BEYOND KYOTO: CORE CHALLENGES

Remarks of Elliot Diringer
Pew Center on Global Climate Change

May 13, 2002

I would like to thank our hosts the opportunity to speak here today. This is my first trip to Wilton Park, and it’s truly an honor to partake of your traditions. I will do my best to uphold them.

Next month marks an important anniversary: It will be 10 years since the Rio Earth Summit and the launch of the international effort against climate change. I attended Rio as a reporter. I recall long, exhausting days criss-crossing the conference center to dutifully witness official proceedings and pronouncements, all the while trolling for hallway chit-chat that often proved be the better story, then frantically typing up dispatches for my readers in San Francisco. Those of you who were also there will recall much talk of the spirit of Rio. Le me tell you the source of my Rio spirit. The Brazilian coffee industry had set up a booth, very strategically located, where all day long they handed out tiny cups of the strongest coffee I’d ever had. Every time I passed the booth, I’d grab another shot. To this day, I remain indebted to the coffee growers of Brazil.

Now back in my days in journalism, we had a real fondness for anniversaries. On the anniversary of a particularly notable event – an earthquake, let’s say – we’d like to look back and assess. How had it changed people’s lives? Were the authorities doing all they should to rebuild and help victims recover? Were we better prepared for the next big one? We’d call it the “one-year-later” story. Sometimes, for a really big event, we might do a “five-years-later” story. Today I’d like to offer you a “ten-years-later” story. Ten years after the nations of the world committed themselves to the fight against climate change, how far have we come? And more importantly, how do we go the next step? Of course, when I was a reporter, I got to think up the tough questions, then stick them to somebody else to answer. I can no longer get away with that. Having posed the questions, I must venture at least some semblance of a response. And worse yet, when I’m done, you get to ask questions. I just hope you’re prepared to accept a “no comment.”

So how far have we come? We have spent the decade since Rio struggling to take the first step – struggling to create a common framework that would start industrialized countries on the path to emissions reduction. In just the past 18 months, that effort has met both its greatest success – and its greatest setback. The success was the completion of negotiations over the rules for implementing the Kyoto Protocol. The setback, of course, was President Bush’s flat-out rejection of the Protocol. So now that we are on the verge of making the framework real – of bringing into force a treaty establishing the first binding international limits on greenhouse gas emissions – the largest emitter refuses to go along. We begin the second decade of this effort with the United States and the rest of the industrialized world on two separate paths.

With or without the United States, Kyoto is a profound accomplishment. It forges both a vision, and a formula, for transcending national interests for the sake of a common, global, long-term good. It sets ambitious goals. And rather than fight the market, it tries to tap the market, and motivate the market, so those goals can be reached as affordably as possible. Much credit is due the European community for now embracing market approaches that just a few years ago were viewed with such deep suspicion. It is critical now that Kyoto enter into force, and I would say that at the moment the prospects appear good. It is critical as well that parties actually implement it – that they demonstrate it can be done.

At the same time I think it is important that we be honest about Kyoto – about what it is and what it is not, what it gets us and what it does not. And to do that, we must remind ourselves of the goal established in Rio: stabilizing greenhouse gas concentrations at a level that prevents dangerous anthropogenic interference with the climate system. No one can tell us with any certainty just what that level might be – a question I’ll come back to later. But what is clear is that the emission reductions we need to achieve over the long term exceed by many magnitudes the reductions that might be achieved under Kyoto.

I say “might” because we really don’t know how much of a reduction Kyoto will deliver. Without the United States, Kyoto addresses less than 40 percent of global emissions, and that assumes all other industrialized countries do ratify. And for that subset of emissions, it only begins to move countries down the path of emissions reduction. This is not meant as a criticism of Kyoto. Rather, it is meant to underscore that Kyoto is only a stage – a first stage – in a very long-term effort.

Of course, anyone struggling with this issue understands that. But in the drive to bring Kyoto to life, that at times has come to appear an end in itself. By necessity, Kyoto has become something of a holy grail. Now that it is within reach, I’d like to suggest it is time we start viewing it less as an icon and more as a tool – a critical tool to get us through a critical stage – but in the end, just a tool. Many in Europe have now come to terms with the fact that President Bush is not returning to the Kyoto Protocol. I think we all should contemplate the possibility – the very real possibility – that the United States is never returning to Kyoto. Clearly, the international effort against climate change can not succeed unless the United States in time becomes a full partner. But I suspect that when that time comes, the U.S. will be signing on to something that looks very different than the Kyoto Protocol.

So as we approach the tenth anniversary of Rio, we stand at another critical juncture, one that requires that we be nimble. We must at the same time embrace Kyoto and look beyond it. We must start to think post-Kyoto.

One way to begin is to ask: What will it take to get the United States back in? Certainly, that concern will and must play heavily in any effort to move the climate regime beyond Kyoto. And I’d like to offer some perspective on the prospects for stronger action in the United States. But in truth, I don’t believe the best way to begin charting a path beyond Kyoto is by asking what will entice the U.S. back in. And that is because the challenges we face in constructing an effective global regime are really no different whether the U.S. is in Kyoto or it is not. They are the core challenges that have loomed before us from the start: How we define a safe level of greenhouse gas concentrations. How we launch the technological revolution it will take to achieve the reductions we need. How we ensure that all the major emitters shoulder their fair share of this effort. When we arrive at reasonable answers to those questions, I believe we will at the same time have answered the needs of the United States. So after focusing a bit on the situation in the U.S., I’d like to come back to those core questions, and at least sketch out some thoughts on how we might begin to approach them.

I know that to many on this side of the Atlantic, the U.S. attitude on climate change is not merely aggravating; it is inexplicable. I said earlier that Europeans had come to accept that President Bush is not returning to Kyoto. But many still have trouble comprehending, I am sure, why he rejected it in the first place. Let me offer two explanations. In a narrow sense, the U.S. rejection of Kyoto was a function of pure interest group politics. The new administration – without closely analyzing Kyoto and the history behind it, without putting any real thought to alternatives, and without anticipating the international furor it would invite – renounced Kyoto in part to reward certain of its favored constituencies.

In a broader sense, though, the rejection of Kyoto might also be seen as a necessary readjustment. There had evolved a fundamental disconnect in U.S. climate policy. Internationally, the Clinton administration supported a binding treaty, and in Kyoto it agreed to an ambitious target. But at home, the Senate had laid down terms that made Kyoto’s ratification a remote possibility at best, and the administration was barely contemplating let alone promoting the kinds of measures needed to meet the Kyoto target. In other words, the United States was in no way prepared to deliver at home what it had promised abroad. Some kind of readjustment was due. A mid-course correction in U.S. policy might have sufficed. Instead, the new president chose an abrupt about-face.

It may not be readily apparent, but interestingly enough, the United States may well be further along now in addressing climate than ever before. To be sure, the new climate strategy outlined by the president earlier this year will not take us far. One encouraging element is a pledge that companies voluntarily reducing their emissions will receive some assurance that their efforts will be recognized in a future climate regime. But the President’s strategy relies exclusively on voluntary approaches, and its goal – an 18 percent reduction in greenhouse gas intensity by 2012 – translates into a 12 percent increase in actual emissions. It is more or less business as usual.

But when you look past this administration and its policies – to what is happening in the states, in the business community, and in Congress – the picture looks somewhat brighter. Last month, for instance, New Hampshire became the third state to enact some form of mandatory carbon controls on power plants. Other states, like Texas, are requiring electric utilities to generate a share of their power from renewable sources. Others are investing in energy efficiency, carbon sequestration, and transportation improvements. In many cases, these efforts are not driven exclusively nor even primarily by climate concerns. But they are delivering real emission reductions, along with a host of other benefits, like cleaner air and lower tax bills.

A growing number of companies are also taking steps to address climate change. At last count, we’d identified more than 40 major companies, most with significant operations in the United States, that have taken on some kind of greenhouse gas reduction target. Many of you, I am sure, are aware that BP has already cut its emissions 10 percent below 1990 levels, eight years ahead of target, and now has pledged to keep them there for at least the next 10 years. Some other examples: Alcoa is aiming to reduce its emissions 25 percent below 1990 levels by 2010. DuPont is aiming for a 65 percent reduction. IBM has set targets for both emissions and energy efficiency, and has pledged that virtually every one of its new products will earn the government’s highest energy efficiency rating.

We recently completed a report taking a closer look at several companies with voluntary greenhouse gas targets. The companies cited a variety of motivations for taking on a target. They believe the science of climate change is compelling, and in time the public will demand strong climate protections. They want to get ahead of the curve by reducing their emissions. They want to encourage government policies that will work well for business. And they all cited one other important motivation: to improve their competitive position in the marketplace. That, in fact, has been the result. The companies are finding that their efforts to reduce emissions are helping to improve operational efficiencies, reduce energy and production costs, and increase market share – all things that contribute to a healthier bottom line.

Important political shifts are underway as well. Just as President Bush’s rejection of Kyoto helped galvanize international support for the Protocol, it helped elevate the issue of climate change in the U.S. media and in Congress. All of a sudden, it seems, members of both parties are eager to demonstrate their commitment to protecting the climate. Nearly twice as many climate change bills were introduced in Congress over the past year as in the previous four years combined. The energy bill passed last month by the Senate includes two bipartisan climate provisions. One would establish a new office in the White House charged with developing a strategy to achieve safe levels of greenhouse gas concentrations in the atmosphere. The other would establish a voluntary system for tracking and reporting greenhouse gas emissions. If after five years less than 60 percent of the nation’s emissions are registered in this new inventory, reporting by major emitters would then become mandatory.

These are only first steps, and they have not yet passed the House or been signed into law. But some lawmakers are already looking much further down the road. Senators John McCain and Joe Lieberman, a Republican and a Democrat, plan to introduce a bill later this year to cap greenhouse gas emissions in the United States and establish an economy-wide emissions trading system. It is, frankly, hard to imagine such legislation being enacted for some time, probably years. But the fact that it is even being drafted is a sign that Congress at least is awakening to the need for the United States to meet its responsibilities on climate change.

So let’s assume for the moment that Kyoto enters into force, countries do their best to implement it, and on a parallel track, the United States begins building a credible climate strategy. That may be too hopeful, or not hopeful enough, depending on your point of view. But let’s assume it. What, then, are the challenges we face in going the next step? What are the core challenges nations must confront if they are to craft a truly effective international response to climate change?

I’d like to suggest four. There are many more, of course, and even with the four I’d like to suggest, it’s sometimes hard to know where one stops and the next one begins. But I believe each represents a unique and important dimension, and each must be resolved if we are to move forward.

The first is the question of a goal. As I said earlier, the ultimate objective set in Rio is to stabilize of greenhouse gas concentrations at a level that prevents dangerous anthropogenic interference with the climate system. The only way to meet that objective is to reduce emissions. So, wouldn’t it make sense to define it more concretely – in other words, to set a specific concentration target – so we will know just how much emissions must be cut? I for one think it does make sense. But we also have to ask: is it practical? The process of translating broad objective into concrete target would be one fraught with uncertainties, laden with value judgments, and subject to extraordinary political pressures. Even if our understanding of the climate system were far more precise, the level of risk we as a society are willing to accept is in the end more a question of values than of science. And precisely because such a determination would frame the entire climate effort, the political and economic stakes would be profound.

It is absolutely critical that we better understand the various emission pathways that could achieve stabilization at given concentrations, and the climate impacts that could result from each. But how much expertise and scarce political capital should we invest in establishing a specific concentration target? Might it not be better to aim for consensus on the overall direction and pace of our effort, and periodically readjust as we learn more?

A second challenge is fairness. Climate change confronts us with deep inequities of many different kinds. These are captured, at least in part, with the observation that those bearing the least historical responsibility for climate change – the developing countries – are also those facing the worst consequences, and those least able to do something about it.

Given these inequities, the understanding since Rio has been that developed countries should act first. There has been no clear understanding about what would happen next. Nor as yet have there been any real hints that developing countries are any closer to contemplating commitments of their own. That is not to say that developing countries are not acting. Many, in fact, are making impressive gains in reducing or avoiding greenhouse gas emissions. In most cases, climate protection is not the objective but rather an added benefit of efforts to reform markets or improve local environments. Still, these successes help demonstrate the strong synergies between climate protection and the overriding development priorities of developing countries. These efforts should be recognized and they should be nurtured.

But it may also be time to move the equity debate beyond the developed-developing country divide. And the U.S. withdrawal, curiously enough, may present an opportunity to do that. On the one hand, by undermining the basic [bargain] struck in Rio, the U.S. withdrawal could make it harder to deepen the engagement of developing countries. On the other hand, it recasts the terms of debate. The question is no longer: How do we get developing countries to take on commitments? Rather, it is: How do we ensure that all major emitters do their fair share? Because I believe one thing is certain: Nations will not commit to a serious, long-term global plan against climate change, let alone abide by it, unless each perceives it to be fair.

A third challenge is ensuring that we do whatever we do as cost-effectively as we can. Quite obviously cost has been a central concern, particularly for the United States, from the very start. It is reflected in the very architecture of Kyoto, with its various forms of emissions trading. And the major sticking points in negotiating Kyoto’s implementation rules – whether to allow unfettered access to trading, for instance, or how much sinks credit countries could claim – revolved largely around questions of cost.

As we look beyond Kyoto, getting the maximum environmental gain for every dollar, pound, or euro invested becomes even more critical. To build political support for steeper cuts in emissions, it will be necessary to demonstrate that they can be achieved without wreaking economic havoc. Better mechanisms may be part of the answer. Experience with the trading systems now emerging will no doubt lend insight into how market forces can be better harnessed for the cause of climate protection. But affordability will depend just as much or more on questions like timing. For instance, how do you send a strong, early signal to the marketplace – so companies begin investing now in the technologies that will deliver deep reductions decades down the road – without setting overly ambitious targets that force the costly turnover of capital stock before it is really necessary? Is the answer to set an upper limit on cost, compromising on environmental integrity for the sake of economic certainty? Or is there a way we can ensure both?

The fourth challenge is, perhaps, a way of restating the first three. It has to do with the nature of commitments under a future climate regime. Kyoto takes one approach: targets and timetables. But there are many types of targets. President Bush chose a greenhouse gas intensity target, measuring emissions against GDP, an approach he suggested might work well for developing countries. How might other indicators work? Alternatively, must the commitment take the form of a constraint on emissions? Or might countries more readily agree to a positive set of requirements – not a fully harmonized list of specific measures that all countries must implement, but a broader set of policy mandates, for instance phasing out fossil fuel subsidies?

Beyond the type of commitment is the question of who must take it on. The precedent for differentiated commitments is well established. But what is the proper grouping? Must it simply be developed, developing, or both? If we instead start with the 20 largest emitters – a list that includes 12 developed and 8 developing countries – we would capture nearly 80 percent of global emissions. The top ten gets you nearly two-thirds.

As I hope you can tell, my intent is not to advocate any one approach, but rather to suggest that we must think openly and creatively about the possibilities. What set of reciprocal arrangements can create incentives strong enough to induce countries first to join an effective climate regime, and second to comply with it?

Under Kyoto, negotiations for a second round of commitments must begin by 2005. But it may be a mistake to limit those negotiations to the Kyoto framework. To actually secure a new set of commitments, and to create a durable international approach to climate change, we may need to construct a new framework. Certainly, we should borrow all we can from Kyoto, because there is much of value there. But we must also look beyond Kyoto, and it’s best if we start now.

I’ve asked many questions. Now, I believe, it is your turn. Thank you for listening.