involving energy issues. The Secretary has appointed an International Energy Coordinator, who serves as a special advisor on this critical issue, and we have significantly expanded our energy policy staff to ensure more comprehensive collaboration within the U.S. government and in our work with others. We are strengthening existing relationships, looking for new opportunities and partners - both at home and abroad - and we are working in innovative ways to achieve our international energy goals.

The President's Energy Security Objectives

Ensuring a sound energy future is one of President Bush's highest priorities. Just over a year ago, he laid out a plan that builds energy security by promoting diversity of both the types and the sources of our energy. The President's plan begins at home, but it also sets the foundation for our energy consultations with our Allies and partners.

The first parts of the President's plan strengthen energy markets. The plan calls for: (1) diversity of energy suppliers through competitive and open markets, (2) variety of energy sources, including renewable and alternative fuels, and (3) wise management of energy demand through increasing efficiency and conservation. A key way forward - and one that also promotes economic growth - is through new technologies. A centerpiece of the President's plan is to reduce America's gasoline usage by 20 percent in 10 years. To achieve this, the United States needs to diversify the fuels we use to power our cars and trucks by increasing the use of renewable biofuels, like ethanol, and to use energy more wisely by reforming and improving fuel economy standards for automobiles.

The second parts of the President's plan strengthen physical energy security. The plan calls for: (4) doubling the size of our strategic petroleum reserves and (5) protecting the world's critical energy infrastructure.

Good Progress

These energy security objectives are far-reaching and ambitious. Although there are many challenges to overcome in the course of attaining them, we are making progress by working together.

The U.S. leads and actively participates in multinational institutions, like the International Energy Agency (IEA); we engage in bilateral and regional activities with allies, producers, consumers, and NGOs; we conduct energy ­focused foreign assistance programs aimed at reducing energy poverty; and we hold public-private dialogues to promote energy investment and innovative commercial activity.

Next month, I will attend the IEA Biennial Ministerial Meeting in Paris where Ministers from the Member countries of the IEA will review the state of global energy markets and discuss policy options, which taken together, could benefit energy security over the next ten years.

Let me share some recent examples of our international energy cooperation.

Biofuels

Last month, President Bush and Secretary Rice visited Brazil and launched a new partnership with the Brazilian government in the field of biofuels. The partnership calls for the United States and Brazil, the two largest producers of ethanol in the world, to cooperate on the development and deployment of biofuels. Bilaterally, the United States and Brazil will advance the research and development of next generation biofuels technology. Regionally, the two countries will work together to promote domestic biofuels industries for local consumption through technical assistance aimed at stimulating private sector investment.

Finally, the United States and Brazil plan to work together multilaterally through the International Biofuels Forum (IBF) and through the complementary G8-endorsed Global Bio-Energy Partnership, to advance the global development of biofuels. Our shared goal is to enable more countries to supply energy for themselves and for their neighbors. Increasing the number of energy suppliers will expand markets, boost competition, and reduce the chance of disruptive supply interruption.

Asia-Pacific Dialogues

Asia provides another example of our international energy cooperation. Due to Asia's tremendous economic growth, natural gas, coal, and oil demand are expected to rise faster in East and South Asia than anywhere else in the world. In response, the U.S. has championed the Asia Pacific Partnership (APP) on Clean Development and Climate, where we are joining Australia, China, Japan, Korea, and India to focus on voluntary and practical measures to create new investment opportunities, build local capacity, and remove barriers to the introduction of clean, more efficient technologies. We are also taking a leadership role in promoting biofuels in Asian Pacific Economic Cooperation (APEC) for a through a U.S. chaired APEC Biofuels Task Force. Bilateral energy cooperation with China is a featured element of the new Strategic Economic Dialogue led by Secretary Paulson.

One example of APP success is the recent commercial transaction between Caterpillar and a Chinese company, Shanxi Jincheng Anthracite Coal Mining Group, to install the largest coal mine methane power facility in the world. The APP helped leverage a small initial investment from the United States into over $120 million of private-sector investment bringing modern technology to increase energy supply and also reduce carbon dioxide­equivalent emissions.

In another project co-sponsored by General Electric, the Partnership is helping to deliver cleaner energy based on local fuel sources in rural parts of India and China by developing biomass gasifiers. Both examples illustrate that private sector involvement is key to selecting and completing on practical and innovative projects that promote near-term results.

Our deep engagement with international partners on strategic economic and energy dialogues is a critical element of our international energy policy. These dialogues include: (1) the LEA's new accelerated outreach program to draw China and India into the more market-based partnership that characterizes the OECD, and (2) the recent five party energy ministerial bringing together China, India, Japan, Korea, and the United States to discuss joint energy and economic challenges. These five nations represent nearly half of the world's energy consumers.

These dialogues have been very successful. They have encouraged nations with growing energy needs to recognize that they are now stakeholders in the energy marketplace and that unilateral efforts, like buying upstream oil assets, will not guarantee their energy security. They have produced agreements to enhance strategic petroleum stocks and to manage their use with shared principles and prudent policies. These dialogues have also enhanced membership in U.S. advanced energy technology to jointly develop nearly emission-free power from coal, share best practices for energy efficiency, and pursue policies for fuel diversification.

Diversifying Traditional Energy Supplies to Europe

There may be no better example of our international energy policy than our consistent and dependable support for Eurasian energy security. Our Eurasian energy policy focuses on encouraging energy production, promoting competition, diversifying energy sources, supplies and markets, promoting energy efficiency, developing advanced technologies, and enhancing the safety of energy infrastructure.

Helping Europe diversify its sources of supply and strengthen its internal and external energy policies is a key USG priority. Heavy and growing European reliance on imported energy sources is a vulnerability - one the U.S. shares. As we seek to diversify our own sources, supplies and energy technologies in the U.S., we also seek to work with the EU to help enact policies that will enhance Europe's long-term energy-security.

The "Southern Corridor" concept of new gas and oil pipelines linking Caspian energy resources to European markets is a cornerstone of our gas diversification effort. Encouraging increased energy production in areas like the Caspian basin and Central Asia, and developing new routes of supply to Europe will contribute to our shared energy security goals. New sources and routes of gas serving the European market will strengthen the competitiveness within and among European energy markets overall, benefit the companies who are competing for those markets, and benefit the consumers who depend on them.

The first phase of the concept is operational: new oil pipelines and a new gas pipeline bring energy resources from the Caspian region to world markets. The Baku-Tbilisi-Ceyhan (BTC) pipeline stretches more than 1000 miles from Azerbaijan through Georgia to Turkey and was built to the highest standards of care and sensitivity to the environment. BTC's companion South Caucasus Gas Pipeline (SCP) is operating along a parallel route to Turkey.

The oil now flowing through the BTC pipeline and the gas about to flow through the South Caucasus Gas Pipeline are continuous reminders of the rewards of regional cooperation. These pipelines demonstrate the effectiveness of public-private partnerships that bring technical know-how and investment to large energy projects.

Working with companies and countries, we now seek to expand the SCP and gas production in Azerbaijan to deliver large volumes of Azerbaijani gas for the Turkey-Greece-Italy (TGI) and Nabucco Pipelines. We also hope to explore the possibility of future Central Asian gas moving along this route.

Azerbaijan's gas reserves are sufficient to fill both TGI and the first phase of Nabucco. The U.S. welcomes both of these projects on a commercial basis; however, we would oppose Nabucco as a means to transport Iranian gas to Europe.

As with BTC and SCP, close cooperation among all transit countries, the producer country governments, and investors in both the pipeline and in Azerbaijani gas production, is crucial to ensure sufficient Azerbaijani gas is available on time for these projects. We are working closely with all of these parties and with European governments to encourage these projects to move forward.

U.S.-EU Cooperation

Finally, the U.S. and the EU are working closely together on several fronts to advance our shared goals for global energy security. We also welcome Europe's interest in deepening our energy and climate cooperation, and we are engaged in a high-level dialogue on climate change, clean energy, and sustainable development with the EU. This dialogue advances the 2005 G8 Gleneagles Plan of Action for Climate Change, Clean Energy, and Sustainable Development, and is guided by the ultimate objective of the UN Framework Convention on Climate Change. Through this approach, the U.S. focuses on specific technology projects that address energy efficiency, reducing greenhouse gases, and accounting for economic concerns.

We have joint work programs on biofuels and energy efficiency, and are cooperating on clean technologies. On biofuels, we have made strong progress under the U.S.-EU biofuels work plan emerging from the 2006 U.S.-EU Summit. We are interested in agreeing on a roadmap toward a level of compatibility in standards by the end of 2007.

We also are working to intensify our cooperation on clean or near-zero emissions coal. This is vital, given our large coal reserves and the fact that coal will remain an important part of our energy mixes in coming decades.

We have an Energy Security Cooperation Dialogue with the EU aimed at efforts to develop new Caspian/Central Asian gas supplies, and we are exploring options for Ukraine to boost energy efficiency and improve energy infrastructure.

We seek regular discussions on the geopolitical aspects of energy security, and hope to accelerate the peaceful development of nuclear energy by those responsible countries that are also committed to non-proliferation and international nuclear safety standards.

On energy efficiency, the U.S. is exploring the possibility of expanding the U.S.-EU agreement on Energy Star to include other globally traded products such as consumer electronics. Ours is a bottom-up approach that empowers consumers with the technical information they need to choose the latest energy-efficient technologies. Working with the EU, the U.S. seeks to identify other cooperative efforts in energy conservation in buildings and housing and to find ways to cooperate to address energy efficiency in - and cooperation with - third countries.

Accelerating Innovation and Deployment of New Energy Technologies

We are also looking at ways to facilitate Trans-Atlantic research cooperation and we are seeking greater private sector input into our research coordination. Last month, Secretary Rice, German Foreign Minister Steinmeier and EU Commissioner Ferrero-Waldner launched a U.S.-EU Energy Technology CEO Forum, which is charged with preparing recommendations in this area that will be presented by the end of the German EU Presidency.

This CEO Forum highlighted our unique position to advance our common energy agenda. The United Kingdom and the United States are the world's two largest foreign direct investors, and our business relationship represents the largest economic partnership in the world. Our nations also have both world-leading technical capacity and the most innovative capital markets that can seed the world's most innovative companies and accelerate the deployment of new energy technology.

Secretary Rice and the Forum participants recognize that now is the right time to challenge our governments and our private sectors to accelerate the innovation and deployment of new energy technology. Our Trans-Atlantic economic relationship can be a boon to achieving these objectives.

Conclusion

This gives you a brief look at the degree to which energy security concerns are incorporated into overall U.S. foreign policy, and our efforts to ensure that global energy issues are addressed. In recent years, we have seen notable successes in government-to-government, business-to-business, and public-and-private partnerships. Chief among them may be the LEA's success in calming energy markets roiled in the wake of Hurricane Katrina; the building of the BTC pipeline through the Caucasus and Turkey; the development and implementation of the G8 Energy Principles: and the launch of the Asia Pacific Partnership for Clean Development and Climate. These triumphs and all that we hope to accomplish in the future require communication, cooperation, and coordination.

We will continue to work with our foreign partners to develop cleaner and more efficient sources of energy and to ensure that the world's growing demand for energy resources is met by an open, secure, and cooperative energy marketplace.

Thank you very much.