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Reasonable Middle on Aggressive Actn [Action] -- [Climate Change]
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Reasonable Middle on Aggressive Actn [Action] -- [Climate Change]
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Records of the Council of Economic Advisers (Clinton Administration)
Jeffrey Frankel's Files
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FOIA Number: 2017-1095-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
Collection/Record Group:
Clinton Presidential Records
Subgroup/Office of Origin:
Council of Economic Advisers
Series/Staff Member:
Jeffrey Frankel
Subseries:
OA/ID Number:
13727
FolderID:
Folder Title:
Reasonable Middle on Aggressive Actn [Action]--[Climate Change]
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Section:
Shelf:
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S
20
5
1
2
Asian-American
Strategists for Ms. Boxer express doubt
servative Christian group while fighting
that the Asian constituency will prove that
for the GOP Senate nomination. he
large on Election Day. But Republicans
quickly offered a public pledge of support
Isin Close Race
say Mr. Fong's ethnicity has paid divi-
for gay-rights initiatives. Ms. Boxer has
dends in other ways
pounced on the issue, which has riled
as the vulnerable De-
both gay-rights Republicans and the reli-
Against Boxer
mocratic incumbent
gious right.
attacks him as an op-
Mr. Fong. for his part, has fired back
ponent of gun con-
at Ms. Boxer for displaying "hypocrisy"
trol, abortion rights
in treating President Clinton's sex scan-
By JOHN HARWOOD
and environmental
dal more gently than earlier controver-
Staff Reporter of THE STREET JOURNAL
protection.
sies involving GOP figures such as for-
PALO ALTO, Calif. Two years ago,
His status as a
mer Sen. Bob Packwood. And he has at-
the election campaign ended in disap-
member of a minor-
tacked his liberal-Democratic opponent
pointment for Albert Chin. A Clinton sup-
ity group "makes
for running "racist" TV ads that display
porter, he watched a late-breaking cam-
the attack of being
Mr. Fong's picture alongside the words
paign-finance scandal cast a shadow over
a right-winger less
"foreign diplomat"; the ad, which the
the new prominence of Asian-Americans
credible," says Sal
Boxer camp says has no racial connota-
in politics.
Russo, a GOP con-
tion, argues that Mr. Fong favors giving
But this fall, Mr. Chin has reason to cel-
sultant who is Mr.
Barbara Boxer
managed-health-care executives the
ebrate: the very real prospect that his fel-
Fong's top strate-
same immunity from lawsuits enjoyed by
low Chinese-American, Matt Fong, a Re-
gist. For the same reason, a victory here
diplomats.
publican, could unseat Democratic Sen.
could turn Mr. Fong into a valued
If the contretemps further energizes
Barbara Boxer in Tuesday's election. "It's
spokesman for the national Republican
Asian-Americans to turn out for the GOP
very important," says Mr. Chin, a busi-
Party.
candidate, that would only underscore the
nessman who serves on the board of San
However, the 44-year-old Air Force
contrast with the end of the 1996 campaign.
Francisco's Chinese
Academy graduate remains relatively in-
Then, Republican presidential candidate
Hospital. "For all
experienced and has been squeezed be-
Bob Dole railed against the "foreign aid"
these years we really
tween different GOP factions in the clos-
Mr. Clinton had received from illegal
didn't have any rep-
ing days of just the third campaign of his
Asian sources. Last week, Mr. Dole was
resentation.'
career. After news broke recently that he
greeting Mr. Chin at the fund-raiser for
His excitement,
had donated money to a prominent con-
Mr. Fong.
like that of the other
Asian-Americans
who packed a recent
Fong fund-raiser
here at Ming's
Restaurant, sug-
gests that the 1996
campaign-money
controversy may
prove to have had
Matt Fong
virtually no impact
on the rising political participation of
Asian-Americans. Moreover, their enthu-
siasm for Mr. Fong could become a critical
factor in one of the nation's key Senate
races. A Field Poll released yesterday
shows Ms. Boxer pulling out to a nine-per-
centage-point lead after a barrage of at-
tack ads. Still, both candidates' strategists
say their surveys show the race remains
close enough that it could go either way.
Asian support "is going to be ab-
solutely critical," says Mr. Fong, now
California's state treasurer. Donations
from Asian-Americans accounted for half
of the $3 million war chest that helped
him win the GOP Senate nomination in
THE WALL STREET JOURNAL FRIDAY, OCTOBER 30, 1998
June. (For the entire campaign through
mid-October, he has raised $8.8 million,
compared with Ms. Boxer's $13.5 million.)
In the general election, Mr. Fong's tele-
vision ad campaign has featured Chinese-
language spots aimed at snatching Asian-
American votes away from Ms. Boxer's
home base around San Francisco.
Though Asian-Americans represent
just 6% of California's registered voters,
Fong campaign aides say ethnic pride
could help swell the proportion of those
actually voting to 8% in an election that
has given most voters here, as in other
states, little reason to flock to the polls.
Most are Democrats, but Mr. Fong hopes
to a garner a solid majority of their votes.
Global- -Warming Treaty's Opposition Is Strained
By JOHN J. FIALKA
associations working with the Clinton ad-
Still, U.S. negotiators, led by Undersec-
Staff Reporter of THE WALL STREET JOURNAL
ministration in support of the treaty.
retary of State Stuart Eizenstat, will find
WASHINGTON-The coalitions of oil,
"You are seeing a fair amount of re-
plenty of logs in their way in Buenos Aires.
automobile, utility and other companies
assessment," said Kevin J. Fay, executive
They include a Republican-led congres-
that opposed last year's global-warming
director of the Washington-based group,
sional delegation, most of which is opposed
THE WALL STREET JOURNAL FRIDAY, OCTOBER 30, 1998
treaty are showing some strain as talks to
which, he said, has doubled its member-
to ratifying the treaty, and a European
complete the pact are set to resume next
ship in a year. Joseph M. McGuire, chief
Union proposal to limit the amount of in-
week in Buenos Aires.
regulatory analyst for AlliedSignal Inc.,
ternational trading that a nation can use to
Some members are leaving the coali-
said belonging to the group allows his com-
meet its emissions quota.
tions or repositioning themselves on the is-
pany to get inside the process.
The U.S., which may have to cut its
sue. One sign of the changed landscape is
Connie Holmes, head of the anti-treaty
emissions by 30% below 1990 levels to meet
the American Automobile Manufacturers
Global Climate Coalition, said it, too, hopes
Association, whose members helped fund
to follow the process more closely. If a treaty
its treaty obligations starting in 2008,
art anti-treaty television campaign on the
limiting emissions of such "greenhouse
wants unlimited trading to ease the cut's
eve of last fall's treaty deliberations in Ky-
gases" as carbon dioxide is ratified, she
economic impact and provide incentives
oto, Japan. Now the AAMA is about to dis-
noted, emissions trading will be very impor-
for more-efficient uses of fossil fuels. Mr.
solve, and its largest member, General
tant to many GCC members. Such trades
Eizenstat said in a news briefing yesterday
Motors Corp., has begun to work with envi-
would allow companies that don't meet car-
that he hopes to avoid a fight over the issue
ronmental groups and joined a pro-treaty
bon-dioxide emissions quotas to buy excess-
in Buenos Aires. But the U.S. is prepared to
lobby association.
emission certificates from those that do.
wage one, he added, with the help of
"Our main direction is to be construc-
"The rules for that, oh Lordy, are really im-
Japan, Canada, Russia and other allies.
tive on this issue," explained John
portant," she said, referring to the main
Williams, leader of GM's climate-issues
item looming on the agenda in Buenos Aires.
team. "We need to be active in a wide vari-
Two major oil companies, British Pe-
ety of issues. It helps us influence the way
troleum Co. and Royal Dutch/Shell Group,
things are going."
have recently dropped their GCC member-
The giant auto maker's moves mean
ships because of its opposition to the
that this year it will be plotting strategies
treaty, and some other large members are
for lobbying on both sides of the issue. It is
said to be considering following suit.
still a charter member of the Global Cli-
"You're beginning to see the logs breaking
mate Coalition and the Business Round-
up and a return to forward motion domesti-
table, two large U.S. groups that oppose
cally on this issue," said Fred Krupp, exec-
the treaty. But it has also joined the Inter-
utive director of the Environmental De-
national Climate Change Partnership, a
fense Fund, which is helping BP design its
group of more than 40 companies and trade
own emissions-trading system.
International Federation of Industrial Energy Consumers
North America
1110 N. Glebe Road, Suite 610 Arlington, VA 22201 Ph (703) 276-0600 Fx (703) 276-7662
December 5, 1997
MEMORANDUM
TO:
Distribution List
FROM:
James M. Childress AC
SUBJECT: Letter to President Clinton
Attached is a letter IFIEC sent to President Clinton last week on climate change.
Attachment
International Federation of Industrial Energy Consumers
North America
1110 N. Glebe Road, Suite 610
Arlington, VA 22201
Ph (703) 276-0600
Fx (703) 276-7662
November 26, 1997
President William J. Clinton
The White House
Washington, DC 20500
Dear Mr. President:
The International Federation of Industrial Energy Consumers represents U.S. manufacturers in
energy intensive industries such as aluminum, steel, chemicals, cement and paper. Increases in
the cost and availability of energy and power can severely impede the ability of major industrial
energy consumers to compete on world markets and to provide well-paying jobs to millions of
Americans. It is for this reason that we wish to share with you our views and concerns about the
effect that upcoming climate change negotiations in Kyoto could have on our industries.
First, we agree with you that climate change is a global issue and all countries - developed and
developing - must participate in any international treaty.
We also agree that many of the near term elements of your Stage 1 proposal - incentives for
increased energy efficiency, electricity restructuring, and a review of the science and economics
of climate change - could offer a way forward regardless of the outcome of the Kyoto
negotiations. Prudent public/private sector cooperation under Stage 1 could move the U.S. along
a path toward greater energy efficiency while gaining better knowledge of the science of climate
change and the consequences of alternatives being put forward to address the issue.
However, committing the U.S. to a binding emission reduction target in the 2008-2012 period is
not warranted and will not work. It is not warranted given current understanding of the science
of climate change. It will not work given the enormous cost required to turn over the current
capital stock to achieve these reductions over a short period of time. We have looked carefully at
emissions trading proposals which are offered as a "market-oriented" means of reducing
emissions. We do not find them sufficient to reduce greenhouse gas emissions without serious
economic dislocations and loss of international competitiveness. For energy intensive industries
a greenhouse gas tradable permit program would amount to energy rationing. We have enclosed
a white paper that clearly outlines our thoughts on this matter.
A better way forward is through voluntary agreements between government and industry. They
are preferable to tradable permit programs because they are based on mutually defined goals
between the private and public sectors that provide industry with the flexibility to attain the goals
by their own means. Setting a goal and providing flexibility to achieve the goal reflects the
principles and methods industry uses and understands. Voluntary agreements are attractive to
government because they will make the best use of initiative and innovation by industry in
achieving common goals.
Coupling voluntary agreements with technology development efforts under the Stage 1 proposal
you outlined last month will provide a realistic, cost-effective way of bringing new technology
into the capital stock of U.S. industry. Only as capital stock turns over can the next generation of
technologies - - the only real solution to climate change concerns - - be introduced on a wide
scale, bringing with it the increases in energy efficiency envisioned in your October 22 proposal.
Because energy is an important element in the cost of our products, we have a continuing, long
term record of reducing energy consumption per unit of output. We believe that record can and
should be extended and improved upon. Joint government-industry voluntary agreements offer
the way forward. We offer our support and consultation in efforts to bring this about.
Very sincerely yours,
James M. M Childress Children
Executive Director
Enclosures
International Federation of Industrial Energy Consumers
North America
White Paper
Voluntary Industry Agreements -
A Cost Effective Way to Address Greenhouse Gas Concerns
IFIEC represents industries where energy consumption is a significant proportion of total
production costs and energy is therefore a key factor in competitiveness. IFIEC believes
that choice, flexibility and responsible energy management are the necessary ground rules
for competitive and sustainable industrial activity.
The time has come to expand the use of voluntary agreements between government and
industry to address greenhouse gas concerns. They are preferable to emissions cap and
trade programs, energy rationing, carbon/Btu taxes, or emissions/mandatory efficiency
standards now being proposed. Voluntary agreements are attractive to business because
they are based on mutually defined goals between industry and government that provide
industry the flexibility to attain the goals by their own means. Setting a goal and
providing flexibility to achieve the goal reflects the principles and methods industry uses
and understands. Voluntary agreements are attractive to government because they will
make the best use of initiative and innovation by industry in achieving common goals.
Voluntary agreements are recommended for a variety of reasons:
First, they work, with a history of success in Europe and the U.S. An example is the
European Directive on Environmental Management and Audit Scheme (EMAS) and the
ISO 14000 series which provide an opportunity for companies to meet or exceed
environmental objectives while competing in world markets successfully.
Second, they are cost effective. Energy is a cost factor for industrial energy consumers
and reduction of cost and improvement in energy use are consistent with sound business
practice. This is a goal that can be supported by both government and industry, tying
environmental success with good economic practices.
Third, by leaving achievement of goals up to individual companies, voluntary
agreements encourage innovation and lowest cost approaches to environmental
improvement. They allow for testing of a wide range of possible options, and
concentration on those that work best. In this regard, they take advantage of private
sector knowledge, initiative and technical and business expertise.
Fourth, voluntary agreements permit incremental steps along an energy efficiency path
that allows for mid-course corrections in the event that conditions change from those that
existed when the agreements were first drafted. This enables participants to respond
quickly without the need for time consuming regulatory or legislative changes.
Fifth, the agreements provide a means of achieving environmental improvement without
loss of competitiveness. By bringing government and industry together in a cooperative
partnership, they allow industry to identify possible efficiency paths that will provide
reduced emissions per unit of output without loss of international competitiveness.
Key Components of a voluntary agreement program include:
Goal - Increased energy efficiency (reduction in energy consumed per unit of product)
within a given time frame should be the overall goal of voluntary agreements. They
should take account of all energy input (less feedstocks) and all product output. The goal
is not a legally binding target, but is established by industry consensus developed in
discussions between affected industries and government. The resulting goal reflects a
proper balance of environmental improvement, economic realities, industry capabilities,
status of technology and societal and government expectations.
Goals should be flexible to take into account the impact on changing economic conditions
of participating industries, their competitiveness and world energy markets.
Scope - Voluntary agreement goals should be industry-specific and industry-wide to
avoid competitive issues. Monitoring and reporting should also be on an industry-wide
basis with individual companies providing data through trade associations or other
credible third parties. This is a cost-effective, proven means of gathering such data and is
necessary because publication of individual company data may raise competitive issues.
This is also important in convincing individual companies to "buy into" the voluntary
agreement by working within their individual industry's structure and organizations.
A voluntary agreement program should be flexible to allow companies to report on an
individual basis (in addition to reporting on an industry-wide basis) if they wish to take
credit for specific actions or emissions reductions achieved in the event that legally
binding reductions are enacted and enforced.
Industry-Government Interaction - A formal annual dialogue between industry and
government should be established involving individual companies (or trade associations)
and the government bodies responsible for energy, trade, commerce and environmental
policies.
Incentives - An effective voluntary agreement program should include incentives
focusing on improved energy efficiency, accelerating capital stock turnover, and
encouraging research and development.
For more information contact: International Federation of Industrial Energy Consumers, 1110 North Glebe Road, Suite 610,
Arlington, VA 22201 ph. (703) 276-0600, fx. (703) 276-7662
2
November 26, 1997
International Federation of Industrial Energy Consumers
North America
White Paper
A CO₂ Cap and Trade System -
Energy Rationing for Industrial Energy Consumers
Introduction
One concept being promoted to help cut greenhouse gases emissions both at the national and
international levels is a "cap and trade" system (also referred to as tradable allowances, tradable
permits, or tradable emission rights) that would allocate emission permits among sources which
could then buy and sell the permits on the open market. Cap and trade advocates assert that
tradable permits can provide a "market-based" solution that is the most efficient, cost effective
way to cut emissions of greenhouse gases (GHG). This assertion does not hold up under
scrutiny. For energy-intensive industries a cap and trade system is not market-based, but instead
amounts to energy rationing that will cap economic growth.
Basics of a cap and trade system
In order for a cap and trade system to operate, a legally binding limit must be placed on total
carbon emissions. Proposals range from achieving 1990 emission levels by the year 2010 to
fifteen percent below those levels. Permits for total emissions that do not exceed the cap would
be allocated to sources (plants or companies) according to a predetermined formula, most likely
based on emissions in a given year. Each permit would allow a source to emit one ton of carbon
equivalent per year. After being allocated, permits could be used immediately, banked for future
use, bought or sold.
Permits could be issued in one of two ways - either to energy producers or directly to energy
consumers. If permits are issued to energy producers (petroleum, natural gas, coal companies)
the effect will be similar to a carbon tax, raising fossil fuel prices. Energy producers would
compete for the limited number of permits, incurring costs (related to limitations of energy
availability and the cost of GHG emission permits) which would be passed on to consumers.
If permits are issued to energy consumers, the system would be vastly more complicated, but the
end result would be the same, rising energy costs as sources with
growing energy needs bid for a fixed number of permits. Facilities or companies lacking
sufficient permits to operate using existing capital stock could scale back production, buy
permits on the market, or relocate to a country not operating under a cap. The price of permits
would be set by supply and demand, or by government. Facilities or companies able to reduce
emissions below their initial allocation could bank permits for future use or sale. However, it is
unlikely that banking could be of value to industrial energy consumers if the base is 15% below
1990 emissions. It would be extremely difficult to accommodate economic growth and return
emissions to some past level simultaneously.
Implications for energy intensive industries
Because the emissions cap would likely be permanent (total annual CO₂ emissions could not
exceed a level set by international treaty), the finite number of permits would become more
scarce, and more expensive, each year as industrial output and energy consumption grow.
As the cost of permits grows in tandem with energy demand (and increasing CO₂ emissions) so
too would the cost of doing business. Energy intensive industries operating under the GHG
emissions cap would be at a competitive disadvantage to industries in developing nations not
under the cap.
The cost of using fossil fuels (the purchase price plus the cost of permits) would rise. Energy
markets would be distorted. As an example, higher demand for natural gas (a lower carbon fuel)
would drive up its price and feedstock costs.
The rising cost of using energy would redirect capital of affected industries from investment in
developed nations. Capital and jobs would flow to those developing nations not under the
emissions cap and trade program.
Under a cap and trade system, energy producers will pass the higher cost of energy and permits
on to consumers. This will be problematic for industrial energy consumers who already face stiff
international competition and will not be able to pass on all of the increased costs to their
customers.
Companies and industries that have previously invested in energy efficiency will be at a
disadvantage to those that have not, rewarding inaction and penalizing those who have acted
responsibly.
Implications for greenhouse gas reduction efforts
If the permit system applies only to developed nations, GHG emissions, along with capital and
jobs, will flow from developed to developing nations, whose emissions are expected to grow at a
rate almost three times that of developed nations without the cap and trade system. With cap and
trade in place for developed nations only, this trend can be expected to accelerate.
The cost of permits will redirect capital in energy intensive industries from development of
newer, more efficient technologies that are the long term solution to reducing the rate of growth
of GHG emissions by industrial energy consumers.
2
October 1, 1997
The millions of sources that emit approximately two-thirds of GHG emissions (transportation
and residential/commercial) will not be able to participate in a cap and trade system that issues
permits at the consumer level because the sheer number of individual sources would render the
system unmanageable.
Practical implications - - a large scale system that addresses all sources is unmanageable
Cap and trade advocates cite the U.S. sulfur dioxide trading system as a successful model for a
GHG permit system. This comparison is not valid. First, the U.S. SO₂ trading system regulates
a relatively small number of sources, just over 100 large utility power plants. The regulatory
system is relatively simple compared to that required to oversee millions of CO₂ sources in the
industrialized nations, or worldwide. Second, the regulated utilities have been allowed to pass on
their costs to the ultimate consumer, something industrialized energy consumers would not be
able to do in a competitive international market. Finally, the options for cutting SO₂ emissions
are well known - end of stack or process controls or fuel switching. Unlike SO₂, there is no
cost effective means to remove CO₂ from combustion gases. And large scale switching to lower
carbon fuels to cut CO₂ emissions will drive up natural gas prices, distorting energy markets.
The allocation and trading of permits would require strict oversight, management and
enforcement. For international trading this would require unprecedented regulation and rationing
of world energy markets by the United Nations. A tradable permit needs to be a financial
instrument that can be bought and sold, requiring financial and volume integrity no different than
that of a crude oil futures contract. However, there is no identifiable third party at this time to
guarantee that the permit traded on the market is the equivalent of a ton of carbon reduced and
guarantee the ton was actually reduced!
Proponents suggest that emissions reductions in developing nations can be achieved at less cost
than equivalent reductions in developed nations. That is likely. However, this would require
developing nations to accept an emissions cap, something they have refused to do.
Conclusions
A GHG cap and trade system of this scale has never been tested and imposing it on the world's
economies would be risky and premature. It would distort energy supply and demand, and rather
than being "market-oriented" is in the truest sense "command and control". A permit system
picks energy winners and losers based on the number of carbon atoms in a fossil fuel molecule.
Sound policy should instead encourage voluntary actions, technology development, energy
market liberalization, energy price transparency, diversity of energy supply, competition among
and between fuel sources, and optimal use of natural resources.
- 3 -
October 1, 1997
An emissions cap and trade system will limit economic growth not only among industrial energy
consumers but for the U.S. economy as a whole. It will bring hardship to American workers
whose jobs will be exported to developing nations not subject to the system.
In summary, cap and trade is not market-based, but amounts to energy rationing; it will put
industrial energy consumers at a competitive disadvantage and is not workable. Worse yet, it
diverts capital from the only true long term solution to climate change concerns - - new
technology.
For more information contact: International Federation of Industrial Energy Consumers, 1110 North Glebe Road, Suite 610, Arlington, VA
22201, phone (703)276-0600, fax (703) 276-7662
- 4
October 1, 1997
A
To Address
Technology Global Energy
Strategy
Climate Change
November 25, 1997
Mr. Jeffrey A. Frankel
Member Council of Economic Advisors
17th & Pennsylvania Avenue, NW
Room 314
Washington, DC 20502
Dear Mr. Frankel:
We wanted to thank you for your participation in the kick-off meeting of Battelle's Technology
Strategy Project in Washington. We believe that it was a highly successful first meeting and hope
that the presentations and discussions provided guidance on what we are seeking to accomplish.
At the end of the meeting, three participants summarized the days proceedings. Several areas of
consensus appeared to emerge and are described below.
I. Strategic Emphasis
The project must be extremely focused. Given the enormity of the task in developing a
technology strategy to address climate change, it is essential the project not attempt to address
every issue that is raised.
Following the proceeding point, the project must be niche-oriented.
The project should be strategically oriented and not be overly proscriptive. It was stated that if
the documents that evolve from the effort provide general guidance, the market-place and the
entities responsible for addressing the climate issue would get it right.
II. Realism is Important
The economic and technological assumptions that are utilized during the knowledge building
and strategy development must be realistic. For example, the IS92a scenarios utilized by the
IPCC are extremely optimistic and it is not clear as to whether these scenarios are being
achieved.
The project should not pay undue attention to the politics surrounding the climate issue. As
mentioned early in the day, the staff of the project believes that the climate issue is a long-term
issue and that technology development and diffusion is a essential component of any strategy to
address greenhouse gases, regardless of what emerges from Kyoto.
Battelle Pacific Northwest Division
901 D Street SW, Suite 900, Washington, DC 20024
- 2
III. Do Not Pick Winners and Losers
There was lengthy discussion On this point. Most project participants articulated that
this project should not be on record in support or opposition to specific technologies.
However, there appeared to be some agreement that the project could provide some
value by identifying areas of unproductive resource allocation.
IV. Partnerships Are Key
The project believes that this effort is unique because there is participation from such a
broad array of affected communities. Results of the effort will only have a major
impact if all interests are represented and are reasonably comfortable with the strategy
that is ultimately developed. We are attempting to form partnerships between industry,
government, non-governmental organizations and the scientific and economic
communities.
These were the broad areas of agreement that were reached during the discussion. During
the meeting, several participants inquired about the products which would be developed
during the effort. Attached for your review is a description of the products and timelines
for their completion.
Once again, thank you for your time in attending the first meeting of the technology
strategy project. If you have additional questions, please do not hesitate to contact either
one of us. We look forward to your continued participation in this effort.
Sincerely, Edmab
Richard way H. Rosenzweig
Dr. Fae Edmonds
WORKING DRAFT-NOT FOR DISTRIBUTION
ACTIVITIES TO DEVELOP
AN ENERGY TECHNOLOGY STRATEGY
FOR RESPONDING TO CLIMATE CHANGE
An Outline of Projects to Be Undertaken Within
A GLOBAL ENERGY TECHNOLOGY STRATEGY
TO ADDRESS CLIMATE CHANGE
An International, Public/Private Collaboration
WORKING DRAFT-NOT FOR DISTRIBUTION
August, 1997
1
WORKING DRAFT-NOT FOR DISTRIBUTION
ACTIVITIES TO DEVELOP AN ENERGY TECHNOLOGY STRATEGY
FOR RESPONDING TO CLIMATE CHANGE
I. TECHNOLOGY ASSESSMENT
GLOBAL ENERGY SCENARIOS
Objective:
This task will develop reference global emissions scenarios which could be used as
an external point of reference for regional studies. The focus of this activity will be to
map out the variety of different technology backgrounds against which regional
scenarios might develop. The first half of the next century will be characterized by an
energy transition to one of three alternative regimes: coal, oil & gas, or non-carbon
energy forms. The purpose of this activity will be develop a set of scenarios which
can be used by regional analysis teams. Scenarios will include both reference and
policy scenarios.
Products:
1) Report on reference scenarios - different energy regimes, different growth
assumptions
Approach:
This activity will employ a single integrated assessment modeling team with the
charter to develop an new scenarios.
Coordination:
EMF-98 Scenario Development
IPCC Emissions Scenario Development
R&D TRENDS
Objective:
The goal of this activity is to assess the present and recent trends in energy R&D.
Products:
1. Report
Approach:
This activity will employ a small research team charged with surveying the literature.
Coordination:
IEA/OECD
2
WORKING DRAFT-NOT FOR DISTRIBUTION
REGIONAL TECHNOLOGY ASSESSMENT
Objective:
The goal of this activity is to lay down the statistical foundations for the development
of regional energy projections and subsequent analysis.
Products:
1. Technology Data Base-A description of current technologies by sector, average
age, average efficiency, and efficiency of new investments
2. Technology Analysis-Comparison of current technology characteristics to
OECD average and best available technology.
Approach:
This activity will reach out to regional partners, particularly in the non-OECD
nations, to develop the statistical basis for technology analysis. Countries which
have been identified as potential partners include:
oc China
oc Russia
OC India
oc Korea
a Mexico
oc Brazil
oc Indonesia
oc South Africa
The SGM model will be used as a common format in which data can be assembled.
Partners will be chosen which can collaborate in the development of exercise of the
SGM.
Coordination:
IPCC--The IPCC has developed technology inventories, but these have not
been regional in character.
Harvard China Project
REGIONAL ENERGY PROJECTIONS
Objective:
The goal of this activity is to develop a new set of baseline emissions scenarios
relevant in the absence of. further climate policies, and incorporating explicit
technology assumptions, and capable of addressing macro emissions and cost
implications of alternative technologies and policy regimes.
Products:
1) Reference scenarios - high, best guess, low (at least);
2) Qualitative description of the factors affecting high, best guess and low scenarios;
3
WORKING DRAFT-NOT FOR DISTRIBUTION
3) Technology characteristics of the scenarios; and
4) Analysis of where technology development could make a difference in stabilizing
the atmosphere.
Approach:
This activity will develop a better assessment of the role of capital stock turnover, and
the mechanisms by which technology diffuses. Regional modeling teams will be
engaged to consider the value of technologies and technology development and
diffusion. The activities of the regional participants will reference the "Global
Emissions Scenarios" component of the project.
International teams of researchers will be sought in such nations as:
oc China
OC Russia
oc India
OC Korea
oc Mexico
a Brazil
OC Indonesia
OC South Africa
Emphasis will be placed on regions which are of particular importance to achieving
the goal of the Framework Convention on Climate Change (FCCC).
Relationship to the IPCC and EMF Emissions Scenario Development Projects-The
IPCC is currently engaged in the development of new, interim scenarios. These
scenarios are intended to reflect the dispersion of emissions scenarios observed in the
open literature and to incorporate information that has come to light since the 1992
scenarios were developed, especially developments in Transition economies. This
activity will support the work of an EMF subgroup developing a forum in which
regional and global scenarios can be assembled. That process will eventually
supplant the IPCC interim scenarios.
Coordination:
EMF-98 Scenario Development
IPCC Emissions Scenario Development
Harvard China Project
4
WORKING DRAFT-NOT FOR DISTRIBUTION
TECHNOLOGY OPPORTUNITIES-GAP STUDIES
Objective:
This task will examine the potential for technology developments to make a difference
in the cost of emissions mitigation.
Products:
1. Analysis of different technology paths for areas in which technology could make a
difference-near-term, mid-term, long-term.
2. Macro analysis quantifying the potential impacts of different technology
developments
Approach:
This activity will identify R&D opportunities associated with carbon management
technologies, at various stages in the development process - market oriented,
intermediate, and basic research - which show the potential for reducing cost and
enhancing performance in the delivery of energy services. Workshops including
leading analysts will be convened to consider the state of the science and to make
recommendations. Activities which will be considered include:
a Carbon Capture Sequestration
oc
Biomass
oc Solar-Wind, PV, etc.
oc Nuclear Fission - can we say anything new?
∞ Fuel Conversion-H₂ membrane technology, fuel cells, batteries
molecular science
oc New Technologies - Geothermal, Fusion, or Solar Power Satellites
oc Transportation
Coordination:
MIT, Technologies for a Greenhouse Constrained World
IPCC Technology Project
Princeton University
II. TECHNOLOGY STRATEGY
POLICY & INDUCED TECHNOLOGICAL CHANGE
Objective:
This activity will explore the relationship between energy policy and induced
technological change.
Products:
1) Technology Life-cycle--Timing of technology production and diffusion
2) Assessment of endogenous technological change.
5
WORKING DRAFT-NOT FOR DISTRIBUTION
Approach:
This activity will examine the problem of induced technological change. It will
consider the stages of technology development, the inherent time requirements for
technology to penetrate, and the degree to which policy affects technology
development and diffusion.,
Coordination:
Resources for the Future
HISTORICAL ENERGY TECHNOLOGY POLICY
Objective:
This activity will review the success of past energy technology policies. It will seek
lessons that may be useful in developing a new energy technology initiative.
Products:
Reports-Reviewing energy and technology policy since World War II
a) US
b) Japan
c) Europe
d) China
e) Korea
f) India
g) Mexico
Approach:
A series of analyses will be chartered taking a retrospective look at energy policy in a
variety of national settings. Researchers will employ a historical perspective,
examining such policy initiatives as Project Independence, the synfuels program, the
development of the new gas turbine technology, and the PNGV. A similar
examination will be undertaken for Japan, Europe, and developing nations. The
activity will include both research and workshops to examine the question.
Coordination:
ENERGY TECHNOLOGY POLICY ANALYSIS
Objective:
This activity will examine the implications for energy technology of a variety of policy
instruments.
6
WORKING DRAFT-NOT FOR DISTRIBUTION
Products:
1) Report on the implications of the Kyoto COP-4
2) Reports on technology focused protocols
Targets & timetables for technology
Technology regulatory protocols
3) Reports on other analysis as appropriate
Approach:
This activity will examine the implications for energy technology of various policy
instruments. It will begin by considering the implications of FCCC Conference of the
Parties meeting in Kyoto in December of 1997. It will give particular emphasis to the
problem of stranded assets, including both capital stocks, and resources such as
conventional oil and gas. It will move to extend consideration of the implications of a
variety of alternative technology based protocols, again giving particular emphasis to
the problem of stranded assets, including both capital stocks, and resources such as
conventional oil and gas. Given the evolving nature of the climate issue, this activity
will take up other policy and technology issues as they arise.
Analysis will employ integrated assessment models (IAM) to understand the
relationship between energy, technology, economic activity, and climate.
Coordination:
EMF
ENERGY TECHNOLOGY DIFFUSION POLICY
Objective:
This activity will explore the relationship between energy technology and energy
policy.
Products:
1. Making JI work
THE TECHNOLOGY STRATEGY
This activity will produce a technology strategy by bringing together a group of
senior, thoughtful individuals who are presented the findings of the assessment, and
who are charged with the responsibility of framing a strategy.
Products:
1. The technology strategy.
7
WORKING DRAFT-NOT FOR DISTRIBUTION
PROJECT BUDGET
ESTIMATED LEVEL OF EFFORT FOR THE PROJECT
1998 $2,000,000
1999 $2,000,000
2000 $1,500,000
FUNDING
The project is a multi-sponsored activity with two levels of sponsorship. Major sponsors
are those sponsors who provide $250,000 per year or more over the life of the project. Major
sponsors help guide the development of the project and participate in the creation of the
Technology Strategy Document as well as participate in the annual description of progress and
receive the analytical products of the project.
Contributing sponsors are those which provide support at less than $250,000 per year or
more over the life of the project. They participate in the annual description of progress and
receive the analytical products of the project.
Support from both public and private sponsors is welcome.
CONTACTS
Battelle
Pacific Northwest Laboratories
901 D Street SW
Suite 900
Washington, DC 20024
Tel: +1 202-646-5200
Fax: +1 202-646-7824
Dr. Jae Edmonds
Dr. John Clarke
Chief Scientist
Associate Director
[email protected]
[email protected]
8
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ADDITIONAL ADDITIONAL
NV7J PROTECT
0007
8661
L661
BP
Where We Stand.
BP's Climate Change Principles
INTERNATIONAL AGREEMENTS:
The solution to climate change requires a global long-term framework that encom-
passes industrialized and draws in developing nations.
The framework should allow space for differing national circumstances and should
give equitable weight to the developing world's particular interests.
BINDING COMMITMENTS:
We all have a responsibility to take constructive, precautionary action.
Any legally binding commitment on emission levels should include a package of
flexible international mechanisms to enable efficient implementation.
Adequate time should be provided to allow for effective turnover of capital stock.
TARGETS AND TIMETABLES:
Targets and timetables are useful tools to help business deliver long-term results.
Targets and timetables for greenhouse gases should be realistic and achievable for
all nations.
There should be a thorough and comprehensive target setting process for interna-
tional negotiations. BP does not seek a role in setting specific targets.
Nations should earnestly pursue specific targets and timetables but recognize that
finding solutions is a lengthy journey, with success defined by numerous decisions
taken over a series of international conferences.
MONITORING AND REPORTING:
An international measurement protocol for greenhouse gases is required.
Emission levels should be reported in an open and transparent manner.
FLEXIBLE MECHANISMS:
Flexibility is necessary to allow for innovation and creative solutions; to maintain competitive-
ness; to handle new and changing information; and to allow approaches to remain relevant
over time.
Better and more efficient solutions, employing both technology and sequestration, flow from
responsible behavior and the marketplace. Emissions trading and joint implementation are
two flexible international mechanisms that should be employed.
Voluntary actions can be integrated into business plans and substantially reduce emissions.
Rewards and incentives can enhance delivery. Ultimately, they may not be enough, with some
mandatory steps required.
Any mandatory national approaches should be performance-based with governments setting
broad objectives and businesses delivering creative, cost effective results that continually
improve, while ensuring accountability.
EARLY ACTION AND CREDIT:
Although managing emission levels is a long term process, near term reductions will have a
positive contribution and should be encouraged.
Governments should give incentives for near term reductions and provide credit against future
obligations that may arise.
TECHNOLOGY DEVELOPMENT AND DEPLOYMENT:
Moving the world toward less carbon intensive emissions requires technology that should
become available for broad application.
A comprehensive international strategy is needed to effectively develop and deploy technology
that can transform the world to a low-carbon emission structure. Present solutions involve a sub-
stantial cost premium. A concerted effort is required to find and apply cost effective technology.
A strategy developed through international collaboration and public/private partnerships can
lead to better resource allocation for finding climate solutions.
INCLUSIVE DECISION-MAKING:
All parts of society should have the opportunity to have their needs and priorities taken
into account.
BP will continue to be available to contribute to the debate.
For more information contact:
Ken Blower 212-421-5010 or visit our home page: http://www.bp.com
Continued From Page Al
vehicles that in the near term should
have a greater impact on urban
AUTO MAKERS PLAN
smog problems because of their
and Grand Cherokees, which will
much higher sales volumes," he said.
have new engine designs, would be as
Mr. Nasser made clear in an inter-
clean as Ford's sport utility vehicles.
view that Ford wanted to maintain
CUTS IN EMISSIONS
Chrysler sold roughly 130,000 Chero-
the acceptability of sport utility vehi-
kees and 260,000 Grand Cherokees
cles as alternatives to cars, while
last year.
gaining an advantage over rival auto
OF SPORT VEHICLES
Michael A. Grimaldi, vehicle line
makers in catering to environmen-
executive for pickup trucks and
tally aware families. "Anybody who
sport utility vehicles at the General
has concerns about the environment
Motors Corporation, the world's
can set them aside," Mr. Nasser
largest auto maker, said his compa-
CRITICISM IS ADDRESSED
said, adding that Ford had also been
ny had the technology to reduce
influenced by recent articles in The
emissions as much as Ford, in some
New York Times on the environmen-
cases for the 1999 model year. Exec-
tal problems of light trucks.
Ford Says '99 Models Will Be
utives are reviewing whether to do
Ford is not planning to reduce
so, he added. G.M., Ford and Chrys-
emissions immediately for its slow-
40% Cleaner Than in '98;
ler together produce five of every six
selling Mercury Villager mini-van,
light trucks, a category including
an old design, or for its pickup
Chrysler Soon Follows
sport utility vehicles, mini-vans and
trucks, which are locked in a fierce
pickups.
Al
competition on price with G.M. and
All of Ford's sport utility vehicles
Chrysler pickups.
By KEITH BRADSHER
- including the Ford Explorer and
Federal emissions regulations on
Expedition, the Mercury Mountain-
DETROIT, Jan. 5 - The Ford Mo-
eer and the Lincoln Navigator - will
tor Company announced today that
be cleaner next year. Ford sold
this autumn it would start selling
650,000 such vehicles last year, as
sport utility vehicles and Windstar
well as 200,000 Windstars, and ex-
Changes that could
mini-vans that would produce as lit-
pects to sell even more sport utility
tle air pollution as cars. The Chrysler
clear the consciences
vehicles in the coming years.
Corporation, after initially express-
Ford's 1998 model light trucks are
ing reservations, said this evening
alreády the cleanest in the industry
of some gasoline
that it would match that move in its
because of recent advances in engine
most popular sport utility vehicle.
technology. Other auto makers
guzzlers' drivers.
Ford said 11 would Install larger
produce sport utility vehicles that
and more effective catalytic convert-
are far dirtier and could have a
ers and fine-tune its engines so all of
harder time following Ford's exam-
its 1999 model-year sport utility vehi-
cars and light trucks are likely to be
ple. A Chevrolet Suburban, for exam-
cles and Windstars nearly a mil-
tightened, but not until 2004. Auto
ple, produces three times as much in
lion vehicles - emit roughly 40 per-
makers had also been considering
smog-causing nitrogen oxides as a
cent less in smog-causing gases like
Ford Expedition, which is only
unilateral improvements in emis-
nitrogen oxide than the comparable
sions for cars and light trucks in
slightly smaller. G.M. is close to in-
1998 models now on the market.
troducing more advanced engines.
exchange for a commitment from
"On emissions, anyway, there will
Mr. Nasser of Ford declined to
state governments not to impose
be nothing to feel apologetic about in
discuss the company's costs for the
even tougher standards in the future.
driving a sport utility vehicle," said
move, which will include some in-
Ford and Chrysler said they would
Alexander Trotman, chairman and
vestments in new factory equipment
proceed with their plans regardless
chief executive of Ford, the world's
and greater purchases of precious
of those talks but said they were not
second-largest auto maker. Mr. Trot-
metals like platinum and palladium,
committing themselves to further
man was addressing recent criticism
which are used in catalytic convert-
improvements nationwide. Toyota,
that, because of special favors from
the largest foreign brand seller of
ers.
Washington, sport utility vehicles
Industry experts estimated Ford's
sport utilities in the United States,
are allowed to emit as much as 175
costs at a little over $100 per vehicle,
said tonight that it would wait to see
percent more nitrogen oxides than
or about $100 million in the first year,
what became of those negotiations
even the largest cars.
and possibly less thereafter. Ford
before changing its vehicles' emis-
Ford said it did not plan to charge
earns up to $14,000 apiece on the
sions.
extra for its cleaner vehicles, choos-
Navigator and more than $3 billion a
Loretta M. Ucelli, an associate ad-
ing instead to look for other cost
year in profits on light trucks but
ministrator of the Environmental
savings, said Jacques Nasser, Ford's
loses money on its cars.
Protection Agency, welcomed to-
president of worldwide automotive
In addition to producing more air
day's move by Ford, while caution-
operations.
pollution than cars, sport utility vehi-
ing that the agency wanted to study
The Ford initiative initially drew
cles typically burn a lot more gaso-
the technical details.
little enthusiasm from rival auto
line. Because of that, they produce
Ford said that no matter where in
makers. Thomas Stallkamp, Chrys-
more gases that are thought to con-
the nation these vehicles are sold, all
ler's president, said he doubted that
tribute to global warming. And be-
will meet the stringent emissions
Americans wanted cleaner vehicles
cause they weigh more than cars and
standards being phased in by Califor-
enough to pay the $50 to $200 extra
ride higher off the ground, they tend
nia for light trucks. Those standards
per vehicle that he estimated it
to be particularly deadly to occu-
are not as strict as the state's stand-
would take to reduce emissions from
pants of other vehicles in crashes.
ards for cars. But the California light
Mr. Trotman said Ford was work-
truck standards are similar to Fed-
existing engines. "Keeping our man-
ufacturing costs as low as possible is
ing to develop lighter, fuel-efficient
eral standards for cars, and allow
important to us," he said.
sport utility vehicles.
less than half as much pollution as
But later in the day, Chrysler an-
Mr. Nasser said in a speech here
Federal standards for light trucks.
nounced that all 1999 Jeep Cherokees
that Ford's decision to build cleaner
California proposed last month to
sport utility vehicles would do more
require light trucks to meet its even
Continued on Page All
to clean up the air in the United
stricter air pollution standards that
States than recent plans by the in-
will be in force for cars in 2004. Ford
dustry to offer cars running on elec-
remains opposed to such a measure,
tricity and other nontraditional fuels
said Kelly M. Brown, Ford's director
early in the next century. "This year
of vehicle environmental engimeer-
we'll offer cleaner, gasoline-powered
ing.
The New York Times
TUESDAY, JANUARY 6, 1998
Stephen Crowley/The New York Times
President Clinton credited the hard work of the American people, and his own policies, for the deficit reductions that led to his annomicement that he would propose a balanced budget for
1999. He met with his economic advisers yesterday, from left, Franklin D. Raines, the budget director; Erskine B. Bowles, his chief of staff, and Vice President Al Gore.
N/C
The New York Times
TUESDAY, JANUARY 6, 1998
nelief Teams Say North Korea
Faces Vast Drought Emergency
Continued From Page Al
situation is "absolutely disastrous."
Millions May Now Be at
Today, North Korea will for the
first time be taking part in prelimi-
Brink of Starvation,
United Nations World Food Pro-
nary talks with South Korea, China
gram, came to a similarly grim con-
and the United States that could lay
Specialists Report
clusion. "The difference is that in
the ground for a peace conference to
Ethiopia and Somalia you had pock-
reduce tensions in the Korean Penin-
Al
ets that were affected because of
sula. Relief officials familiar with
drought or war, but it wasn't a gener-
North Korea, suggest that the talks,
By BARBARA CROSSETTE
alized phenomenon," he said. "In
to be held at Columbia University's
UNITED NATIONS, Aug. 4 - Re-
North Korea it is far more general-
School of International and Public
lief officials allowed to visit North
ized. As the food goes down, everyone
Affairs, are more important to the
Korea over the last several weeks
is suffering."
North Koreans than they have ad-
say that a drought may be pushing
Most relief specialists permitted
mitted publicly.
millions of people in the reclusive
to enter were limited to seeing insti-
Although the United States and
country to the brink of starvation
tutions where their own aid money
other governments say that their aid
and that they have not seen such
was spent, and spontaneous visits to
is not politically conditioned, many
severe malnutrition since the fam-
private homes were rare. But most
officials say they believe that only if
ines in Ethiopia and Somalia.
aid officials now returning from a
North Korea appears more coopera-
The drought - more than 60 days
third or fourth trip say they have
tive in dealing with South Korea,
with no rain and temperatures in the
seen the health of North Koreans
Japan and other nations, will Pyong-
90's arrived after food stocks were
deteriorate on each visit.
yang have a hope of getting major
already *severely depleted by two
"During winter, malnutrition is
international aid.
years of floods and decades of eco-
sometimes camouflaged" by many
The World Food Program, which
nomic ruin wrought by the most bi-
layers of clothing, said Dr. Amayun,
has raised more than $120 million in
zarre of Communist systems, which
who toured the country for World
emergency aid to North Korea from
is now struggling to feed itself with-
Vision, a private group. "But now in
governments and private donors, has
out allies.
summer, we could really tell how
developed a monitoring system to
The relief officials acknowledged
stunted they were and how thin were
insure that the food reaches the right
that they could not move freely in
their arms and legs."
people.
North Korea and that their visits
Today four United Nations agen-
North Korea's two million govern-
were tightly controlled by Commu-
cies and two independent groups said
ment officials and army soldiers
nist authorities, making the extent of
in a joint statement that the drought
have their own system of acquiring
TUESDAY, AUGUST 1997
what some experts have called an
had already cost North Korea 70
and distributing food for themselves
"invisible" catastrophe hard to
percent of this year's corn crop,
- siphoning off much of what is
gauge. North Korean officials them-
withering virtually all plants not irri-
produced within the country - and
selves, who have long tutored their
gated. Falling water levels will soon
they never go without.
population in a philosophy of self-
threaten rice crops as well, they said.
The relief group has thus so far
The
reliance, often appear ambivalent
The country of 24 million people,
focused on supplying mostly children
about how dire a picture they want to
most of whom are already subjected
up to six years old, hospitals and
paint for the outside world.
to strict food rationing, had hoped to
some geographic areas where crops
Foreign reporters are barred from
harvest four million tons of food this
were lost to floods in 1995 and 1996.
visiting the country.
year. Projections now show that at
Another $75 million in aid or com-
There have been mounting reports
least 1.5 million tons will be lost.
modities has been provided directly
in recent months of widespread food
The United States has given North
by governments and private groups.
shortages. But the drought of the last
Korea $60.4 million in food aid since
Relief officials say that famine
two months, American Government
September 1995 and is prepared to
and starvation occur only after a
and relief officials said, has signifi-
contribute more if necessary, a State
confluence of failures - economic,
cantly worsened the situation.
Department official said. But the
envir onmental and political - but
"It appears the North Koreans are
that no single event, like drought
going from bad to worse," a senior
alone, would be enough to cause such
American official in Washington said
widespread calamity.
today. 'They were dead on their feet
Children are being
Continuing economic mismanage-
economically for years. Then came
ment and decades of outdated agri-
the floods. Then a drought."
abandoned by their
cultural policies, including a lack of
The official acknowledged that the
crop rotation and the inadequate use
from Scottsdale, Ariz, where the
United States does not yet have a full
parents because they
of fertilizers, have made North Ko-
group is based. "People are not real-
grasp of the extent of the food short-
rea vulnerable to such a disaster.
ly able to understand what is going
cannot be fed.
This summer's monsoon rains ar-
ages, but he said, "What we do know
on."
is that there is serious malnutrition
rived in South Korea in June, but
"They are mobilizing soldiers to
across the country. I have no doubt
then veered away from the peninsula
carry water to the cornfields," he
that there are people on the verge of
and into the Sea of Japan just as they
starvation, no doubt at all."
neared the border with the North.
continued. "You see women lining up
United States, which has no diplo-
to carry water on their heads to
The reports of the aid specialists
matic representation in North "Ko-
Even still, though there is no crisis in
who visited Korea were uniformly
rea, is also pressing Pyongyang to
South Korea, its economic and agri-
irrigate the crops. Fields are
bleak. In interviews since their re-
cultural policies would allow farm-
scorched. The plants are wilting." He.
allow Americans to monitor future
ers there far greater flexibility in
said that people have begun making
turn, officials from international
shipments and to assess the situation
groups and private agencies de-
in the country. Officials in the United
responding to such a drought.
porridge of wheat gruel and grass.
States, South Korea and other Asian
No one can estimate what will be
Dr. Amayun, the specialist who
scribed skeletal people living each
needed if famine and starvation ap-
toured for World Vision, said in an
day on "a fistful" of rice and chil-
nations have expressed concern that
dren too weak to stand.
a potentially huge number of people
pear on a mass scale and among all
interview that increasing numbers of
"We saw children in institutions
could try to flee North Korea in des-
age groups. Some relief officials be-
children are being given up to gov-
who are at the level of malnutrition
lieve that older people, no longer
ernment orphanages by their rela-
peration.
The relief officials who recently
seen on the streets, may be too weak
tives, who can no longer feed them.
comparable to the mid-80's drought
in Ethiopia," said Dr. Milton
returned from North Korea said that
to leave home - or may be dying.
"Children of primary school age
Amayun, a physician who had just
Relief officials also said they fear
are now showing stunting, which
in July the sights in the countryside
that if starvation occurs on a mass
means they are chronically malnour-
returned from conducting the first
were startling.
scale it will be difficult to arouse
ished," Dr. Amayun said. "We see a
systematic measurements of chil-
"Flying over the northeast in a
dren to determine their level of mal-
public sympathy around the world,
Flot of children given up by their par-
chopper from Pyongyang to Ham-
as the crises in the Horn of Africa
ents, who cannot guarantee normal
nutrition.
hung and Chongjin provides stark
Trevor Rowe, spokesman for the
did, or that an effective response
feeding. Most of the children in the
visual data on the extent and sever-
would come too late.
Government centers I saw were
ity of the drought," an official from
Continued on Page A6
At the World Food Program in
abandoned
the World Food Program wrote to
Rome, Mr. Rowe, the spokesman,
"But we know there are children
the group's headquarters in Rome.
said that the crisis is very visible to
"Vast expanses of parched, arid
born in hospitals who are not being
aid workers and organizations, who
land; fields with barely a hint of
taken home by their families. There
have made videos and taken many
green crops; fields that were planted
are a lot of newborns being brought
photographs of the steadily deterio-
in the past lying barren and desert-
to orphanages directly from the dis-
rating condition of the population.
ed; much of the hillside and moun-
trict hospitals.
Mr. Rowe said that his program had
tainside stripped of trees, exposing
"We saw diarrhea, kwashiorkor
seen a "record response" to appeals
sandy soil, rocky outcrops and scrub
and pneumonia. We were told there
from governments.
vegetation.
are cases of measles, and that they
But North Korea, whose govern-
The sense I got was one of ex-
ment has been hostile to the outside
have stopped immunizing children in
haustion - parched, dried, exhaust-
world and has a record of supporting
a systematic way."
ed land," he added.
terrorism, is not an easy country to
"The children we saw were apa-
In an telephone interview today
win sympathy for among the general
thetic, lethargic," he continued.
from Pyongyang, Bergitta Kalgren,
public, said Ted Yamamori, a-doctor
"Many had no strength to stand.
the World Food Program's repre-
and president of Food for the
They had no energy. The severely
sentative in North Korea, said that
Hungry, who has just returned from
malnourished had the faces of old
reservoirs were drying up every-
Pyongyang. He estimated that at
men, with nothing but skin and bones
where, and that residents of the capi-
least five million people were al-
in their arms and legs.
tal were experiencing breaks in the
ready being afflicted by famine.
World Vision plans to airlift high-
urban water supply.
"What we are seeing is not enough
protein food to North Korea this
A Food and Agriculture Organiza-
pictures on the screen," Dr. Yama-
week. For many, said Dr. Amayun, it
tion specialist said today that the
mori said in a telephone interview
INDUSTRIES REVISIT
to take the first steps.
The dominant scientific view is
Developing countries say those
first steps have not been taken, since
that greenhouse gas emissions are
GLOBAL WARMING
most of the richer countries have not
probably responsible for at least part
of a rise of 1 degree Fahrenheit in the
even been able to fulfill a voluntary
average global temperature over the
pledge under the treaty to stabilize
emissions at 1990 levels.
last century. Mainstream scientists
predict that if emissions are not re-
Most companies and industry
Some Producers Now Support
duced, there will be a further rise of
groups do not go as far in the direc-
perhaps 3.5 degrees in the next cen-
tion of strong action as does an
Curbing Greenhouse Gases
American organization called the
tury and more after that, with ac-
Business Council for Sustainable En-
AI
companying disruptions in climate.
ergy. Its members include several
By WILLIAM K. STEVENS
These include, for instance, more fre-
utilities - whose leaders have found
quent and severe floods and droughts
BONN, Aug. 4 - Early in this
and a rise in the sea level. By com-
it in their interest to promote energy
decade, as the nations of the world
conservation, which reduces fossil-
parison, the world has warmed by 5
negotiated a treaty to head off man-
fuel burning and greenhouse gas
to 9 degrees since the last ice age.
made global warming, industry lob-
emissions - as well producers of
There is considerable uncertainty
byists spoke with virtually one voice
solar power, wind power and natural
in these estimates. Nevertheless, Mr.
on the issue of climate change. They
gas. The last, while it is a fossil fuel,
Browne said in a telephone inter-
just said no - no to any binding
view, "it seems to us it's time we
is viewed as a preferred alternative
agreement obligating countries to
should do something" about green-
in the near term because it produces
control emissions of heat-trapping
less carbon dioxide than coal or oil.
house gas emissions. "Just because
greenhouse gases like carbon diox-
there are uncertainties," he said, "it
This group as a whole stands to
ide, and no to the very idea that there
doesn't mean you just stand still and
benefit from controls on greenhouse
was serious cause for concern.
do nothing."
emissions since its members put a
But times have changed, and the
premium on the more efficient use of
In that spirit, the company is for-
industry stance has changed as well.
mally collaborating with the Envi-
energy. Michael Marvin, the group's
Though hard-liners still see no need
ronmental Defense Fund, a private
executive director. said "we've got
to force anyone to limit emissions of
the technology right now" to produce
group, to test practical, market-
greenhouse gases, a whole new spec-
based approaches to emission reduc-
energy more efficiently. Not surpris-
trum of industry voices has joined
tion. It is taking steps to control its
ingly, his organization favors an ear-
the policy debate as businesses have
own emissions and to develop alter-
ly stabilization of greenhouse gas
examined more closely how they
native fuels and energy technologies.
emissions, by 2005, followed by pro-
might win or lose.
It is undertaking cooperative efforts
gressive reductions beginning in
At least one big crack has devel-
to reduce emissions in developing
2010.
oped in the once-monolithic front
countries. And it has assumed the
A larger group, the Washington-
presented by the producers of fossil
rotating leadership of a broad Wash-
based International Climate Change
fuels, like coal and oil, the very peo-
ington-based coalition of industry
Partnership, now under the chair-
1997
ple who might be expected to hold out
moderates on climate, many of them
manship of British Petroleum and
most strongly against any change.
multinational companies.
including a wide range of industries,
At meetings here, where delegates
The Clinton Administration is look-
accepts the existence of a scientific
from around the globe have gathered
ing to the moderates for support as
consensus that some measure of
under the five-year-old treaty, these
part of a campaign to win public
man-made global warming is likely.
changes have surfaced as a more
acceptance of Mr. Clinton's pledge at
"We think that appears to be rela-
widespread willingness to accept the
the United Nations in June to seek
tively strong," said Kevin J. Fay, the
view of mainstream scientists that
strong action in Kyoto. Mr. Browne
group's executive director,
the problem is real and to take at
was one of the chief executives who
But, he said, climate change is a
least some action to solve it.
discussed the subject with the Presi-
highly complex, long-term problem
The heads of several large corpo-
dent today.
that need not necessarily be attacked
rations met with President Clinton in
Mr. Clinton's United Nations
with immediate targets and time-
Washington today to discuss the
speech appears to have infused the
tables for emission reductions. The
problem. The President has prom-
climate debate with new zest - and
Kyoto deadline is an artificial one, he
The Times
ised a strong American proposal for
to have increased the lobbying from
said, adding that it is more impor-
specific levels of greenhouse gas re-
all points on the industry spectrum.
tant to achieve a lasting solution that
ductions that is still being drawn up.
"The status of industry has dra-
allows both environmental protec-
In what may be the most telling
matically changed," said Dan Esty,
tion and economic growth rather
who directs the Yale University Cen-
than a quick "feel good". result.
Continued on Page A4
ter for Environmental Law and Poli-
There are probably many pathways
cy, alluding to the period since the
by which the objective of heading off
Continued From Page Al
climate treaty was negotiated in
dangerous climatic change can be
1992, when he was a member of the
achieved, he said.
change, British Petroleum, the
American negotiating team. "There
Still another group, consisting of
world's third-largest oil company,
was only one position in '92; today
electric utilities and represented by
broke ranks with other fossil fuel
there is a flowering of industry posi-
the Edison Electric Institute, is col-
producers recently and announced
tions." And back then, he said, "you
laborating with the Administration
that it believes that there is now
didn't have a major industrial pow-
to reduce greenhouse emissions by
enough scientific evidence to war-
erhouse like B.P. coming in and say-
promoting more efficient use of elec-
rant concern about whether human
ing the time for action is now."
tricity. This program, the institute
activity - primarily the burning of
As views have proliferated, so
says, has already brought significant
fossil fuels like coal, oil and natural
have industry lobbyists. Connie
reductions. All of this is voluntary,
gas - is changing Earth's climate.
Holmes, a lobbyist for the National
and the group favors that approach
The time to contemplate action "is
Mining Association who opposes any
in any Kyoto agreement. It also is
but voluntary action to reduce green-
determined to get credit for reduc-
not when the link between green-
house gases and climate change is
house gases, said that when she be-
tions already achieved as part of
conclusively proven, but when the
gan lobbying in 1988, there were
such an agreement.
possibility cannot be discounted and
"maybe three or four people" from
The hard-liners have not changed
their position. Several of them are to
is taken seriously," John Browne, the
industry doing the same. Here in
company's chairman, said in a re-
Bonn, there are scores. Mrs. Holmes
be found in the Global Climate Coali-
cent speech. British Petroleum, he
acknowledges that they consist of "a
tion, a Washington-based lobbying
said, "has reached that point."
much broader range of people, a
group representing core energy and
Delegates to the meeting here are
wide spectrum of opinion."
manufacturing industries. Gail Mc-
negotiating reductions in emissions
The shift in outlook should not be
Donald, the new president of the CO-
of greenhouse gases. The most im-
overstated, though. Mr. Browne, for
alition, formed zeros with her fingers
portant of these is carbon dioxide,
instance, does not see climate
when asked what her group would
change as a crisis and argues that
like to see happen in Kyoto.
which is produced by burning fossil
fuels. The negotiations will conclude
there is time to head off the problem
The coalition continues to question
in Kyoto, Japan, in December.
in a deliberate, step-by-step fashion
the science of global warming. It
In the conference rooms, corridors
that balances economic growth and
argues that the impact of climate
environmental protection. Any tar-
change is too uncertain and that the
and coffee bars of the Bonn Maritim
Hotel, where the talks are taking
gets and timetables for emission re-
risk of economic damage is still too
place, the spectrum of industry opin-
duction, he says, should be realistic
high to justify stronger, mandatory
ion runs from hard-liners in the coal
and achievable.
action.
Further, industry is virtually
The Administration's present
and oil industries who want no agree-
ment in Kyoto to companies that
unanimous in insisting that develop-
course toward mandatory targets
produce alternatives to fossil fuels
ing countries share in emission re-
and timetables is "an unjustified
and want strong action immediately.
ductions. Otherwise, it fears, compa-
rush to judgment," the coalition's
In the middle is a broad group with a
nies in industrialized countries will
chairman, William F. O'Keefe, told
be at a competitive disadvantage. As
Congress recently. He likened it to
range of positions.
of now, the richer countries are obli-
driving too fast in a thick fog. This,
gated under the treaty and subse-
he said, "risks a fatal crash."
quent international policy decisions
4/1 197
Wash lut En. Group. Gl.C.C.
AER Richels, Edmorts,
-
summer 93
AEP Theclimafe Challenge voluntary ~sponse.
from stilities == 60% (ut 15 N m yons of corbon
AEP DON'T Know Aar of retiremt 50 coat fived 19 hydro 2 nuclear
E/A 34 2010, 302 20 42? higher emission
want as long budget period as possible
-
vant pearuer revolty for barowg
cuedit for early reducins
Clinton Presidential Records
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This is not a presidential record. This is used as an administrative
marker by the William J. Clinton Presidential Library Staff.
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REDEFINING PROGRESS
ONE KEARNY STREET
FOURTH FLOOR
SAN FRANCISCO
CALIFORNIA
94108
415-781-1191
FAX 415-781-1198
How BUSINESS COULD PROSPER
FROM A TAX SHIFT:
A Case Study Process
WHAT IF A NEW TAX SYSTEM
A NEW APPROACH TO FISCAL POLICY
could be good for both the bottom line and the
Redefining Progress (RP) is proposing a revenue
environment? Economists have long argued that
neutral tax shift that would entail -introducing
a
market based approaches to environmental policy,
series of environmental based. taxes or tradable
such as energy taxes or pollution charge could
permits and reducing other taxes in the economy
help protect the environment while promoting
to offset the increases From the perspective of
greater onomic efficiency. Traditionally, many
business, a large part of the potential appeal of the
bus in leaders object to such pr oposals as
tax shift idea is what is untaxed and deregulated)
antithetical to their core objectives New research
as well as what/is taxed. RP's approach is different
suggests, however that the goals of business
from.the traditional call for environmental taxesin
leaders and environmentálists need not be at odds.
three important ways: (1) We use the market
based approach to environmental policy as a lever
THE ECONOMIC & POLITICAL LANDSCAPE
to reduce other taxes; (2) The primary focus is on
improving the performance of the U.S economy;
The new economic opportunities of the future will
and (3) We believe, that the best way to develop
require the substitution of information and high
the tax shift idea is to work closely with the
value-added for raw material inputs, but America's
corporate sector.
current tax system continues to subsidize the
industries and resources of the past Changes in
THE NEED FOR CASE STUDIES
the American political system, however, have
created a unique set of circumstances that may
Although analyses of market based environmental
finally pave the way toward environmentally-
policy have been done at the macro level it is
sound fiscal policy. For example, consider recent
essential to understand how a tax shift will affect
trends fundamental tax reform has emerged as a
the decision making process of individual firms
prominent issue; there is growing recognition that
We view business as a key ally and want to help
the command and control regulatory structure
business people see how tax shifting could help
has run its course; and partisans in Congress have
their bottom line Therefore over the next 18
reaffirmed their commitment to a healthy
months, we are committed to carrying out
environment but are looking for a new
detailed case studies with five to seven major
approach to environmental policy.
R
companies. Several Fortune 500
members have already expressed strong
interest in participating in this process.
MIT Joint Program on the
Science and Policy of Global Change
OB
SCIENCE
POLICY
CHANGE
M
I
T
Needed: A Realistic Strategy for Global Warming
Henry D. Jacoby, Ronald G. Prinn and Richard Schmalensee
July 1997
The MIT Joint Program on the Science and Policy of Global Change is an organization for research, independent
policy analysis, and public education in global environmental change. It seeks to provide leadership in understanding
scientific, economic, and ecological aspects of this difficult issue, and combining them into policy assessments that
serve the needs of ongoing national and international discussions. To this end, the Program brings together an
interdisciplinary group from two established research centers at MIT: the Center for Global Change Science (CGCS)
and the Center for Energy and Environmental Policy Research (CEEPR). These two centers bridge many key areas of
the needed intellectual work, and additional essential areas are covered by other MIT departments, by collaboration
with the Ecosystems Center of the Marine Biology Laboratory (MBL) at Woods Hole, and by short- and long-term
visitors to the Program. The Program involves sponsorship and active participation by industry, government, and
non-profit organizations.
To inform processes of policy development and implementation, climate change research needs to focus on
improving the prediction of those variables that are most relevant to economic, social, and environmental effects. In
turn, the greenhouse gas and atmospheric aerosol assumptions underlying climate analysis need to be related to the
economic, technological, and political forces that drive emissions, and to the results of international agreements and
mitigation. Further, assessments of possible societal and ecosystem impacts, and analysis of mitigation strategies,
need to be based on realistic evaluation of the uncertainties of climate science.
This paper is intended to improve public understanding of the climate issue, and thereby contribute to informed
debate about the climate issue, the uncertainties, and the economic and social implications of policy alternatives.
Henry D. Jacoby and Ronald G. Prinn,
Program Co-Directors
For more information, contact the Program office:
MIT Joint Program on the Science and Policy of Global Change
Postal Address: 77 Massachusetts Avenue
MIT E40-271
Cambridge, MA 02139-4307 (USA)
Location: One Amherst Street, Cambridge
Building E40, Room 271
Massachusetts Institute of Technology
Access: Telphone: (617) 253-7492
Fax: (617) 253-9845
E-mail: [email protected]
Web site: http://web.mit.edu/globalchange/www
Printed on recycled paper
Needed: A Realistic Strategy for Global Warming
Henry D. Jacoby, Ronald G. Prinn and Richard Schmalensee*
As the United States, along with other nations, struggles to develop a response to climate
change, a swirl of overheated rhetoric and short-term political maneuvering is obscuring the basic
features of this issue. One day we hear that all responsible scientists agree that global warming is a
dagger at the heart of human civilization and that emissions of carbon dioxide (CO₂) and other
greenhouse gases must be slashed immediately to save our planet. The next day we're told that
global warming is the illegitimate offspring of sloppy science and green fanaticism and that laying a
finger on U.S. CO₂ emissions would wreck our economy and enrich our foreign competitors.
This debate is motivated by intense, ongoing international negotiations on possible near-term
CO₂ emission limits. The agenda for these negotiations, the so-called Berlin Mandate, was adopted
at the first conference of Parties to the Framework Convention on Climate Change, held in Berlin
in 1995. Diplomats were told to devise a set of national ceilings for greenhouse gas emissions for
the early years of the next century. To make agreement more likely, developing countries were not
to be asked to control emissions, although they account for roughly half the greenhouse emissions
now and will emit a larger share in coming decades. These complex negotiations were to be
completed in just two years, in time for the third Conference of Parties this December in Kyoto,
Japan. Negotiations have become focused on a single question: how much will each of the
developed nations promise to cut CO₂ emissions by 2010?
Our aim here is not to settle this near-term question, though the answer (if any) agreed to in
Kyoto may be of great environmental and economic importance. Instead, we will show, through a
brief look at the science and economics of climate, that if climate change turns out to be a serious
threat, an effective response will require a substantial and very long-term global effort. Today's
focus on near-term emissions reductions will be counter-productive if it delays development of the
institutions and policy architectures that would be necessary to mount and sustain such an effort
over much of the next century.
What Do We Know About Global Warming?
Global warming or cooling can be driven by an imbalance between the energy the Earth
receives from the sun, largely as visible light, and the energy it radiates back to space as invisible
infrared light. The "greenhouse effect" is caused by the presence in the air of gases and clouds that
absorb some of the infrared light flowing upward and radiate it back downward. This warming
effect is opposed by substances at the surface and in the atmosphere that reflect sunlight directly
back into space. These include snow and desert sand, as well as clouds and aerosols from smog
and volcanic action. (Aerosols are very tiny, submicroscopic solid or liquid particles suspended in
the air. Smoke and fog are familiar examples.)
The authors are William F. Pounds Professor of Management, TEPCO Professor of Atmospheric Chemistry, and
Gordon Y. Billard Professor of Economics and Management, respectively, at the Massachusetts Institute of
Technology (MIT). Professors Jacoby and Prinn are Co-Directors of the MIT Joint Program on the Science and
Policy of Global Change, Professor Prinn is Director of the MIT Center for Global Change Science, and Professor
Schmalensee is Director of the MIT Center for Energy and Environmental Policy Research. The authors are
indebted to A. Denny Ellerman, Peter H. Stone, and Diane H. Schmalensee for useful comments.
The most important greenhouse gas is water vapor, which typically remains for a week or so in
the atmosphere. Central to the climate change debate, however, are less important but much longer-
lived greenhouse gases, most notably CO2. Concern arises because the atmospheric concentrations
of CO₂ and other long-lived greenhouse gases have increased substantially over the past century.
When this happens, the flow of infrared energy to space is reduced, so that, all else equal, the
Earth receives slightly more energy than it radiates to space. This imbalance, which is often called
"radiative forcing," tends to raise temperatures at the Earth's surface. These aspects of the
greenhouse effect are not controversial. It is also generally accepted that emissions of CO₂ from
combustion of fossil fuels (primarily coal, oil, and natural gas) are the most important way humans
can affect radiative forcing, and that this emitted CO₂ remains in the atmosphere for a long time, on
the order of a century or so. Thus today's radiative forcing reflects, in small part, the CO₂ emitted
when coal was burned to keep President William McKinley warm in the White House.
What is much more uncertain, and the cause of serious scientific debate, is the response to
radiative forcing of the complex system that determines our climate. "Climate" is usefully defined
as the average of the weather we experience over a ten- or twenty-year time period. In this context,
it is important to emphasize that year-to-year changes in weather patterns or storm tracks should
not be, but often are, confused with climate change. Some poorly understood processes in the
climate system tend to amplify the warming effect of radiative forcing, while others, equally poorly
understood, tend to counteract or delay that effect.
To take a familiar example, clouds in the daytime provide a cooling mechanism by reflecting
sunlight back to space. But abundant clouds and high humidity at night help keep temperatures
high because they contribute to the greenhouse effect. This is why on clear, cloud-free nights we
can get rapid lowering of temperatures by tens of degrees Fahrenheit. Unfortunately, the processes
that drive long-term changes in daytime and nighttime humidity and cloud cover are not well
understood. Similarly, we know that any global warming will tend to be delayed because it takes a
lot of heat to warm the oceans, but we're quite uncertain exactly how rapidly heat is carried into the
deeper parts of the ocean.
Computer models used to predict climate attempt to simulate these and many other important
processes on regional and global scales. These models are remarkable in their complexity and are
invaluable tools for scientific research. However, their complexity taxes the capabilities of the
world's largest computers. Moreover, they are based on incomplete knowledge about the key
processes that control clouds, the ocean circulation, the natural cycles of greenhouse gases, and
natural (volcanic) and manmade (smog) aerosols. Current climate models cannot reproduce the
succession of ice ages and warm periods over the last 250,000 years, let alone the smaller climatic
changes observed over the last century. In addition, climate models are driven by forecasts of
emissions of greenhouse gases, and these rest on highly uncertain long-term forecasts of
population and economic growth and of technological advance.
To help quantify the uncertainty in climate forecasts, a group of scientists and economists at
MIT have recently developed a coupled model of global economic development, climate processes,
and ecosystems. This model is unique in its combination of detailed treatments of the relevant
natural and economic processes. Within this model, the researchers have explored the
consequences of a range of plausible assumptions about future economic development (assuming
no regulations are enacted to restrict future greenhouse gas emissions) and about fundamental
2
climate processes, to produce a family of seven forecasts of climate change over the next century.
Each forecast in the family can be defended as reasonable given current knowledge.
To illustrate the range of uncertainty
involved in climate forecasts, the first figure
Sample Forecasts of
Future Temperature Change
shows the predictions for the change in global
9°F
average surface temperature from its 1990
value. Temperature increases by the year 2100
8°F
as small as two degrees Fahrenheit or as large
7°F
as nine degrees Fahrenheit can be defended as
plausible. About two thirds of the overall
difference here is due to uncertainty about
uncertainty about emissions. Despite a great
Temperature Change from 1990
6°F
5°F
climate processes; the other third reflects
4°F
deal of research, we simply do not know which
3°F
of these paths (or indeed other plausible paths)
2°F
we are now on. Indeed, there may be rapid
climate changes driven by purely natural
1°F
processes that are not well handled by any
0
current climate models and are not reflected in
2000
2020
2040
2060
2080
2100
Year
any of the forecasts shown here.
Unfortunately, we know less about the likely impacts of plausible changes in climate than
about either future emissions or the natural processes determining climate. Warming may increase
storm damage, for instance, but it may also decrease it. Almost nothing is known about likely (as
opposed to possible) impacts on human health or about the ability of unmanaged ecosystems to
adapt to climate change. Civilization has adapted to climate change in the past and can, to at least
some degree, adapt to future changes. What we do know suggests that the changes summarized by
the lowest path in the figure would do little harm over the next century and might even be beneficial
on balance for some countries. Most analysts would agree, however, that the highest path would
correspond to significant risks to a variety of important natural processes (including ocean
circulation, polar glaciers, and unmanaged ecosystems) as well as to agriculture and other human
activity.
In some respects the most important finding of climate research is that the range of possible
outcomes is enormous. We believe it is impossible to make sound policy decisions in this field
without taking explicit account of this profound uncertainty. In addition, it is plainly vital to
continue research aimed at improving emissions forecasts, climate models, and impact estimates in
order to narrow the range of plausible forecasts. An important component of this work is the
search for a so-called "fingerprint" that would reveal human influence on the climate system.
Has Human-Induced Warming Begun?
Last year, the Intergovernmental Panel on Climate Change (IPCC) declared in its Summary for
Policymakers that "the balance of evidence suggests a discernible human influence on climate."
There were some qualifications and hedging in the Summary and much more in the detailed
Working Group Report upon which it was based. Nevertheless this statement, largely in isolation,
3
was widely reported and has since shaped policy discussions around the world. But was this
isolated, unqualified summary statement, written by governments' representatives, a scientifically
defensible conclusion?
To establish a human influence on the global climate, we would ideally want to show that the
observed global patterns of climate change over the past 100 years, say, are consistent with those
predicted by climate models which include human activities such as production of CO₂ and
aerosols from fossil fuels, but are not consistent with the patterns predicted when those activities
are omitted. The latter predictions would reflect the natural variability of climate-the "noise" out
of which the human "signal" (or "fingerprint") must arise for a definitive detection. Unfortunately,
current climate models are both uncertain predictors of the climate response to human influences
and inadequate tools for assessing natural variability. In addition, data on the global climate and
human influences in past decades, and our understanding of the cooling effects of manmade
aerosols, are far from ideal.
For these and other reasons, some scientists have been skeptical about the IPCC's "balance of
evidence" statement from the beginning. This group has grown substantially over time. Even some
scientists who were significantly involved in producing the IPCC statement are now publicly
expressing doubts. In an important news report on this subject in the journal Science in May 1997,
Richard A. Kerr describes the growing skepticism about the original IPCC Summary conclusion,
and the growing realization that it may be a decade or more before the human effects can be
discerned above the noise of natural climate variability.
This does not mean that we should wait to take action until and unless human effects on climate
are definitively detected. As the discussion above indicates, we know enough to know that
significant global warming, with significant adverse impacts, may occur in the future. It would be
irresponsible to ignore such a risk, just as it would be irresponsible to do nothing when you smell
smoke at home until and unless you see flames. It would also be irresponsible, of course, to call
the fire department and hose down all your belongings at the slightest whiff of what might be
smoke.
Nevertheless, the search for a definitive detection of human-induced climate change can
provide valuable information for the policy process. The figure above provides a simplified
illustration of the point involved. The shaded region at the bottom represents a plausible estimate of
the range of natural variability or noise in global mean temperature over the course of a century. As
the figure shows, the greater the eventual warming, the sooner observed temperatures will rise
above this range, and the signal of a human influence will emerge from this noise. (This
conclusion holds whatever the noise level; higher noise levels simply imply later detection, all else
equal.) The larger the human effects on climate, the sooner it should be possible to find definitive
evidence of those effects, and the stronger will likely be the case for substantial emissions
reductions.
Should Global Warming Be Stopped?
If climate change turns out to be a serious problem, the sorts of emissions reductions being
fiercely debated in the run-up to the Kyoto meeting will not by themselves do much to solve it.
Under the Berlin Mandate, emission reductions are to be sought only from countries listed in
Annex I to the original climate treaty: the members of the Organization for Economic Cooperation
4
and Development (OECD) as of 1990 (Western Europe, the United States, Canada, Australia, New
Zealand, and Japan) and the "economies in transition" (Eastern Europe and most of the Former
Soviet Union). To illustrate the effects of restrictions limited to these nations, let us consider one of
the toughest proposals now on the table: the call by the European Union (EU) to cut Annex I CO₂
emissions to 15% below 1990 levels by 2010.
When measured not in relation to 1990 but against emissions today or those expected in
another 13 years, this proposal would require much more than a than a 15% reduction in most
countries. There is little doubt that such sharp cuts in CO₂ emissions over little more than a decade
would be very expensive, even if economic growth were to slow from its pace in recent decades. It
would be even harder for Annex I nations to maintain the proposed 2010 level of emissions for the
rest of the next century. Yet, largely because of projected emissions growth in the developing
world, the MIT climate model shows that such a costly effort by the Annex I countries would
reduce projected warming in 2100 by only about 20 percent in the mid-range of the forecasts
illustrated in the first figure. If climate change turns out to be a serious threat, this response, by
itself, would be inadequate; if it turns out not to be a threat, this response would be a large-scale
waste of resources.
A policy aimed at reducing near-term emissions may, if properly designed, be a valuable first
step toward a more serious (and even more expensive) response strategy that could be used if we
learn that human-induced warming is a serious threat. The Framework Convention on Climate
Change calls for stabilizing atmospheric concentrations of greenhouse gases at levels that will
avoid "danger" to economies and ecosystems. The European Union, among others, has
recommended stabilizing the concentration of CO2 in the atmosphere at 550 parts per million,
which is roughly twice pre-industrial levels. Doing this would substantially slow (but not stop)
climate change. Following the particular path to stabilization at this level that was estimated by the
IPCC would lower the projected warming in 2100 in the mid-range forecast in the earlier figure by
only about 30%, though it would have larger relative effects in the following century.
Following this EU recommendation would
Allowed Annex I Emissions
require sharp cuts in global CO₂ emissions,
Under Stabilization
however, and the Annex I nations almost
6
certainly could not do the job by themselves. We
can illustrate the magnitude of the task using a
5
mid-range forecast from the set shown in the
4
first figure, along with the IPCC's estimate of a
global emissions path that would lead to the 550
parts per million target. The second figure
Carbon Emissions (billion tons)
3
2
shows the maximum Annex I emissions
consistent with this path, assuming that non-
1
Annex I nations accept no restrictions. (To
0
calculate the emissions allowed to Annex I
countries, we simply subtracted the forecasted
-1
non-Annex I emissions from the global total.)
-2
Without participation by the developing world,
2000
2020
2040
2060
2080
2100
emissions by Annex I nations would somehow
Year
5
have to become negative around the middle of the next century! Even a total ban on all use of fossil
fuels in all developed nations within a few decades would not do the job.
Of course, if the richer nations continue to reduce emissions over time some voluntary
abatement by non-Annex I nations would probably occur. Over the coming decades, some non-
Annex I nations will no doubt become wealthy enough to join the Annex I emissions reduction
club voluntarily. But the countries most likely to do this account for only a small fraction of
projected non-Annex I emissions. In China, India, Indonesia, Brazil, and other high-population,
high-emissions countries, income growth seems unlikely to stimulate voluntary abatement much
before the end of the next century. Until then, these nations will be more concerned with feeding
themselves and their children than with protecting their grandchildren from potential global
warming. Thus, if the rich countries want to stabilize greenhouse gas concentrations, they will
have to pay poor countries to reduce their emissions. Rough estimates of the costs that would be
involved, even assuming fully efficient abatement policies and neglecting costs of monitoring and
enforcement, imply massive international transfers of wealth on a scale well beyond anything in
recorded history.
What Should We Do Now?
There is little or no political support today for a long-term commitment to such a Herculean
effort. Moreover, since climate change could turn out to be relatively harmless, making such a
commitment now would make little economic sense. On the other hand, since climate change may
also be a significant threat, it would make no more sense to do nothing. Unfortunately, there are no
simple rules that can be relied upon to tell us what to do. We must consider costs and risks and
take actions in the face of profound uncertainty about their consequences.
In such a setting, it is important not to lose the long-term perspective. Today's actions should
aim to reduce the costs of massive global emissions reductions, in case advances in climate science
show such reductions to be desirable. Investments in new technology and in the development of
policy architectures and institutions are particularly attractive in this regard. While it is almost
certainly too late to agree on investments of this sort before December's Kyoto meeting, that
meeting is but one step in what will very likely be a long political and diplomatic process.
Whatever else happens there, the participants will produce some sort of "Kyoto Mandate" to guide
the next round of international negotiations. That Mandate should focus the process on investments
with long-term benefits.
The potential value of investments in new technology is clear. It may well prove impossible to
slow warming appreciably without condemning much of the world to poverty unless carbon-free
energy sources become roughly competitive with conventional fossil sources. Further, a serious
attempt to produce important new technological options would be cheap relative to the cost of
controlling emissions resulting from the use of current technologies. The range of possible options
is wide, stretching from solar electricity to the continued use of fossil fuels with capture and
sequestration of the CO₂ their combustion produces.
Unfortunately, we know too little about what produces fundamental technical change. The
available evidence points to the importance of marketplace incentives for private sector research and
development and (with somewhat more controversy) to public expenditure on basic research and
fundamental technologies. Politicians love to call for more research instead of more regulation, but
6
we see only a tiny and diminishing commitment to the development of greenhouse-friendly
technology by those countries most capable of performing it.
It is at least as important to begin the development of an institutional structure for managing
global emissions agreements that can evolve easily over time. Such a structure must be able to
adjust the stringency of abatement effort to the evolving science, giving incentives for national
participation but accommodating failures along the way, and to provide compensation to induce
participation by the developing world.
This is a tall order, and we do not pretend to know the best design. Some useful insight and
perspective can be gained from the international trade regime developed under the General
Agreement on Tariffs and Trade (GATT), now the World Trade Organization. This regime has
grown and evolved over time, adding countries and goods along the way, peacefully resolving
substantial conflicts in national economic interests, contributing importantly to global economic
growth, and producing a stunning success by the standards of international affairs. But it has taken
50 years of hard work to do this!
In this connection, experimenting with national emission ceilings of the type that are the near-
total focus of the Berlin Mandate process may be of long-term value. Naturally, one objective of
such an effort is to make actual reductions in the quantities of greenhouse gases we would
otherwise put into the atmosphere over the next decade or two. We do not belittle this motivation.
But it should not be allowed to completely dominate the design of international agreements in this
area. Such experiments will be of long-term value only to the extent that they facilitate development
of sets of possible policy measures, a policy architecture if you will, that can, if necessary,
contribute to effective and cost-efficient stabilization of greenhouse gas concentrations. This
architecture would need to address all important sources and sinks of significant greenhouse gases,
not just CO₂ produced from fossil fuels. Such a system would need to provide for reliable
emissions monitoring and for some system of sanctions for those who violate their obligations. A
host of other important issues must also be confronted.
For example, since global participation will be necessary if global emissions are to be reduced,
it is important to structure any Annex I targets and timetables to facilitate the inclusion of non-
Annex I countries. This involves, at a minimum, development of a regime to govern climate-related
international wealth transfers. In this regard, the Berlin Mandate's exclusive focus on Annex I
countries is a double-edged sword. On the one hand, unless the rich nations control their emissions
first and support abatement by poor nations, the latter are unlikely even to slow their emissions
growth. On the other hand, CO2 emissions controls will raise the cost of producing energy-
intensive goods in Annex I countries, tending to encourage the development of energy-intensive
industries in non-Annex I nations. (This is sometimes referred to as "emissions leakage.") Once
this has happened, non-Annex I nations will be more reluctant to take actions to curb the CO₂
emissions that have become a more important source of wealth. Attempts by the rich Annex I
countries to use trade policies to slow the migration of energy-intensive industries to poorer nations
may create major international tensions.
In order to minimize the global cost of CO2 emissions reductions, the cheapest abatement
opportunities should be exploited first. In principle, a regime involving emissions trading, like that
used to control sulfur dioxide pollution in the U.S., could contribute substantial savings. But this
approach, which has been advanced by the U.S. in the ongoing negotiations, runs into a problem
7
if participation is restricted to Annex I countries. Trading can only work effectively among
countries that have agreed to emissions caps. Without the participation of the developing countries,
where most observers agree that many of the cheaper emissions reductions are to be found, the
advantages of trading are drastically reduced.
Finally, agreeing to lower future emissions may increase incentives to develop energy-saving
consumer devices, along with low-carbon energy sources. But commitments to modest, short-term
emissions reductions may focus R&D efforts on small advances over current technologies.
Credible commitments to substantial, long-term reductions may be necessary to stimulate the
fundamental research necessary to produce needed breakthroughs in energy technology. Lack of
adequate political support seems to rule out making such commitments now, however, and the
inability of any government to bind its successors would limit the credibility of any long-term
commitments that were made.
*
*
Unless climate scientists discover soon that greenhouse warming is definitely not a threat, the
struggle to devise a global response will occupy our children, along with their children and
grandchildren. We have discussed three legacies that our generation could leave that would make
this struggle easier: (1) an international climate agreement that could, if necessary, reduce
greenhouse gas emissions substantially, at least cost, while being responsive both to changes in
our scientific understanding and to evolving political and economic conditions, (2) enhanced
technical options that could, if necessary, ease the task of maintaining economic growth while
controlling greenhouse gas emissions, and (3) an international system that could, if necessary,
transfer substantial sums to developing countries to assist their participation in an emissions control
effort. Building these legacies is a huge challenge, but this task merits at least the same sense of
urgency that has motivated pre-Kyoto negotiations about short-term CO₂ emissions reductions.
8
CC:FO
United States Department of State
Under Secretary of State
for Global Affairs
Washington, D.C. 20520-7250
July 28, 1997
Dear Climate Change Luncheon Participant,
As the climate issue heats up, the relevance and importance of our Climate
Luncheon series becomes greater, for meeting and learning from experts, and for
developing a better understanding of each other and the issues.
These are the next scheduled events; please note the very recent addition of John
Browne from British Petroleum (this session will be held jointly with the members of the
President's Council on Sustainable Development).
John Browne
Harry Pearce
Group Chief Executive, BP
Vice President, General Motors
Monday, August 11
Tuesday, August 26
1:00-2:30
12:00-1:30 p.m.
Main State, TBA
Henry Clay Room, Main State
James Wolfensohn
President, World Bank
Wednesday, September 3
12:30-2:00 p.m.
Henry Clay Room, Main State
We also have invitations to Dale Jorgenson, Kenneth Arrow, Michael
Oppenheimer, Richard Cooper, and Robert Stavins. I look forward to any ideas you may
have for guests.
Attached is a list of guests to date and a list of luncheon attendees and their
contact points within the Administration. We agreed that the luncheon works best
without substitutes.
You will note that the number of participants in the Climate Luncheons exceeds
our space for 22 at the table. In order to assure your spot at the upcoming luncheons,
please respond as soon as possible to Debbie Jones at 647-6205.
With best regards,
Im Sincerely yours, wuth
Timothy E. Wirth
INTERAGENCY CLIMATE CHANGE DEPUTIES GROUP
Brian Atwood
USAID
(O) 647-9620
(F) 647-0148
POC: Paula
Jim Baker
Commerce/NOAA
(O) 482-3436
(F) 408-9674
POC: Pat
Rosina Bierbaum
OSTP
(O) 456-6202
(F) 456-6025
POC: Lorena/Sandy
Joseph Bordogna
NSF
(O) (703) 306-1001
(F) (703) 306-0109
POC: Ruth
Stuart Eizenstat
State
(O) 647-7575
(F) 647-9763
POC: Carolyn
Dirk Forrister
CEQ
(O) 343-1060
(F) 343-1162
POC: Mary
Jeffrey Frankel
CEA
(O) 395-5046
(F) 395-6947
POC: Francine
John Garamendi
Interior
(O) 208-6291
(F) 208-1873
POC: Gwen
Jack Gibbons
White House
(O) 456-7116
(F) 456-6021
POC: Susie
T.J. Glauthier
OMB
(O) 395-4561
(F) 395-4639
POC: Alecia
2
Sherri Goodman
Defense
(O) (703) 697-1013
(F) (703) 693-7011
POC: Sherry
Joshua Gotbaum
OMB
(O) 395-3060
(F) 395-3174
POC: Lois
Fred Hansen
EPA
(O) 260-4711
(F) 401-3764
POC: Linda H.
Kitty Higgins
Labor
(O) 219-6151
(F) 219-7971
POC: Liz T.
Elgie Holstein
Energy
(O) 586-6210
(F) 586-7644
POC: Carolyn
Jeffrey Hunker
Commerce
(O) 482-6055
(F) 482-4636
POC: Sandra
Melinda Kimble
State
(O) 647-9604
(F) 73 6-4116
POC: Lena
Jeff Lang
USTR
(O) 395-5114
(F) 395-4549
POC: Dena
Al Larson
State
(O) 647-7971
(F) 6475713
POC: Ann
Mark Mazur
NEC
(O) 395-5147
(F) 395-6809
POC: Mark
Katie McGinty
CEQ
(O) 456-5147
(F) 456-2710
POC: Robert
3
Jerry Melillo
OSTP
(O) 456-6202
(F) 456-6025
POC: Sandy
Betsy Moler
Energy
(0) 586-5500
(F) 586-0148
POC: Donna
Rodrigo Prudencio
State
(O) 647-6240
(F) 647-0753
POC: Debbie
Dan Reicher
Energy
(O) 586-7701
(F) 586-0148
POC: Vernellia
Richard Rominger
USDA
(O) 720-6158
(F) 720-5437
POC: Joanne
David Sandalow
CEQ
(O) 456-5145
(F) 456-2710
POC: Adam
Lois Schiffer
Justice
(O) 514-2701
(F) 514-0557
POC: Norma
James Steinberg
White House
(O) 456-9480
(F) 456-9490
POC: Kathy
Todd Stern
White House
(O) 456-2702
(F) 456-2215
POC: Carol
Lawrence Summers
Treasury
(O) 622-1080
(F) 622-0081
POC: Beth
Dan Tarullo
NEC
(O) 456-5353
(F) 456-1605
POC: Kristin
4
William Townsend
NASA
(O) 358-2165
(F) 358-3092
POC: Joanne
Timothy E. Wirth
State
(O) 647-6240
(F) 647-0753
POC: Debbie
Janet Yellen
CEA
(O) 395-5854
(F) 395-6958
POC: Alice
G/Admin:LAClimte
John Browne
Climate change:
John Browne became BP's
group chief executive on
1 July 1995, having been a
the new agenda
managing director since 1991.
Since joining the company
in 1966, Browne has held a
variety of posts in oil and gas
exploration and production
and in corporate finance,
working in Britain and North
America. He is a former chief
executive of BP's exploration
John Browne
and production business.
Group Chief Executive
A non-executive director of
The British Petroleum Company p.l.c.
SmithKline Beecham and the
Intel Corporation, Browne is
also a trustee of the British
Museum and a member of the
governing body of the London
Business School.
He is a Fellow of the Royal
A presentation to Stanford University, California
Academy of Engineering and a
19 May 1997
Fellow of the Institute of
Mining and Metallurgy.
Climate change: the new agenda
all citizens of one world, and we must take shared
A presentation to Stanford University, California,
responsibility for its future, and for its sustainable
19 May 1997
development.
We must do that in all our various roles - as students and
teachers, as business people with capital to invest, as legislators
with the power to make law, as individual citizens with the
right to vote, and as consumers with the power of choice.
The people who
These roles overlap, of course. The people who work in BP
work in BP are
are certainly business people, but they're also people with
I pleasure and a privilege to speak to you today on a subject
is always marvellous to come back to Stanford, and it is a
people with
beliefs and
beliefs and convictions, individuals concerned with the quality
convictions
of life for themselves and for their children. When they come
which I believe is of the utmost importance.
through the door into work every morning they don't leave
I can't think of anywhere better than Stanford to discuss in
behind their convictions and their sense of responsibility.
a calm and rational way a subject which raises great emotion
And the same applies to our consumers. Their choices
and which requires both analysis and action.
determine our success as a company. And they too have beliefs
I think it's right to start by setting my comments in context
and convictions.
Following the collapse of communism in Europe and the
fall of the Soviet Empire at the end of the 1980s, two
The global environment
alternative views of the consequences for the rest of the world
Now that brings us to my subject today - the global
were put forward. Francis Fukuyama wrote a book with the
environment. That is a subject which concerns us all, in all our
ironic title, 'The End of History'. Jacques Delors, then
various roles and capacities. I believe we've now come to an
president of the European Commission, talked about the
important moment in our consideration of the environment.
'acceleration of history'.
It is a moment when, because of the shared interest I talked
History
In the event, history has neither accelerated nor stopped.
about, we need to go beyond analysis to seek solutions and to
has neither
But it has changed. The world in which we now live is one no
accelerated nor
take action. It is a moment for change and for a rethinking of
longer defined by ideology. Of course, the old spectrums are
stopped. But
corporate responsibility.
still with us - of left to right, of radical to conservative - but
it has changed
A year ago, the Second Report of the Inter-Governmental
ideology is no longer the ultimate arbiter of analysis and action.
Panel on Climate Change was published. That report and the
Governments, corporations and individual citizens have all
discussion which has continued since its publication show that
had to redefine their roles in a society no longer divided by an
there is mounting concern about two stark facts. The
Iron Curtain separating capitalism from communism. A new
concentration of carbon dioxide in the atmosphere is rising,
age demands a fresh perspective on the nature of society and
and the temperature of the earth's surface is increasing.
responsibility.
Karl Popper once described all science as being
The passing of some of the old divisions reminds us we are
provisional. What he meant by that was that all science is open
PAGE 2
PAGE 3
to refutation, to amendment and to development. That view is
planet, then it falls to us to begin to take precautionary action
certainly confirmed by the debate around climate change.
now.
There's a lot of noise in the data. It is hard to isolate cause
But what sort of action? How should we respond to this
There is now
and effect. But there is now an effective consensus among the
mixture of concern and uncertainty ?
an effective
world's leading scientists and serious and well-informed people
I think the right metaphor for the process is a journey.
consensus
outside the scientific community that there is a discernible
Governments have started on that journey. The Rio conference
that there is
human influence on the climate, and a link between the
marked an important point on that journey. So was the Berlin
a discernible
concentration of carbon dioxide and the increase in
human influence
review meeting. The Kyoto conference scheduled for the end
on the climate
temperature.
of this year marks another staging post.
The prediction of the IPCC is that, over the next century,
It will be a long journey because the responsibilities faced
temperatures might rise by a further 1 to 3.5 degrees
by governments are complex, and the interests of their
centigrade, and that sea levels might rise by between 15 and 95
economies and peoples are diverse, and sometimes
centimetres. Some of that impact is probably unavoidable,
contradictory. But the journey has begun, and has to continue.
because it results from current emissions.
The private sector has also embarked upon the journey, but
Those are wide margins of error, and there remain large
now that involvement needs to be accelerated. This too will be
elements of uncertainty - about cause and effect and, even
long and complex, with different people taking different
more importantly, about the consequences. But it would be
approaches. But it is a journey that must proceed.
unwise and potentially dangerous to ignore the mounting
Alternative responses
concern.
The time to consider the policy dimensions of climate
As I see it, there are two kinds of actions that can be taken in
change is not when the link between greenhouse gases and
response to the challenge of climate change.
climate change is conclusively proven, but when the possibility
The first kind of action would be dramatic, sudden and
cannot be discounted and is taken seriously by the society of
surely wrong. Actions which sought, at a stroke, drastically to
which we are part.
restrict carbon emissions or even to ban the use of fossil fuels
would be unsustainable because they would crash into the
BP's role
realities of economic growth. They would also be seen as
We in BP have reached that point. It is an important moment
discriminatory, above all in the developing world.
for us. A moment when analysis demonstrates the need for
The second kind of action is that of a journey taken in
action and solutions.
partnership by all those involved. A step-by-step process
To be absolutely clear, we must now focus on what can and
involving both action to develop solutions and continuing
what should be done, not because we can be certain climate
BP is committed
research that will build knowledge through experience.
change is happening, but because the possibility can't be
to an approach
BP is committed to this second approach, which matches
which matches
ignored.
the agreement reached at Rio, based on a balance between the
the Rio agreement
If we are all to take responsibility for the future of our
needs of development and environmental protection. The Rio
PAGE 4
PAGE 5
agreements recognise the need for economic development in
Let me put that another way, to be clear. Human activity
the developing world. We believe we can contribute to
accounts for a small part of the total volume of emissions of
achievement of the right balance by ensuring that we apply the
carbon, but it is that part which could cause disequilibrium.
technical innovations we're making on a common basis,
Only a fraction of the total emissions come from the
everywhere in the world.
transportation sector, so the problem is not just caused by
What we propose to do is substantial, real and measurable.
vehicles. Any response which is going to have a real impact has
What we
propose to do is
I believe it will make a difference.
to look at all the sources.
substantial, real
Before defining that action I think it is worth establishing a
As a company, our contribution is small. and our actions
and measurable
factual basis from which we can work.
alone could not resolve the problem. But that does not mean
we should do nothing.
The facts
We have to look at both the way we use energy. to ensure
Of the world's total carbon dioxide emissions, only a small
we are working with maximum efficiency. and at how our
fraction comes from the activities of human beings. but it is
products are used.
that small fraction which might threaten the equilibrium
That means ensuring our own house is in order. It also
between the much greater flows.
means contributing to the wider analysis of the problem -
You could think of it as the impact of placing even a small
through research, technology and engagement in the search for
weight on a weigh-scale which is precisely balanced. But in
the best public policy mechanisms - the actions which can
preserving the balance we have to be clear where the problem
produce the right solutions for the long-term common interest.
actually lies.
We have a responsibility to act, and I hope that through
Of the total carbon dioxide emissions caused by burning
our actions we can contribute to the much wider process
fossil fuels, only 20% comes from transportation. 80% comes
which is desirable and necessary.
from static uses of energy - the energy used in our homes, in
Specific steps
industry and in power generation. Of the total, 43% comes
from petroleum.
BP accepts that responsibility and we're therefore taking some
We've looked carefully, using the best available data,
specific steps:
at the precise impact of our own activities.
To control our own emissions
Our operations in exploration and in refining produce
To fund continuing scientific research
around 8 megatonnes of carbon. On top of that, a further
To take initiatives for joint implementation
1 megatonne is produced by our chemical operations. If you
To develop alternative fuels for the long term
add to that the carbon produced by the consumption of the
And to contribute to the public policy debate in
products we produce, the total goes up to around 95
First, we will
search of the wider global answers to the problem.
monitor and
First, we will monitor and control our own carbon dioxide
megatonnes.
control our carbon
That is just one per cent of the total carbon dioxide
emissions.
dioxide emissions
emissions which come from all human activity.
This follows the commitment we've made in relation to
PAGE 7
PAGE 6
other environmental issues. Our overall goal is to do no harm
So far our approach to carbon dioxide has been indirect
or damage to the natural environment. That's an ambitious
and has mainly come through improvements in the energy
goal which we approach systematically.
efficiency of our production processes. Over the last decade,
efficiency in our major manufacturing activities has improved
Establishing priorities
by 20%.
Nobody can do everything at once. Companies work by
Now we want to go further.
prioritising what they do. They take the easiest steps first -
We have to continue to improve the efficiency with which
picking the low-hanging fruit - and then they move on to
we use energy. And in addition we need a better understanding
tackle the more difficult and complex problems. That is the
of how our own emissions of carbon can be monitored and
natural business process.
controlled, using a variety of measures including sequestration.
Our method has been to focus on one item at a time, to
It is a very simple business lesson that what gets measured gets
identify what can be delivered, and to establish monitoring
managed.
processes and targets as part of our internal management
It is a learning process, just as it has been with the other
system and to put in place an external audit to confirm
emissions we've targeted, but the learning is cumulative and I
delivery.
think it will have a substantial impact.
In most cases
In most cases the approach has meant that we've been able
We have already taken some steps in the right direction. In
we've been able
to go well beyond the regulatory requirements. That's what
Norway, for example, we've reduced flaring to less than 20%
to go well beyond
we've done with emissions to water and to air.
of 1991 levels, primarily as a result of very simple, low-cost
the regulatory
In the North Sea, for instance, we've gone well beyond the
measures. The operation there is now close to the technical
requirements
legal requirements in reducing oil discharges to the sea. And
minimum flare rate which is dictated by safety considerations.
now at our crude oil export terminal in Scotland at Hound
Our experience in Norway is being transferred elsewhere,
Point, which handles 10% of Europe's oil supplies, we're
starting with fields in the UK sector of the North Sea, and that
investing $100 million to eliminate emissions of volatile organic
should produce further progressive reductions in emissions.
compounds. These VOCs would themselves produce carbon
Our goal is to
Our goal is to eliminate flaring except in emergencies. That
dioxide by oxidation in the atmosphere.
eliminate flaring
is one specific goal within the set of targets which we will
except in
No legislation has compelled us to take that step. We're
establish.
emergencies
doing it because we believe it is the right thing to do.
Some are straightforward matters of efficient operation,
Now, as well as continuing our efforts in relation to the
such as the reduction of flaring and venting. Others require
other greenhouse gases, it is time to establish a similar process
the use of advanced technology in the form of improved
for carbon dioxide.
manufacturing and separation processes that produce less
Our carbon dioxide emissions result from burning
waste and demand less energy.
hydrocarbon fuels to produce heat and power, from flaring
Other steps will require investment to make existing
feed and product gases, and directly from the process of
facilities more energy efficient. For instance, we're researching
separation or transformation.
ways in which we can remove the carbon dioxide from large
PAGE 9
PAGE 8
compressors and reinject it to improve oil recovery. That
International Energy Agency, which is analysing technologies
would bring a double benefit - a cut in emissions and an
for reducing and offsetting greenhouse gas emissions from
improvement in production efficiency.
fossil fuels.
The task is particularly challenging in the refining sector,
The third area is
The third area is the transfer of technology and the process
where the production of cleaner products requires more
the transfer of
of joint implementation, which is the technical term for
extensive processing and a higher energy demand for each unit
technology and
projects which bring different parties together to limit and
of output. It means that to make gasoline cleaner, with lower
the process
reduce net emission levels of greenhouse gases.
of joint
sulphur levels, takes more energy at the manufacturing stage.
implementation
Joint implementation is only in its infancy, but we believe
That's the trade-off.
it has great potential to contribute to the resolution of the
In each case our aim will be to establish a database,
climate change problem. It can increase the impact of
including benchmark data, to create a monitoring process, and
reduction technology by reducing the overall cost of abatement
then to develop targets for improvement through operational
actions.
line management.
We need to experiment and to learn, and we'd welcome
Monitoring and controlling emissions is one step.
further partners in the process. The aim of the learning process
The second step
The second is to increase the level of support we give to the
must be to make joint implementation a viable and legally
is to increase
the level of
continuing scientific work which is necessary.
creditable concept that can be included in international
support we give
As I said a few moments ago, there are still areas of
commitments.
to the continuing
significant uncertainty around the subject of climate change.
We've begun by entering into some specific programmes of
scientific work
Those who say they know all the answers are fools or knaves.
reforestation and forest conservation programmes in Turkey
which is
More research is needed on the detail of cause and effect,
and now in Bolivia, and we're in discussion on a number of
necessary
on the consequences of what appears to be happening, and on
other technology-based joint implementation projects.
the effectiveness of the various actions which can be taken.
The Bolivian example, I think, shows what can be done.
We will increase our support for that work. That support
It's a programme to conserve 1.5 million hectares of forests
will be focused on finding solutions and will be directed to
in the province of Santa Cruz. It is sponsored by the Nature
work of high quality which we believe can address the key
Conservancy and American Electric Power and sanctioned by
outstanding questions.
the US government.
Specifically, we've joined a partnership to design the
We're delighted to be involved, and to have the chance to
right technology strategy to deal with climate change. That
transfer the learning from this project to others in which we
partnership, which will work through the Batelle Institute,
are involved. Forest conservation projects are not easy or
includes the Electric Power Research Institute and the US
simple, and that learning process is very important.
Department of Energy. We're also supporting work being done
Technology transfer is part of the joint implementation
at MIT in Cambridge, Massachusetts, and through the Royal
process but it should go wider. We're prepared to engage in an
Society in London.
open dialogue with all the parties who are seeking answers to
We're also joining the greenhouse gas programme of the
the climate change problem.
PAGE 10
PAGE 11
So those are three steps we can take - monitoring and
At the moment solar is not commercially viable for either
controlling our own emissions, supporting the existing
peak or base load power generation. The best technology
scientific work and encouraging new work, and developing
produces electricity at something like double the cost of
experiments in joint implementation and technology transfer.
conventional sources for peak demand.
Why are we doing all those things? Simply because the oil
But technology is advancing and, with appropriate public
industry is going to remain the world's predominant supplier of
I'm convinced
support and investment, I'm convinced that we can make solar
energy for the foreseeable future.
diat we can make
competitive in supplying peak electricity demand within the
Given that role, we have to play a positive and responsible
solar energy
next 10 years. That means, taking the whole period from the
competitive in
part in identifying solutions to a problem which is potentially
time we began research work, that 25 to 30 years will have
supplying peak
very serious.
electricity
elapsed. For this industry that is the appropriate timescale on
The fourth step -
The fourth step - the development of alternative energy -
demand within
which to work.
the development
is related but distinct.
The next 10 years
We explore for oil and gas in a number of areas where
of alternative
Looking ahead, it seems clear that the combination of
production today wouldn't be commercially viable at the
energy - is related
markets and technology will shift the energy mix. The world's
moment. Thirty years ago we did that in Alaska.
but distinct
population is growing by 100 million every year. By 5,000 just
We take that approach because we believe that markets and
since I began this speech.
technology do move, and the frontier of commercial viability is
Prosperity is spreading. By the end of the century 60% of
always changing.
the world's economic activity will be taking place in the South,
We've been in solar power for a number of years and we
in areas which 10 years ago we thought of as Third World
have a 10% share of the world market. The business operates
countries.
across the world, with operations in 16 countries. Our aim now
Both these factors will shape a growing level of demand for
is to extend that reach, not least in the developing world,
energy.
where energy demand is growing rapidly.
At the same time technology moves on. The sorts of
We also want to transfer our distinctive technologies into
changes we've seen in computing, with continuing expansion
production, to increase manufacturing capacity and to position
of semiconductor capacity, are exceptional but not unique.
the business to reach $1 billion in sales over the next decade.
I think it is a reasonable assumption that the technology of
alternative energy supplies will also continue to move forward.
Solar investment
One or more of those alternatives will take a greater share of
I am happy to report there will be significant investment in the
the energy market as we go into the next century.
USA and we'll be commissioning a new solar manufacturing
But let me be clear. That is not instead of oil and gas. It is
facility here in California before the end of this year.
additional.
The result of all that is that, gradually but progressively,
We've been looking at alternative energies for a long time,
solar will make a contribution to the resolution of the problem
and our conclusion is that one source which is likely to make a
of carbon dioxide emissions and climate change.
significant contribution is solar power.
So, a series of steps on the journey. These are the initial
PAGE 12
PAGE 13
steps. We're examining what else we should do, and I hope to
We're working, for instance, with the Environmental
be able to announce some further steps later in the year.
Defence Fund to develop a voluntary emissions trading system
Of course, as I said at the beginning, nothing we can do
for greenhouse gases, modelled on the system already in place
alone will resolve the concern about climate change. We can
in respect of sulphur.
contribute, and over time we can move towards the elimination
Of course, a system which just operates here in the United
of emissions from our own operations and a substantial
States is only a part of the solution. Ideally such structures
reduction in the emissions which come from the use of our
should be much wider. But change begins with the first step
products. The subject of climate change, however, is a matter
and the development of successful systems here will set a
of wider public policy.
standard which will spread.
A wider debate
Sustainable growth
We believe that policy debate is important. We support that
I began with the issue of corporate responsibility, the need for
debate, and we're engaged in it, through the World Business
rethinking in a new context.
Council on Sustainable Development, through the president's
No company can be really successful unless it is
No company
own Council here in the United States, and in the UK where
can be really
sustainable, unless it has capacity to keep using its skills and to
the government is committed to making significant progress on
successful unless
keep growing its business.
the subject.
it is sustainable
Of course, that requires a competitive financial
Knowledge in this area is not proprietary, and we will share
performance. But it does require something more, perhaps
our expertise openly and freely.
particularly in the oil industry.
Market-based
Our instinct is that, once clear objectives have been agreed.
The whole industry is growing because world demand is
solutions are
market-based solutions are more likely to produce innovative
growing. The world now uses almost 73 million barrels of oil a
more likely
and creative responses than an approach based on regulation
day - 16% more than it did 10 years ago.
to produce
alone.
In another 10 years, because of the growth of population
innovative
and creative
Those market-based solutions need to be as wide-ranging
and prosperity, that figure is likely to be over 85 million barrels
responses
in scope as possible, because this is a global problem which has
of oil a day, and that is a cautious estimate. Some people say it
to be resolved without discrimination and without denying the
will be more.
peoples of the developing world the right to improve their
For efficient, competitive companies that growth will be
living standards.
very profitable. But sustainability is about more than profits.
To try to do that would be arrogant and untenable, when
High profitability is necessary but not sufficient.
what we need are solutions which are inclusive, and work
Real sustainability is about simultaneously being profitable
through co-operation across national and industry boundaries.
and responding to the reality and the concerns of the world in
There have been a number of experiments, all of them
which you operate. We're not separate from the world. It's our
partial, but many of them interesting because they show the
world as well.
way in which effective markets can change behaviour.
I disagree with some members of the environmental
PAGE 15
PAGE 14
movement who say we have to abandon the use of oil and gas.
They think it is the oil and gas industry which has reached the
end of history. I disagree because I think that view
underestimates the potential for creative and positive action.
But that disagreement doesn't mean that we can ignore the
mounting evidence about climate change and the growing
concern. As business people, when our customers are
concerned, we'd better take notice.
To be sustainable, companies need a sustainable world.
That means a world where the environmental equilibrium is
maintained, but also a world whose population can all enjoy
the heat, light and mobility which we take for granted and
which the oil industry helps to provide.
I don't believe those are incompatible goals. Everything
I've said today, and all the actions we're taking and will take,
are directed to ensuring that they are not incompatible.
No easy answers
There are no easy answers. No silver bullets. Just steps on a
journey which we should take together because we all have a
vital interest in finding the answers.
The cultures
The cultures of politics, of science and of enterprise must
of politics, of
work together if we are to match and master the challenges we
science and of
all face.
enterprise must
I started by talking about the end of history. Of course it
Published by
work together
Group Media & Publications
hasn't ended. It's moved on.
The British Petroleum Company p.l.c.
Francis Fukuyama, who coined that phrase, describes the
future in terms of the need for a social order - a network of
Additional copies are available from
Corporate Publications
interdependence which goes beyond the contractual. An order
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driven by the sense of common human interest. Where that
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exists, societies thrive.
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Nowhere is the need for that sort of social order - at the
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global level - more important than in this area. The
achievement of that has to be our common goal.
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May 1997
PAGE 16
CLIMATE CHANGE RISKS AND
POLICIES: AN OVERVIEW
Michael A. Toman
Climate Issues Brief No. 1
March 1997
Resources for the Future
1616 P Street, NW
Washington, DC 20036
Telephone 202-328-5000
Fax 202-939-3460
To: 6/26/97 JEFF FRANKEL
Climate Issue Briefs are short reports produced as part of RFF's
Climate Economics and Policy Program to provide topical, timely
FYI - Rosina Bierbamm
information and analysis to a broad nontechnical audience.
thought you'd be
© 1997 Resources for the Future. All rights reserved.
Reproduction of this paper is permitted with attribution and
interested in this.
copyright citation.
CLIMATE CHANGE RISKS AND POLICIES: AN OVERVIEW
Michael Toman, Senior Fellow, Resources for the Future
INTRODUCTION AND SUMMARY
A great deal of controversy surrounds the issue of climate change. Some participants in the
debate say that climate change is one of the greatest threats facing humankind, one that calls for
immediate and strong controls on greenhouse gases, particularly carbon dioxide emissions from
fossil fuel burning and releases of other gases such as methane. Others say that the risks are
weakly documented scientifically, that adaptation to a changing climate will substantially reduce
human vulnerability, and that consequently little action is warranted other than further study and
development of future technological options. The same kinds of divides arise in discussing
policy options to reduce greenhouse gas emissions, with some predicting net benefits to the
economy and others fearing the loss of several percentage points of national income.
These disagreements surface in the ongoing efforts of the international community to
negotiate goals and actions under the 1992 Framework Convention on Climate Change. They
reflect not only different interpretations of the evidence but different interests as well. Article 2
of the Framework Convention requires signatories to take actions to "prevent dangerous
anthropogenic interference with the climate system" from greenhouse gas emissions (and other
actions such as deforestation). However, the term "dangerous" in Article 2 does not have an
unambiguous, purely scientific definition; it is inherently a question of human values.
To help sort through the tangle, in this paper I attempt to summarize some ways to think
about climate change risks and policies that can be useful for considering both international
agreements and actions by the United States. The paper starts with some background on the
current state of the knowledge and then presents a six-step decision framework. The steps
include the following:
Think comprehensively about risks and costs.
Think long term.
Address adaptation.
Think internationally.
Keep distributional issues in mind.
Estimate control costs realistically.
Using this framework, I also suggest some points for enhancing the effectiveness of
climate policies:
Allow flexibility in the timing of cumulative emissions reductions to reduce overall
costs.
1
Incorporate economic incentives into emissions-reduction policy.
Provide opportunities for emissions reductions wherever possible.
Encourage development of the climate change knowledge base and improved
technology for emissions reduction.
Increase the emphasis on adaptation.
Each of these points is elaborated on in the paper. However, as an overview, the
discussion necessarily is somewhat abridged. Other Issues Briefs to be produced for RFF's
Climate Economics and Policy Program will explore in greater detail the issues raised here. I
conclude with some brief comments on the draft protocol promulgated by the Clinton
Administration in January 1997.
BACKGROUND
In its recent Second Assessment, Working Group I of the Intergovernmental Panel on Climate
Change (IPCC)-a body of several hundred distinguished scientists established by the United
Nations-concluded that a human cause for the climate change now observed is likely, not just
possible. This is a much stronger conclusion than the one the IPCC reached in its First
Assessment several years ago, although it is dogged by skepticism from some who feel that
dissenting views were not adequately represented in the process. In its First Assessment, the
IPCC stated that although all signs pointed to human-induced climate change, crucial evidence
for cause and effect was not yet available. The evidence at the time indicated that atmospheric
greenhouse gas concentrations had increased in the previous 130 years and that the global
climate had warmed; however, when applied retrospectively, complex computer simulations of
climate change predicted a larger warming than had actually occurred and did not adequately
represent climate changes in different regions and at different altitudes.
The latest generation of models can now replicate the past with greater realism. In
particular, new models include analysis of the cooling effect of aerosols-tiny particles-in the
air formed during the burning of fossil fuels. By including in their analyses the cooling effects of
aerosols and stratospheric ozone depletion. most of the latest studies have detected a significant
climate change. The Summary for Policymakers of the Working Group I report states that "the
observed warming trend is unlikely to be entirely natural in origin The balance of evidence
suggests a discernible human influence on global climate."
While the improved capacity of climate models to track past events increases confidence
in their capacity to explain observed changes, future changes in climate could depart from the
models' predictions. In particular, the change may be neither gradual nor continuous, but abrupt
and surprising. Despite recent improvements, however, climate models are still unable to project
the details of climate change on a regional scale. complicating assessment of potential impacts
and response options.
In the latest assessment, Working Group II of the IPCC addresses many potential impacts
of climate change. including the effects on agriculture, forestry, terrestrial and marine
2
ecosystems, hydrology and water resource management, human health, human infrastructure, and
financial services. While the potential impacts of climate change are broad, some aspects of
human society are more sensitive than others. In particular, more highly managed systems like
agriculture, where skills and resources for investing in adaptation are available, may be less
sensitive than less managed systems like wilderness areas. By the same token, some of the
adverse effects of climate change may fall disproportionately on poorer parts of the world where
adaptation capacity is more limited. Particularly if climate change were very rapid, damage could
be severe and long-lived, perhaps irreversible. However, such rapid change may be unlikely and
is difficult to predict.
In any event, the ability to quantify future damage and adaptation potential varies greatly
across sectors. The physical consequences of a given magnitude of sea level rise, or the impacts
of climate change on agricultural yields and forest conditions, can be projected with higher
confidence than, say, impacts on wetlands and fisheries. Yet even when confidence is high that a
certain effect will occur if climate changes, its magnitude cannot be predicted precisely. In
addition, already significant damage to ecosystems and human structures arising from population
growth, industrial expansion, and changes in land use may be of more immediate concern than
how best to respond to climate change risk. Over the longer term, however, these forces could
combine with the effects of climate change to push already stressed systems "over the edge."
In evaluating the context for climate change policies, several points need to be kept in
mind.
Some degree of climate change appears inevitable. Given current emissions trends and the
inertia of the climate system, even if emissions were stabilized or substantially reduced, the
scientific models suggest that climatic changes and their consequences would continue. To
stabilize atmospheric concentrations of greenhouse gases and thus their effects would eventually
require very large cuts in emissions from current levels (let alone future levels implied by
continued economic growth under a "business as usual" scenario). For example, to stabilize
carbon dioxide concentrations at something over twice pre-industrial levels would require
emissions ultimately to fall by over 70 percent from their current level.
)
The problem is global. Rich and poor countries argue over how the burden of greenhouse gas
emissions reductions should be allocated. However, no solution can be effective in the long term
unless it ultimately leads to reductions in total global emissions. not just emissions in selected
countries.
It is the human consequences of climate change that will animate public support for
policies. The findings of climate scientists or studies of physical impacts from climate change
cannot drive policy alone. This simple but important point often seems to be overlooked in
debates about "what the science says," and it leads to our next major topic-what kind of
framework is useful for evaluating climate risks and policies?
3
DECISION FRAMEWORK
Although substantial scientific and socioeconomic uncertainties exist about the risks that climate
change poses, these uncertainties do not justify taking no action. At the same time, priorities
must be set in how the public's scarce resources will be used. At the broadest level, there must be
some weighing and balancing of the benefits and costs of different actions in response to climate
change risks. The values served by reducing the risks from climate change can only be
appreciated in comparison with other values to which society devotes its scarce resources.
The need for such balancing casts doubt on the usefulness of a strict "safety first"
framework that puts a high premium on any and all forms of risk reduction. We cannot devote
disproportionately huge amounts of resources to reducing climate change risks while, for
example, utterly ignoring health care needs. Moreover, not all the effects of climate change are
likely to be equally serious, so it is not helpful simply to argue that the risks of climate change
should be minimized.
Some analysts argue that we can enjoy the benefits of reduced climate change risks
without significant economic costs or even with net benefits from economic and environmental
improvements arising from greenhouse gas control. They suggest that pervasive but latent
markets exist whose failure to operate, once fixed, will yield substantial economic and
environmental benefits. Many people who have examined this argument-including participants
in IPCC Working Groups II and III-seem to agree that some low-cost reductions in greenhouse
gases are feasible through revitalized markets for new product development. However, for
reasons discussed below, I believe that some skepticism is warranted regarding sweeping claims
about the potential for low-cost emissions reductions.
If a strict "precautionary principle" of the type sketched above is of limited practical use
for evaluating the risks of climate change, there are also limits to what can be gleaned from
conventional benefit-cost analysis. Climate change risks and policies inherently have substantial
distributional effects that may operate both within generations (who bears what share of response
costs) and across generations (how much the future benefits from our actions to reduce climate
change risks). In addition. uncertainty surrounding the risks and costs of climate change is
especially large, and there is at least the possibility of very large-scale impacts that human
responses will have a hard time mitigating. These issues are not easily handled through normal
benefit-cost calculations that calculate expected net benefits over time.
While there is no easy cookbook answer to what should go into a climate change decision
framework, and no approach that commands universal agreement, several elements seem useful.
Think comprehensively about risks and costs. Given the number of risks associated
with climate change, efforts to gauge the benefits of reducing them should be as broad as
possible. Elements to consider include the impacts on market goods like agriculture; effects on
human health; effects on nonmarket resources like wilderness areas and wetlands that provide
both recreational values and ecological functions: and the ancillary benefits of greenhouse gas
reduction such as improved air quality.
4
Given the current state of knowledge, it will be difficult to attach monetary values to
many of these risk reductions. This uncertainty is likely to persist for many risk categories
(especially those related to ecological impacts) even if uncertainty about the physical
manifestations of climate change declines. Nevertheless, these risks are important to consider:
lack of information about a risk should not be confused with that risk being negligible. Where
economic assessments are problematic, information about the likelihood, potential magnitude,
and timing of impacts still is useful for decisionmakers. In this connection, an assessment of
climate change risks should go beyond a sequence of "best guess" estimates of atmospheric
changes, biophysical impacts, and socioeconomic impacts. It is necessary to consider the
variability of possible consequences as well. At the same time, the assessment should not be
limited only to severe but unlikely effects in "worst case" scenarios.
Assessments of the costs of response options should similarly be broad and sensitive to
uncertainties. For example, the overall economic costs of abatement policies that distort existing
patterns of employment, investment, and innovation may be a multiple of direct out-of-pocket
compliance costs. By the same token, technical progress over time in reducing greenhouse gases
can lower abatement costs. Cost assessment should also address ancillary effects of policy
responses-some positive, like reduction of conventional air pollutants with reduced energy use,
and some negative, like increased indoor air pollution from tighter insulation, or increased
pressures to develop hydroelectric capacity on scenic rivers. Finally, a comprehensive approach
must be concerned with other greenhouse gases besides carbon dioxide (such as methane from
pipeline leaks and landfills), and with changes in carbon sequestration in forests due to shifting
land use patterns.
Think long-term. The risks posed by climate change depend on the path of changes in
the atmospheric concentration of greenhouse gases over many decades and centuries, not just on
the emissions of these gases over a relatively short period of time. The long-term aspect of
climate change means that we are dealing with the cumulative effect of many smaller influences
on the biosphere, a process with a great deal of natural inertia. Having to deal with the distant
future greatly complicates risk assessment and the development of consensus for policy actions.
To be effective, at least some actions must be taken in anticipation of long-term impacts, before
all of the scientific evidence is clear. Our political system arguably is less effective at responding
to such issues than to a single large and immediate concern. On the other hand, the long-term
nature of climate change risks means we also have time to hone our scientific understanding and
policy responses over time; we need not do everything right away.
Address adaptation. In a number of areas such as agriculture, managed forestry, and
human settlements, intuition and experience in other contexts suggest a medium-to-high degree
of potential adaptability to natural changes, given enough lead time and investment. Adaptation
possibilities include development of new plant varieties and crop patterns. changes in irrigation
technology, relocation of coastal infrastructure, and expanded protection of wetlands to
compensate for their potential future damage. Failure to account for adaptation as a viable
response to climate change will cause climate change risks to be overstated.
Adaptation may be difficult in other cases, for example in response to potential damage to
natural ecosystems whose functions are not well understood. Even where adaptation seems
5
problematic, it should not automatically be treated as negligible. Improving the capacity to adapt
where it is weak-as in many poor developing countries-may be the one of the most effective
ways to respond to some climate change risks, at least until the cost of stabilizing atmospheric
concentrations of greenhouse gases falls.
Think internationally. Long-term global climate change risks will not diminish to any
significant degree until total global emissions are reduced. This will require global cooperation,
not just action by today's rich countries. This point deserves to be underscored in light of the
likely future decline in the share of total emissions from advanced industrial countries (currently
about 50 percent) as economic growth proceeds in other areas. The efficacy of any policies the
United States pursues to reduce climate change risks thus will depend on the actions taken by
others.
No simple rules of thumb exist as to how the international burden of emissions control
should ultimately be allocated. Developing countries note that rich countries are responsible for
the vast bulk of emissions to date. They assert that allowing developed countries to maintain high
emissions levels while constraining the growth of emissions in developing countries to reduce
climate change risks would impose unacceptable burdens on the latter countries' economic
development. Developed countries note that most emissions growth will occur in developing
countries, that past economic progress has had at least some global benefits, and that simply
treating all countries as having equal rights to carbon emissions (after adjusting for population
differences) would impose unacceptably high control costs on developed countries. The ongoing
tension over the responsibilities of different parties to the Framework Convention can only be
resolved by negotiation among the parties themselves.
Keep distributional issues in mind. Climate change risks and response capacities vary
with income level. There is also a fundamental asymmetry between the timing of response
costs-which will be borne to a significant extent by the current generation-and the benefits of
reduced climate change-which will largely accrue to future generations. This asymmetry
complicates a comparison of benefits and costs, since we cannot simply compare the costs of
reducing the risk with the value of enjoying the ultimate benefits. Instead, we must assess both
the costs members of the current generation would bear and the strength of our concerns for the
well-being of future generations-not just our own descendants, but all those who would be
vulnerable in the future. These are economically and ethically complex questions about which we
know little and which require a very mature political debate.
Some analysts have argued that intergenerational equity concerns should be incorporated
into climate risk assessments by applying a lower "philosophical" discount rate to the evaluation
of benefits received by future generations, so as to not trivialize these benefits relative to current
costs. A weakness of this approach is that it attempts to reduce a very complex ethical debate to
the value of a single parameter. A more general approach is to carry out the best possible
assessment of the costs to be borne in the short to medium term (taking into account various
effects on productivity and economic growth as well as such benefits as reduced air pollution),
combined with the best possible enumeration of the potential advantages (physical and
economic) of our actions for future generations. Such an approach would give policymakers the
6
information they need to make more explicit, well-informed judgments about the desired level of
risk reduction.
Estimate control costs realistically. As already noted, some people argue that market
inefficiencies are so rife. and opportunities for innovation so plentiful. that emissions abatement
is actually a low-cost proposition that might even benefit the economy. This point of view is in
sharp contrast to the outputs of economic models indicating that stabilizing emissions may cost
as much as several percent of a country's gross domestic product (implying that deeper cuts in
emissions to reduce greenhouse gas concentrations in the atmosphere would be even more
expensive). This divergence of opinion reflects in part a long-standing disagreement about the
cost of improving energy efficiency. Energy analysts have argued that opportunities for large and
low-cost improvements in technical efficiency have been missed because of market failures that
require government action, while economists have generally assumed that most of the supposed
failures to act were actually rational responses to factors such as the likelihood that a new
technology was not going to perform as expected.
Most people who have looked at the debate seem to agree that some low-cost
improvements in energy efficiency exist. Reducing subsidies and other distortions in energy
markets that encourage excess energy use can reduce greenhouse gas emissions while improving
economic and environmental well-being. However, it is open to question whether these
opportunities are substantial compared to, say, the amount of abatement needed to stabilize
greenhouse gas emissions. Against the backdrop of future increases in global energy demand, the
cost of longer-term reductions in greenhouse gas emissions cannot help but rise unless further
progress occurs in the development of nonfossil energy alternatives. In assessing medium-to-
long-term costs, it is a mistake to treat technical progress as a panacea for reducing abatement
costs, or to assume no technical progress.
Another argument offered in the debate over the cost of greenhouse gas emissions
reductions is that our tax system is so distorted that we can use energy taxes to reduce
greenhouse gas emissions and use the proceeds to lower other taxes that hamper economic
growth. However, recent analysis calls into question this "double dividend. While the technical
details can be complicated, the basic point is that broader-based taxes like the income tax tend to
cause less overall economic distortion than narrower-based taxes like energy taxes. Adjusting
other taxes might soften the economic bite of an added carbon tax, but not to negligible levels.
Moreover, any tinkering with the tax system is possible only if politicians take the difficult step
of imposing higher energy taxes in the first place.
Most studies of greenhouse gas abatement costs assume the application of idealized least-
cost policy measures like a comprehensive "emissions trading" program or a comprehensive
carbon tax. The costs of meeting any particular emissions reduction goals likely will be
significantly higher if less well-designed measures are followed. The debate about which
greenhouse gas reduction targets are appropriate cannot be conducted independently of
discussions about what concrete measures can and should be used to actually restrict emissions.
7
POLICY LESSONS
In assessing climate change policies, we must consider complex "portfolios" of actions that
include abating emissions, investing in technical innovations to reduce emissions sources and
increase adaptation capacity, and improving risk assessment. In putting together a portfolio of
policies, it is important to consider the synergies among them, such as the effects of economic
incentives to reduce greenhouse gas emissions on the rate of innovation for new energy sources
and other types of emissions reduction options. Because of the long-term nature of the climate
change problem, the ultimate goals for responding to it also must be long-term. Such a
perspective offers increased opportunities for implementing low-cost strategies to reduce
emissions and promote adaptation opportunities through new investment.
Beyond these general observations, the decision framework developed above has several
implications for how to formulate policy.
Allow flexibility in the timing of cumulative emissions reductions to reduce overall
costs. This approach takes into account the inertia in the economic system that makes rapid
adjustments more costly; for example, it may be cheaper to replace long-lived electricity
generating capacity more slowly while also achieving improved energy efficiency when the
capital is replaced. It also provides increased scope over time for investments in knowledge to
enhance technological change. The cost savings from intertemporal flexibility in meeting long-
term emissions reductions goals depend on the assumptions made, but it appears that savings of
at least 20 percent or more are possible.
Taking this approach does not mean that all or even most policy actions are deferred to
the future. It simply means that the emphasis is placed on sequential decisions that add up to
avoiding unacceptable damage from anthropogenic greenhouse gas emissions. Some actions will
be appropriate in the short term as first steps down the policy path, or to enhance the domestic or
international credibility of policy agreements. Other actions may be more useful later. Unless we
start with a longer-term perspective, it is impossible to consider these tradeoffs.
Incorporate economic incentives into emissions-reduction policy. Such incentives are
crucial to both short- and long-term policy successes because they make emissions limitations
less expensive. Both a large body of analysis and a small but growing body of evidence in areas
other than greenhouse gas control show that incentive-based policies help bring about the lowest-
cost options and stimulate innovative new methods for abatement. (Both Articles 3 and 4 of the
Framework Convention support the concept of such cost-effective policies.)
The main alternatives for incentive-based policies (beyond "no regrets" actions like
reductions in energy subsidies) are carbon taxes on energy sources, and various forms of
"tradable permits" systems. The latter approach would effectively establish quotas on emissions
but allow trade in emissions, so that sources with higher control costs could (in effect) pay
emitters with lower control costs to assume more of the reduction burden. A full discussion of
the pros and cons of different tax and tradable permit schemes is beyond the scope of the paper.
It should be noted, however, that both types of policies have advantages, and neither should be
written off. Moreover, there are many policy combinations that might be relevant in future policy
8
debates (such as a mixture of emissions trading with command and control for different sectors)
whose performance is largely unknown.
Provide opportunities for emissions reductions wherever possible. Given the
international nature of the problem and the need for international action to solve it, policies
should seek to provide abatement opportunities everywhere, not just in the industrialized
countries that constitute the "Annex I" group under the Framework Convention-the group that
already is committed to emissions reductions targets. One example of such opportunities is "joint
implementation" (JI) programs, whereby emitters in, say, the United States, can satisfy any
emissions reductions requirements they face through actions that reduce emissions in non-Annex
I countries. The emissions reductions are achieved through the transfer of technology and
investment to a host country in order to reduce emissions below some established baseline level.
Formal emissions trading programs among sources in countries with quantified emissions
reduction targets also are possible.
A number of analyses indicate that the cost savings from using JI and other forms of
international emissions trading to meet emissions reduction goals could be very large. As with
intertemporal flexibility, the savings depend on the assumptions made, but savings of 50 percent
or more seem possible. At the same time, properly designed JI projects should convey
considerable economic development and environmental benefits to host countries.
A number of practical problems need to be addressed in pursuing JI. There must be
international agreement that such actions count toward meeting emissions reduction
requirements, or else incentives to generate the reductions will remain weak. Procedures must
also be established to ensure that large-scale JI trading volumes could occur without excessive
red tape, while also ensuring that credible emissions reductions occur relative to some well-
defined baseiine. Last but not least, the credibility and appeal of JI to potential host countries in
the developing world must be increased.
Encourage development of the climate change knowledge base and improved
technology for emissions reduction. The flow of technology transfer and new investment
occurring as a matter of course in world markets presents plenty of opportunities for greenhouse
gas limitations. Particularly in a number of developing countries and economies in transition to
market systems, many opportunities exist to improve energy and economic efficiency at the same
time. Even where there are some costs to upgrading capital stock and improving energy
efficiency, they may be more than offset by the gains from improved environmental quality. To
realize these gains requires policymakers worldwide to come to grips with broader handicaps that
thwart economically sound and environmentally sustainable development.
Even if we do all the best things possible to reduce emissions given the current state of
knowledge, economic growth-especially in developing countries-will continue to push up
greenhouse gas emissions and atmospheric concentrations. Unlike limiting pollutant gases such
as sulfur dioxide, for which a variety of technical control options is available, limiting carbon
dioxide emissions requires either reduced energy use (greater energy efficiency) or substitution
of energy sources with lower carbon content. To avoid unacceptable climate change risks
ultimately will require a fundamental change in our energy systems toward much greater reliance
9
on other energy sources-solar, biomass, and possibly nuclear. Such a transition would be too
costly now, given the current state of knowledge. To make the transition economically
manageable will require continued or enhanced investments in basic and applied knowledge.
The government has an inescapable role to play, not just in creating the incentives for
private parties to seek better technologies but also in funding the development of basic
knowledge about technology as well as climate change impacts. At the same time, we must
recognize that our understanding of what policy can actually do to induce climate-friendly
innovation is weak at best. We must also recognize that diverting resources from other areas to
research on low-carbon energy systems may well reduce innovation elsewhere in the economy-
technical progress is not a free good.
Increase the emphasis on adaptation. Adaptation is part of an optimal response strategy
in any event. Indeed, it is the means of transcending the narrow concern about our vulnerability
to climate change from greenhouse gas emissions to a broader concern with global-scale changes
that place stress on natural systems and pose threats to human well-being. Furthering human
capacity to adapt to climate change entails investment in improved understanding of the options
and their international diffusion. It also entails adjusting economic and other distortions that limit
adaptation potential (such as assistance programs that subsidize coastal development or water
use). In many cases, the best climate policy may have little to do with greenhouse gases or
climate per se, and much more to do with developing better basic social infrastructure for natural
resource conservation and use and public health protection.
CONCLUDING REMARKS: THE U.S. DRAFT PROTOCOL
The "U.S. Draft Protocol Framework" which the Clinton Administration issued on January 17,
1997 embraces a number of policy ideas that, if implemented, could significantly enhance the
cost-effectiveness with which any emissions reduction targets are achieved. To comply, countries
agreeing to emissions limits would be allowed to average emissions over a number of years
(though a precise number is not proposed in the framework). They would be able to trade
emissions internally and internationally (not just within specified groups, like the European
Union), and they would be able to bank emissions for future use. To smooth out the cost of
emissions reductions over time, they could borrow from the future to meet current obligations.
(Both unspecified limits on volumes borrowed and a significant (20 percent) "repayment
premium" on borrowed emissions allowances are included to help ensure that the achievement of
tours
long-term emissions reductions goals would not be undermined. However, the use of both tools
for this purpose is redundant, and the high repayment premium will cause uneconomically early oil
YEST &
emissions reductions.)
COUNTY 4am Today 10.1
Developing countries would be encouraged to participate in several ways. Joint
implementation with countries not yet accepting national emissions targets would be fully
sanctioned, including fully usable and transferable credits for emissions reductions. In addition,
developing countries would be required to identify and adopt "no regrets" measures for
greenhouse gas reductions, and all countries would be required to "facilitate investment in
climate-friendly technologies." although these important action areas are not spelled out in any
10
detail. Emissions reporting procedures and practices also would be strengthened. Finally, while
no future emissions targets for developing countries are specified, the proposal does call (in
Article 16) for all countries to accept some quantified emissions limitation targets (which could
be different from the targets accepted by developed countries) by a particular future date (2005 is
suggested in the draft). This proposal is consistent with the idea that comprehensive participation
ultimately is required for success in avoiding unacceptable impacts of climate change, though it
is bound to be controversial among developing countries who do not currently have any
emissions limitation targets.
In establishing international emissions targets among industrialized countries (a new
"Annex A" group that includes the current Annex I countries), the U.S. proposal calls for all such
countries to reduce their emissions over time by common (not yet specified) percentages of their
respective baseline levels. Other countries that either have achieved substantially greater energy
efficiency improvements earlier or believe that such reductions may simply be too costly in light
of their fossil fuel use hotly contest this approach. It remains to be seen whether the United States
can secure agreement for its approach or will be forced to modify it.
The U.S. Administration has stated that it will accept and support legally binding
emissions reductions. The draft protocol does not specify any concrete emissions targets
(although it does call for periodic review of whatever targets are established). The actual targets
remain to be negotiated, and the proposal does not indicate what criteria should be used to
determine acceptable targets from the U.S. perspective.
Last but not least, the draft protocol does little to address adaptation. This neglect reflects
not a weakness in the proposal so much as a broader weakness in the Framework Convention,
which has viewed adaptation as an individual country concern. Adaptation must gain greater
prominence in the debate over climate policies.
The U.S. draft protocol is an important contribution to the negotiating process and to
domestic debate over U.S. climate policies. However, further discussion of the issues identified
above-and of the analyses the Administration and others are performing to determine what it
will cost to meet different emissions reductions targets-is a prerequisite to building broader
understanding of climate change risks and policies, and political support for a new climate
agreement.
FURTHER READING
For a broad overview of all climate change issues. some perusal of the three volumes of the IPCC
Second Assessment Report is essential. All three have the main heading "Climate Change 1995"
and the following subtitles: "The Science of Climate Change" (Working Group I), "Impacts,
Adaptations and Mitigation of Climate Change: Scientific-Technical Analysis" (Working Group
II), and "Economic and Social Dimensions of Climate Change" (Working Group III). Each
volume contains a Summary for Policymakers that is quite informative (though not a perfect
guide to the contents of the volume), and the first two volumes contain Technical Summaries as
well. The main body of each report contains a wealth of information and analysis, though some
11
of it is quite technical and, in some cases, a little dated. The reports are published by Cambridge
University Press (fax: 212-691-3239). Find out more about the IPCC at
http://www.unep.ch/ipcc/ipcc-0.html. Find out more about RFF's Climate Economics and Policy
Program at http://www.rff.org.
12
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Check Against Delivery
Rosina
The World Bank Group
Statement By
Mr. James D. Wolfensohn
President
At the United Nations General Assembly
Special Session
"Towards Global Sustainability
45
June 25, 1997
STRON
James D. Wolfensohn
Remarks to the United Nations Special Session
June 25th 1997
TOWARDS GLOBAL SUSTAINABILITY
1. Mr. President, Mr. Secretary-General, Distinguished Heads of State, National
Delegates, and colleagues from the U.N. system.
2 Five years ago in Rio, governments from around the world came together and
committed themselves to a more equitable and sustainable world.
3. Five years later the picture is very mixed. As an institution dedicated to
reducing poverty, we at the Bank are more aware than ever of the continuing link
berween the degrading environment and the poverty still afflicting so many of the
world's people. Less than a quarter of the world's people consume three-quarters
of its raw materials, while 3 billion people still live on less than $2 a day.
4. At the global level we have not achieved our objectives.
5. Today, however, at the national level, we have seen a highly positive shift
toward environmental responsibility, with a third of our client countries
implementing national environmental strategies.
6. On a positive note, the GEF has become an effective financing mechanism to
address global environmental issues. It must be replenished generously this year.
The World Bank. as an implementing agency for the GEF and Montreal Protocol
and in its own lending portfolio, has worked to help countries fulfill their global
commitments, but is committed to doing more, as I believe we all must. Today I
will-outline a plan of action in 5 areas where I believe the Bank - working in
partnership with many of you here - can make a real difference.
7. First on Climate Change. Progress has clearly been inadequate. Only 3 of
the OECD countries are likely to reach their non-binding commitments under the
Convention for the year 2000. II is essential that at the Kyoto meeting later this
year industrial countries make a strong commiment to significantly reduce
greenhouse gas emissions - and that these commitments be implemented.
8. Continued global warming is in nobody's interest but the simple facts of the
matter are that the developing countries will suffer the most damage. and their
poor will be at an even greater disadvantage. I see the Bank's role in Climate
Change as providing every opportunity to developing countries to benefit from the
huge investment the OECD must make in reducing climate change.
ENVIRONMEN:
CKK
9. I believe that progress would be facilitated if Joint Implementation with crediting
were permitted under the Convention. I recognize that this is a sensitive issue. but I
believe the gains for both the global environment and our client countries could be
substantial Under this voluntary mechanism, which need not imply aggregate
emission limitations for developing countries. tens of billion of dollars could be saved
annually by 2010. Of course, the savings must be shared equitably between our client
countries and the OECD countries. Developing countries could apply these savings,
as they choose, to facilitate expanded development financing and technology transfer.
These savings must also result in larger binding commitments to reduce emissions on
the part of industrial countries.
10. To help make these gains a reality, the World Bank would be willing to launch
a Carbon Investment Fund, should Parties to the Convention find this helpful.
11. In addition. to promote renewable energy. we are exploring a broader
strategic partnership with the GEF and other financiers that would move us
towards a large-scale program of renewable energy investment
12. Second, on biodiversity; we simply won't succeed unless environmental
values can be reflected in the marketplace.
13. With this in mind. the Bank is creating "Market Transformation Initiatives"
with the private sector and NGOs to move the forest and marine products
industries to a truly sustainable base.
14. As a first step, I am inviting the CEOs of some of the world's leading forest
products companies and conservation organizations to join forces with the Bank to
arrest the current unacceptable rate of forest degradation.
15. I am also pleased to announce a global alliance between the Bank and WWF
to help arrest the loss of forests globally. We are committed to work together, and
with others. towards achieving by the year 2000 a representative network of
protected areas amounting 10 at least 10% of each of the world's forest types.
And, in Bank client countries we will strive to achieve an additional 50 million
hectares of forest ecosystems under strict conservation, and an additional 200
million hectares of tropical, temperate and boreal forests under genuinely
sustainable management with independent certification, by the year 2005.
16. Third, let Wht them to ozone depletion - the major bright spot in dealing with
global environmental issues - but even here, much more needs to be done.
17. A major remaining challenge is to eliminate CFC and other ozone-depleting
substance production in Russia. This accounts for nearly half of remaining CFC
production world wide and, through illegal smuggling to other countries, is
threatening to undermine the effectiveness of the Montreal Protocol.
ENVIRONMENT
are
18. The Bank, in collaboration with the Russian CFC producers and government,
has developed a program to eliminate CFC production in Russia by 2000.
19. We now need to complete the necessary fund raising, and we seek your
support in this critical endeavor.
20. Fourth, addressing desertification is essential for poverty reduction and
food security in developing countries.
21. The Bank is already the largest financier of drylands investment, but we can
and must do more.
22. We have embarked upon a revitalized Rural Strategy - in which the links
between poverty and land degradation are given special emphasis. We are helping
introduce improved agricultural techniques to stem the spread of further
desertification, and to restore degraded land.
23. We offer to assist the Desertification Convention - in partnership with others
- in establishing mechanisms for mobilizing financing, and coordinating
implementation.
24. Fifth, the water crisis. Twenty countries now are water scarce or stressed,
and the number will double by 2020.
25. Developing countries will need to invest about US $600 billion over the next
decade on water. The Bank expects to lend about US $35 billion during this
period, following the Dublin principles.
26. The Global Water Partnership offers an opportunity to solve water issues in a
more holistic way, and to raise additional financial resources. We are committed
to make this work, and to continue working in parmership on the Regional Seas
Programs.
27. In all these areas, the World Bank will work in partnerships with others.
28. We will expand our work with the private sector a promote practical business
opportunities for sustainable development
29. We will join others to promote higher standards of environmental and social
performance for private and public investments around the world. As an example,
with the World Conservarion Union. we are launching an International Advisory
Commission on Large Dams to help raise standards for all large dams.
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NO.
30. I recognize that we must work harder to make absolutely sure that our OWN
house is in order.
31. With this in mind I would like to inform you of two important changes in
cur own organization.
First, we will be consolidating the supervision of our environmental and social
activities across the entire World Bank Group including IFC and MIGA With
our private sector operations assuming greater prominence, it is vital that all of
our activities have the same high standards.
Second, we will be establishing a stronger system of compliance monitoring
for environmental policies within our own operations. Details will be
announced in the near funure.
32. Mr. President, Mr. Secretary-General, Distinguished Heads of State and
colleagues, the growing global problems of climare change, biodiversity, forest
loss, desertification and water are seriously threatening the long-term development
of many of our client countries - with the poor paying the highest price.
33. These are not fringe activities. They are central LO meeting human needs and
reducing poverty. I wholeheartedly commit the Bank to do all it can to forge a global
partnership to promote equitable approaches to global environmental issues, and to do
so quickly. Time is not on our side. This agenda cannot afford to wait.