HON. EILEEN CLAUSSEN, PRESIDENT

PEW CENTER ON GLOBAL CLIMATE CHANGE

At the House of Representatives,
Committee on Foreign Affairs

May 15, 2007

Regarding U.S. Re-Engagement in the Global Effort to Fight Climate Change

Mr. Chairman and members of the committee, thank you for the opportunity to testify on U.S. Re-Engagement in the Global Effort to Fight Climate Change. My name is Eileen Claussen, and I am the President of the Pew Center on Global Climate Change.

The Pew Center on Global Climate Change is a non-profit, non-partisan and independent organization dedicated to providing credible information, straight answers and innovative solutions in the effort to address global climate change.[1] Forty-three major companies in the Pew Center’s Business Environmental Leadership Council (BELC), most included in the Fortune 500, work with the Center to educate the public on the risks, challenges and solutions to climate change.

Mr. Chairman, I would like to commend you and the members of this committee for convening this hearing today on U.S. re-engagement in the global effort to fight climate change. As one who has worked for many years to advance efforts on this and other critical environmental challenges, it is very gratifying to me that the U.S. Congress is at long last engaged in a genuine debate on how – not if, but how – the United States should address global climate change. So far, this debate has focused primarily on questions of domestic climate policy. This is a critical first step. But truly meeting the challenge of climate change will require global solutions as well, and these will be possible, I believe, only with strong leadership from the United States. By broadening the scope of debate here in Washington, and by focusing attention on the international dimension of climate change, this hearing will help set the stage for constructive U.S. engagement and for an effective multilateral response to global climate change.

In my testimony today, I would like to outline the following: the key objectives that a post-2012 climate framework must meet; the form that a post-2012 framework should take; the steps the United States must take at home and internationally to ensure that such a framework is established; and how the United States can best address the questions of competitiveness and developing country participation. In the course of my testimony, I will address each of the questions the Committee has posed.

The Pew Center’s perspective on the future international framework reflects not only our own detailed analysis but also the collective views of an impressive group of policymakers and stakeholders from around the world. As part of our effort to help build consensus on these issues, we convened the Climate Dialogue at Pocantico, a group of 25 from government, business, and civil society in 15 key countries, all participating in their personal capacities. The group included senior policymakers from Britain, Germany, China, India, Japan, Australia, Canada, Mexico, Brazil and the United States. It also included senior executives from companies in several key sectors, including Alcoa, BP, DuPont, Exelon, Eskom (the largest electric utility in Africa), Rio Tinto, and Toyota. The group’s report was released in late 2005 at an event here in Congress hosted by Senators Biden and Lugar.[2]

Despite a very diverse range of interests and perspectives, the Pocantico group succeeded in reaching consensus on a broad vision of a post-2012 climate framework. This vision begins with a set of key objectives that a post-2012 framework must meet. I would like to emphasize the two most critical objectives, which speak directly to the Committee’s question about the need for and nature of developing country participation.

First, the post-2012 framework must engage all of the world’s major economies. Twenty-five countries account for about 85 percent of global greenhouse gas emissions. These same countries also account for about 70 percent of global population and 85 percent of global GDP. The participation of all the major economies is critical, first and foremost, from an environmental perspective, because all must take sustained action if we are to achieve the steep reductions in emissions needed in the coming decades to avert dangerous climate change. But the participation of all major economies is critical from a political perspective as well. For reasons of competitiveness, none of these countries will be willing to undertake a sustained and ambitious effort against climate change without confidence that the others are contributing their fair share. We must agree to proceed together.

At the same time, we must recognize the tremendous diversity among the major economies. This group includes industrialized countries, developing countries, and economies in transition. Their per capita emissions range by a factor of 14 and their per capita incomes by a factor of 18. This leads directly to the second objective identified in our Pocantico dialogue: The post-2012 framework must provide flexibility for different national strategies and circumstances. The kinds of policies that effectively address climate change in ways consistent with other national priorities will vary from country to country. We must allow different pathways for different countries. An economy-wide emissions target may work for some but it will not work for others. If it is to achieve broad participation, the future framework must allow for variation both in the nature of commitments taken by countries and in the timeframes within which these commitments must be fulfilled.

With these key objectives in mind, the Pocantico group thenconsidered one of the other questions the Committee has asked: What could be the key elements of a post-2012 framework? The group recommended several policy approaches.

The first of these is targets and trading. This is the approach employed in the Kyoto Protocol, as well as in the European Union’s Emissions Trading Scheme and the Regional Greenhouse Gas Initiative being undertaken by ten states in the northeastern United States. There are very sound reasons why U.S. negotiators insisted so strongly on a market-based architecture for the Kyoto Protocol – and why many of the major climate bills now before Congress adopt the same approach. Emission targets provide a reasonable degree of environmental certainty, while emissions trading harnesses market forces to deliver those reductions at the lowest possible cost.

While targets and trading should remain a core element of the international effort, we must recognize that China, India, and other developing countries are highly unlikely to accept binding economy-wide emission limits any time in the foreseeable future. In their view, binding targets, by holding them to specific emission levels regardless of the economic consequences, would amount to a cap on economic growth. Economy-wide targets also may be technically impractical for them: to accept a binding target, a country must be able to reliably quantify its current emissions and project its future emissions, a capacity that at present few if any developing countries have.

A future framework, therefore, must allow for other approaches as well. A second potential element identified in the Pocantico dialogue is policy-based commitments. Under this approach, countries would commit to undertake national policies that will moderate or reduce their emissions without being bound to an economy-wide emissions limit. This is a more bottom-up approach, allowing countries to put forward commitments tailored to their specific circumstances and consistent with their core economic or development objectives. A country like China, for instance, could commit to strengthen its existing energy efficiency targets, renewable energy goals, and auto fuel economy standards. Tropical forest countries could commit to reduce deforestation. For this to work, the commitments would need to be credible and binding, with mechanisms to ensure close monitoring and compliance. Developed countries also may need to provide incentives for developing countries to adopt and implement stronger policies. One option is policy-based emissions crediting, similar to the Kyoto Protocol’s Clean Development Mechanism, granting countries tradable emission credits for meeting or exceeding their policy commitments.

A third potential element is sectoral agreements, in which governments commit to a set of targets, standards, or other measures to reduce emissions from a given sector, rather than economy-wide. In energy-intensive industries whose goods trade globally, which are the sectors most vulnerable to potential competitiveness impacts from carbon constraints, sectoral agreements can help resolve such concerns by ensuring a more level playing field. Such approaches are being explored by global industry groups in both the aluminum and cement sectors. We believe it is also worth exploring sectoral approaches in other sectors such as power and transportation where competitiveness is less of an issue but where large-scale emission reduction efforts are most urgent.

A fourth potential element is technology cooperation. This could include two types of agreements. The first would provide for joint research and development of “breakthrough” technologies with long investment horizons. Such agreements could build on the Asia Pacific Partnership and other technology initiatives but commit governments to the higher levels of funding needed to accelerate and better coordinate critical research and development. The second type of agreement could help to provide equitable access to both existing and new technologies by addressing finance, international property rights, and other issues that presently impede the flow of low-carbon technologies to developing countries.

The four elements I have outlined thus far fall under the heading of mitigation. A fifth critical element is adaptation. We need stronger adaptation efforts within the international climate framework but extending well beyond it as well. The top priority within the framework should be addressing the urgent needs of those countries most vulnerable to climate change. But the broader goal must be to spur comprehensive efforts to reduce climate vulnerability generally by integrating adaptation across the full range of development activities.

The Pocantico group also considered another question raised by the Committee: whether a new climate framework must establish a specific goal for stabilizing greenhouse gas concentrations in the atmosphere. The UN Framework Convention on Climate Change (UNFCCC) set a long-term objective for the international climate effort: stabilizing atmospheric greenhouse gas concentrations at levels that would prevent dangerous human interference with the climate system. Thus far, there has been no effort under the Convention to define that goal in quantitative terms. The Pocantico group clearly recognized the value of a quantified long-term goal in driving climate action, signaling markets, and establishing a metric to guide and assess near- and medium-term efforts. However, the group cautioned against trying to negotiate a specific quantified long-term target, particularly one intended as a basis for commitments. The scientific issues are so complex, and the inherent political stakes so great, that such a negotiation would likely be futile if not counterproductive. In my view, global consensus on a quantified long-term climate goal will be feasible only if the issue is taken up in an international venue other than that where climate commitments are to be negotiated. The U.S. Climate Action Partnership, of which the Pew Center is a founding partner, recommends stabilizing global greenhouse concentrations at a carbon dioxide equivalent level of 450-550 ppm.

Having outlined the potential elements of a post-2012 climate effort, I now turn to the question of how these approaches can be integrated in a common framework. While different countries should be allowed different pathways, they cannot simply each go their own way. An ad hoc series of parallel initiatives will not produce an aggregate effort nearly adequate to the need. By linking actions, and negotiating them as a package, nations are likely to undertake a higher level of effort than they would acting on their own. Such a negotiation could take the form of sequential bargaining, with countries proposing what they are prepared to do under one or more of the different tracks I’ve described, and then adjusting their proposals until agreement is reached on an overall package. To help ensure a balanced and therefore stronger outcome, it may be necessary to agree at the outset that certain countries will negotiate toward particular types of commitments most appropriate to their circumstances. The objective would be an integrated agreement is flexible enough to accommodate different types of commitments, and reciprocal enough to achieve a strong, sustained level of effort.

The Committee has asked whether the UNFCCC provides a viable foundation for a global climate framework. I believe the answer is yes. The Pocantico group recognized that one precondition for a successful negotiation is broad political consensus among the key players and, accordingly, urged an informal high-level dialogue among the major economies on the broad scope and terms of a post-2012 framework. However, the group agreed that once this informal consensus is reached, it should be carried back to the Framework Convention for the negotiation of formal agreements. The Convention enshrines key principles, such as “common but differentiated responsibilities,” and has been ratified by virtually every nation on earth, including the United States. It is regarded worldwide as the legitimate forum for negotiating and mobilizing the international climate effort. Further, the Convention is flexible enough to accommodate any of the approaches I have described here. The U.N. and Convention processes are often cited as obstacles to agreement on climate change. While these processes are far from perfect, I believe the largest obstacle to date has been a lack of political will, and if that obstacle were to be removed, process issues would not stand in the way of agreement.

The Committee has also asked what steps the United States can take to most effectively reengage in the global climate effort. An effective multilateral response to climate change will be possible only with U.S. engagement and leadership. Lack of action by the United States stands today as the major impediment to stronger efforts by other countries. Of the steps the United States can take to encourage global action, the most critical is to establish unilaterally a mandatory program to limit and reduce U.S. emissions. Demonstrating the will – and establishing the means – to reduce U.S. emissions will greatly alter the international political dynamic and improve prospects for international cooperation.

As it strengthens its domestic response to climate change, the United States should also help lead a renewed multilateral effort both within and outside the Framework Convention process. Within the Convention process, the United States should support the launch of a new round of negotiations, either in parallel with or subsuming those already underway under the Kyoto Protocol, seeking a balanced package of commitments among the major-emitting countries. The Conference of the Parties later this year in Bali presents an opportunity to launch such negotiations. Such negotiations will be fruitful, however, only if other efforts are taken in parallel to build confidence and seek political consensus among the major economies. The Gleneagles Dialogue launched by the G8+5 in 2005 has brought together the 20 largest energy-consuming countries to discuss issues of climate, energy, and development. If given a stronger mandate when it reports back to the G8+5 in 2008, this Dialogue could be a serve as the venue for developing the political consensus needed for the formal negotiations to succeed. If not, an alternative venue for this critical political dialogue will be needed.

Finally, I would like to address directly the questions of competitiveness and developing country participation. These issues are closely related. Ultimately, I believe, both are most effectively addressed through binding multilateral commitments. But it is important to distinguish these two issues because, in advance of a stronger global framework, each will require a different set of interim policy responses.

Competitiveness is a potential concern not for the U.S. economy as a whole, but rather for specific sectors – primarily energy-intensive industries, such as steel and aluminum, whose goods trade globally. In establishing a mandatory domestic climate program, steps can be taken to minimize or mitigate competitiveness impacts. For instance, in the design of a mandatory cap-and-trade program, potentially vulnerable sectors could be allowed special consideration in the emission allowance process. Another option is to provide technology and transition assistance to affected industries and communities, possibly funded by auctioning a portion of allowances. As a longer-term option, legislation also could stipulate that if the major developing countries have not taken stronger action to reduce emissions within a specified timeframe, the United States, in concert with other industrialized countries, will consider tariffs on their energy-intensive exports or other mechanisms to correct the resulting competitive imbalances. I would note that on their own, however, these latter approaches are not likely to induce strong developing country action, and could lead to more confrontation than cooperation.

Engaging developing countries will require a firm but balanced approach. To begin with, we must be absolutely clear in our expectation that the major developing countries assume binding commitments in a post-2012 framework. It is true that the United States, the world’s largest economy, is also by far the largest historic contributor to climate change. In establishing mandatory limits on domestic emissions, the United States will have begun to fulfill the commitment it made with other industrialized countries to lead the climate change effort. And having done so, it will then be reasonable to expect that countries like China fulfill their responsibilities as well. China’s emissions have grown 80 percent since 1990 and could rise another 80 percent by 2020. It is essential that these trends be reversed. Realistically, given the greater capacity and historic responsibility of industrialized countries, China, India and other developing countries will require incentives to undertake strong climate efforts. The United States should provide market-based incentives through a domestic cap-and-trade program by recognizing credits for emission reductions achieved in developing countries. In addition, targeted bilateral and multilateral assistance should be provided for the deployment of critical high-cost technologies such as carbon-capture-and storage. However, in return for these incentives, China and the other major developing countries must assume appropriate commitments that will slow and ultimately reverse the growth of their greenhouse gas emissions.

To summarize, I believe it is incumbent upon the United States to lead both by strong action at home and by actively and constructively reengaging in the international climate effort. Only with strong U.S. participation and leadership can we achieve a fair and effective global response to the critical challenge of climate change. I thank the Committee for the opportunity to present these views and would be happy to answer your questions.