November 9, 2000

Scenesetter for the
Climate Change Conference,
The Hague, Netherlands, November 13 - 24, 2000

U.S. delegation head Frank E. Loy meets the press at a Climate Change scenesetter November 9.

Frank E. Loy, Under Secretary of State for Global Affairs;
Roger Ballentine, Deputy Assistant to the President for Environmental Initiatives;
David B. Sandalow, Assistant Secretary of State for Oceans and International and Environmental and Scientific Affairs (OES)

     MR. LOY: Good morning. We leave next week for The Hague to embark on a very serious and important task, and that is to try to address meaningfully and, hopefully, with considerable success, the problem of climate change. A fair question is to ask what do we expect there, and what do we want to achieve there. Let's just name some of the things that we think we need to achieve.

     First of all, we need to make progress. This is a real issue, an issue that threatens the very planet we live on. We have to make progress at tackling the causes that bring about the climate change.

     The second thing I think we need to be sure is that whatever we achieve at The Hague has what I would call environmental integrity. The negotiations at The Hague have important -- very important economic consequences, but at the heart it is an environmental agreement. We have to make sure that in the process of our negotiation we serve the environment, we reduce the risk of climate change, we reduce the emissions that cause that.

     Third, I think we have to be attentive to the costs of achieving that environmental integrity. We have always stressed, and we will stress again, that what we achieve at The Hague needs to be cost- effective.

     And fourth, I think we need to make sure that the agreement is effective in the sense that it is global. We fully recognize, of course, that the developed countries, including specifically the United States, are the leading contributors to the greenhouse gas emissions that cause climate change. We also recognize, however, that without the contribution of all of the countries, including developing countries, we're not going to be able to solve the problem of greenhouse gas emissions; we're not going to be able to solve the problem of the causes of climate change.

     Right today, as many of you may know, some 44 percent of all of the emissions, greenhouse gas emissions, come from developing countries, and in the next 15 to 20 years, that number will be over 50 percent.

     So we need to find a way to include all in the effort to combat that.

     Let me be a little more specific on the subject of environmental integrity because it is so important to us. We think that what we have been trying to achieve does achieve and is designed to achieve environmental integrity.

     First of all, we have been very strong in making sure that all the countries have the capability and do the measuring and the monitoring of their emissions so we actually know what are the facts. And I might say, we have provided substantial funds to some countries that needed help in permitting them to undertake that measuring and monitoring functions.

     Secondly, I think we have been very clear all the time that we need to have a compliance regime that is effective. We need to make sure that if countries undertake these serious and important obligations, that there are incentives for them to comply with those, and that there are consequences, binding consequences, if they don't comply. We don't want penalties. We're not interested in punishing everyone, but want to provide incentives for compliance, and we have been very strong on that. We think that's part of the environmental integrity that I referred to.

     Third, we think we need to follow through on the architecture that was devised at Kyoto, which says that you need to bring these emissions down, but we need to be flexible in the methods that are available to do so. A key method that was contemplated at Kyoto, and that we believe is necessary in order to achieve maximum environmental result, are the market mechanisms, sometimes called the Kyoto mechanisms. They involve emissions trading, they involve something called clean development mechanism, they involve something called joint implementation. The technical names aren't important. What is important is that we find ways, through these mechanisms, whereby the most tons are reduced for the least amount of money. And the reason for that is fairly simple. In our opinion, the less expensive things are -- and mechanisms tend to reduce the cost -- the less expensive it is to reduce a ton of carbon, the more tons of carbon you're going to reduce. We are going to want to work very hard to make sure that these mechanisms are included and are included without being hobbled or without being restricted.

     Another aspect of our sense of trying to get environmental integrity into the agreement is our belief that the agreement must have an appropriate role for what we call sinks, the process of sequestering carbon from the atmosphere into our forests, our soils, our agricultural lands.

     It is a fact that the greenhouse casts concentrations that cause a climate change to come about because of greenhouse gasses that are sitting there, some of which are emitted by our industrial society, the burning of fossil fuels, and some of which are emitted by natural terrestrial activity such as burning of a forest, and some of which are sequestered, or pulled down out of the atmosphere by things like growing forest.

     These terrestrial activities are a very important part of the carbon cycle. And we have to find a way whereby we provide incentives to nations of the world to pull those carbon concentrations into the soil and into the forests and to reduce somewhat the amount that is emitted from the forests and the soils. So sinks are an important part, in our opinion, of the way you get results, the way you get environmental integrity.

     I think most of you know that some countries have questioned whether the mechanisms and the sinks are in fact a way that we have of not taking actions here at home in the area of reducing our own emissions -- our own emissions from our use of fossil fuels. And somehow or other the notion has been spread that we are not taking effective action at home. I want to say as clearly as I can, that is not right; that is not the correct story.

     And what I'd like to do is I'd like to ask Roger Ballentine to speak a little bit on exactly what is happening in the United States, and about some of the results that we've achieved.

     Can you do that now, Roger?

     MR. BALLENTINE: Thank you, Frank. I appreciate the opportunity to be here.

     Let me just say at the outset what I hope has become perfectly clear over the last eight years, and that is that both the president and the vice president are enormously committed to addressing the challenge of climate change.

     They're committed to this both because they feel quite strongly that this is one of the premier challenges that we're going to face in the 21st century, and because this is a problem that not only must we address; we can address. And we can do it in a way that is going to help not only grow our economy but will grow economies around the world. We think there are real opportunities here, both domestically and in the developing world, for countries to adopt and use new technologies that are going to create jobs, which are going to provide a better quality of life, all at the same time while mitigating greenhouse gas emissions.

     We feel like we've put this into effect here domestically already. And the macro effect of this, before I give you some of the specifics, I think, has manifested itself quite clearly over the last several years.

     I'll tell you what I mean. During 1998 and 1999 alone, the U.S. economy grew by 8 percent. Our greenhouse gas emissions during that time grew by less than 1 percent. What that shows is that there is not a direct connection between growing one's economy, creating jobs, and emitting greenhouse gases. The president and the vice president believe very strongly that we have now demonstrated that you can do both. You can have a clean environment, you can reduce greenhouse gas emissions, and you can grow your economy. We've proven that here.

     We think there are even greater opportunities for other countries and developing countries that have an opportunity to build for the first time infrastructure using the best available technologies and practices and knowledge -- that there are real opportunities for the rest of the world to enjoy economic growth while controlling greenhouse gas emissions. And as Frank Loy said, it is both an environmental imperative on our part and in our view, as well as an economic opportunity on the part of the developing world, for there to be a truly global response to climate change.

     Let me tell you some of the specific things that we're doing here at home. And as Frank said, the importance, for the purposes of this conversation, as to why we're taking these actions at home and the effect of taking these actions at home go to some of the misconceptions that Frank spoke of. There are some who I've heard -- and I've been asked the question, "Why is it that the United States is insisting on unlimited trading? Doesn't that mean that you plan on making 100 percent of your reductions through trading?" That is absolutely and without controversy incorrect. And part of the reason that's incorrect are some of the examples I'm about to give you.

     We've taken a host of action here at home which will -- which is currently under way and which will in fact contribute to the United States meeting any target that it takes on. And therefore there will be significant domestic action.

     For example, the president last summer issued an executive order calling on the United States to set a goal of tripling the use of biomass and bio-based energy in the United States by 2010, 2010 being smack dab in the middle of the Kyoto compliance period.

     We have since, over the last the last year, put together a significant government effort to work in public-private partnerships and otherwise in research to reach this goal. We fully intend to reach this goal. And reaching that goal in 2010 will be the equivalent of -- will get us the equivalent of 100 million metric tons of greenhouse gas emissions reductions. That's close right there to a fifth of Kyoto target. That's just one example.

     Some of the domestic action in the U.S. is taking place solely in the private sector. Ford and GM, for example, recently announced commitments to improving the fuel economy of their sport utility vehicle fleet by 15 to 25 percent -- by 25. The impact of that ultimately on our domestic emissions alone is extraordinarily significant and could be 100 million metric tons by 2020.

     We have new efficiency standards going into place which will require increased efficiency in some of the major energy-consuming U.S. home appliances, like refrigerators and clothes washers. That alone -- we're looking at 22 million metric tons by 2010.

     This list goes on. We have a -- EPA has a methane reduction program, methane being a very potent greenhouse gas, as many of you know. By 2010, we expect that program to produce 120 million metric tons cumulative emission reductions.

     There is a host of things going on in the United States. We are doing these things not because particularly that we're trying to anticipate and meet a Kyoto target; we're doing it because the United States takes the issue of climate change seriously, because the U.S. private sector recognizes that this is a serious problem that requires responses; because we believe that developing renewable energy sources, increasing the efficiency with which we consume energy in this country are things that are going be good for clean air, they're going to be good for the health of our people, they're going to be good for our economy, and they are going to help us reduce our greenhouse gas emissions in a way that will allow us to take significant domestic actions as part of any international agreement that we committ ourselves to. And as Frank said, we're committed to the Kyoto process, and we look forward to success at The Hague.

     Frank, you want to --

     MR. LOY: Let me just speak to one more issue which has been raised frequently, and that is the question whether whatever is negotiated at The Hague -- whether that is likely to be ratified by the U.S. and whether the Senate of the United States is going to give its consent to that ratification. That question has arisen frequently, and I think it's important to think that through.

     I think we start off with a proposition which is very critical in thinking about this, and that is that there is huge bipartisan support in the United States for the proposition that climate change is a real problem and that the people expect -- the American people expect the government to address it meaningfully.

     The science on this has become harder and harder, and we have now had a draft report which -- of the IPCC, which educates us somewhat further. We will not be able to comment on that until we actually see the final official report. But it's clear that the science is getting harder and harder, and clearer and clearer, and that the argument that one heard two or three years ago that somehow or other the jury is out as to whether this phenomenon is taking place or not -- that argument is hardly heard anymore by -- from responsible quarters. And I would say also that the notion -- the question whether the human activity contributes to the warming -- that also is becoming clearer and clearer. And so that contributes to the American people's insistence that there be responses.

     The business community has changed its attitude on this considerably in the United States as more and more has been learned about the science. Three years ago, you did not find any major business entities that were saying climate change is real; it is human-induced; we, the business community are part of the problem, we've got to address it, we've got to take action. Many, many, many of our very largest companies in all sectors, the oil sector, the automobile sector, the electric power sector, the industrial sector, are saying exactly that today. That is very new and, I think, a very significant change.

     All of that, I think, is leading to a national reevaluation of what we, the United States, must do about that. And I think that that will continue in the next year or years.

     If the elements that we are seeking in the negotiations at the Hague -- the elements of environmental integrity, of cost- effectiveness, of a broad-based effort that includes in some fashion the key developing countries -- if those elements are included in the agreement that we achieve in these negotiations, then it seems to me very plausible, very likely, almost certain that this agreement will get a very full hearing, a very fair hearing, and will have a very substantial chance of being ratified.

     Maybe we ought to stop the presentation there and take your questions.

     MODERATOR: Questions please. Do you have a question?

     Q Yes, I do. Thank you. Tracy Watson (sp) from USA Today.

     I was wondering if some members of the administration's team would comment on how the uncertainty about the presidential elections might affect negotiations if things are not settled starting Monday.

     MR. LOY: Well, the question is not a total surprise actually. (Laughter.)

     MR. LOY: Let me make a couple of points. First of all, we represent the president and the vice president of the United States, and as Roger has said, they are very determined to address climate change effectively and seriously. So we intend to carry on the negotiating efforts that we have been planning all along, and we do not think that they will be affected by the uncertainty. Our negotiations -- our plans are based on the kind of bipartisan need to address climate change, and by these elements that I described; the elements of cost effectiveness, of environmental integrity, of broad participation. I think those will not change at all by reason of the uncertainty.

     Obviously, the question will be on the minds of many, and we will have the question you asked posed to us by others, I'm sure. But our sense is that we have thought this thing through very carefully, we are addressing it responsibly; there's no reason for us to change our course.

     MODERATOR: Additional questions?

     Sir?

     Q My name is Chris Nessel (sp). I'm a reporter with the German business daily Handelsblatt. Has the administration been approached by members of the Bush team already in this -- talking about this conference coming up? Because we heard reports that there has already been a task force built by the Bush team dealing with climate change issues.

     MR. LOY: We have not been approached.

     MODERATOR: Any more questions?

     The gentlemen in back over here. We'll get back to you.

     Q Kioshi Ando (ph) of Nikkei newspaper. You mentioned about the ratification of Kyoto protocol. But do you think the new Senate after this election will agree to ratification very soon?

     MR. BALLENTINE: Let me answer the question this way, and then Frank may want to add to it. The United States has stated very clearly that we're committed to negotiating a Kyoto treaty that has environmental integrity and is cost effective, and we don't put any artificial time deadline on when we're going to succeed in doing that. We're committed to doing it.

     We know a number of countries have called for ratification of the treaty by 2002. We've rejected that, not because we necessarily think it's too soon, but we think it's the wrong question; we think it's arbitrary. The question is, how do we get the work done we need to do to have a treaty that we can ratify.

     So in that sense, I think it's really not appropriate for us to even speculate about the makeup of the Senate and how it's changing and how that will affect ratification.

     We're focused on getting the rules right; we're focused on the work remaining to be done, which is considerable. And we're confident that once we finish that work and then we're successful in negotiating a treaty that has environmental integrity, that is cost effective, that whatever Senate we have at that time, whatever the posture is, they're going to agree and ratify this treaty. But I'd rather not speculate any specifics.

     Q On which issues do you expect the major, say, battle grounds, during the negotiations at The Hague? Could you specify on that a little bit, like the things that you might want to focus on because you think they're extremely tricky?

     MR. LOY: I think one area that we expect -- which is not yet resolved and where we have much work to do, is on making the mechanisms that I described a moment ago, making them effective, usable by the parties that would use them, and making them -- providing them without limitations. The Europeans have made it clear that they want limitations on some of these, and we have been very clear that we think that's a mistake. And we have to talk that over.

     A second area that is not fully developed, where we need to make progress, is in the area of the role of sinks. I mentioned earlier why we think sinks are an important part of the picture. It's a complicated issues, although it's remarkable at how measurable sinks are; how measurable it is to the amount of emission or sequestration that takes place in a piece of land or in a particular forest. But it is a complicated issue to deal with, and it is by no means resolved.

     I might say third, quite aside from any -- I don't want to talk about battle grounds; I'm assuming this is going to go quite smoothly. But quite aside from issues of that sort, we have the problem of complexity.

     Now, this is a complicated agreement. It must be; it's trying to deal with very fundamental aspects of our industrialized society. And so one of the things we have to worry about is moving on and getting the various aspects of this agreed in a very short time. And we very much hope that we can do that.

     Let me just make one more comment about one other problem area that we have encountered, and that is the insistence on the part of some OPEC countries that there be some form of compensation for the losses or potential losses or diminution of their sales of petroleum that would come from the measures that industrialized and other countries take to reduce the use of fossil fuels. Our sense is that the notion of paying compensation in that kind of a situation is not a possibility.

     We understand the problem of countries such as Saudi Arabia that needs to -- that has 90 percent of its earnings coming from petroleum, and that is concerned about the long-term future of petroleum. Our sense is that we ought to talk about that; that's a legitimate subject for conversation and it's a legitimate subject for trying to see if one can address a problem such as Saudi Arabia's. What is not appropriate, and what I think we must be -- we must guard against, is that in an effort to resolve that problem, the rest of the negotiations are slowed down or come to a halt. That, it seems to us to be inappropriate.

     And we are prepared to talk to the Saudis and others about issues of -- about possible responses such as addressing the problem of their extreme concentration, possibly diversifying their economy; also possibly talking about a subject they've raised and that is the subsidies some countries provide for -- environmentally harmful subsidies for coal and other very environmentally problematic fuels.

     I think all of those are appropriate subjects to put on the table. It is going to have to be an area that we have to discuss. And on the other hand, our sense is that the compensation proposal is not one that we want to pursue.

     One other area where I think -- it's not a battleground but it is an area that we have to resolve, has to do with the particular role of Europe in connection with what is called "the bubble." Europe has a -- has built a bubble-concept which we think has -- is a perfectly appropriate use of the rules of the Kyoto protocol, but it does raise some problems and I think maybe I'd ask David to comment on some of the views about that, because that's going to be an area of discussion that we will definitely have in response to your question.

     MR. SANDALOW: Thank you. Thank you, Frank.

     With respect to the EU bubble, as Undersecretary Loy has said, the United States strongly supports the right of countries to participate in a bubble under the protocol but has concerns with respect to the rules that would apply to the bubble. And we will be insisting in this negotiation that the bubble receive equal treatment, and that countries who participate in a bubble don't receive special treatment as a consequence of their participation under the bubble.

     This has been an issue with respect to rules concerning compliance under the protocol, with respect to rules concerning domestic action under the protocol, and with respect to rules concerning airline emissions under the protocol. And we can elaborate on all those if you're interested.

     Let me just mention one other item that will be discussed at COP-6, and that is generally the rules for compliance under the protocol. There is a significant set of discussions underway about exactly what the rules will be for compliance under the Kyoto Protocol. The United States has taken a tough stand in favor of legally binding consequences, and we believe that if a country fails to meet its emission-reduction obligations under the protocol, it should be required to make up that difference and more during the next budget period. And we'll be going to the Hague insisting on that provision as we go forward.

     Thanks.

     MODERATOR: Further questions?

     If there are no more questions, I'd ask you if any of you have any last thoughts.

     Oh, we have one?

     Q Just one last question: Since this negotiation has been going on for such a long time and it's real complex, as you said, and there have been a lot of discussions going on the whole time before, and now you're going to go to the Hague, do you expect the negotiations to succeed in terms of having a protocol being signed very soon that will not lead to major upheavals among participants, especially the Europeans?

     MR. LOY: Well, as Roger said, our focus is to make progress at The Hague and to resolve as many of the outstanding problems. To the extent we do that, we of course come closer to a ratifiable instrument.

     And I think -- let me be kind of candid. My sense is that what is needed to achieve that is pragmatism and possibly occasionally a little less ideology.

     This is a complicated agreement that is supposed to set the architecture of an approach to deal with climate change for many, many, many years. The problem is a hundred-year problem, and this architecture is supposed to get us launched there.

     We have to get that architecture right. And in order to do that, I think we have to take into account all the fundamental interests of the various parties -- real interests, real interests. And we ought not to import into that sort of ideological concepts that don't serve those interests.

     And I think the architecture that we're talking about is perhaps even more important than the exact results in the very first period, because we have to -- if this agreement is going to make sense, it has to last. It has to set us on the right path.

     In our opinion, for example, getting incentives to the industrial community, to the business community, to make the investments that will clean their -- make their emissions -- reduce their emissions and make their way of handling their business cleaner. That's a very important part of the architecture. That's a very important part. That's going to last for a long time. That's going to set us on the right road, so that our sense is, if we approach this in a very pragmatic way, problem-solving way, we will get quite far. And that is what we ought to seek to achieve.

     MODERATOR: Another question.

     Q Just a quick follow-up. Could you level a little bit more on what you call "ideological arguments," especially from the European side -- what you mean by that? Thank you.

     MR. LOY: Well, I will mention one or maybe two things I have in mind.

     One is the discussion that Roger and I both alluded to, and that is the domestic action versus the use of mechanisms. That seems to us to be a totally artificial distinction. Our job is not to use domestic action or to use sinks. Our job is to reduce emissions. And the whole concept of Kyoto is that we have a target, and that is, it's important for the planet that we meet that target. And the concept of Kyoto is that the way we get there is up to each nation. And I think that -- that's the way we read the pact that was made. And I think that pact makes sense.

     And so the notion that somehow or other it is a moral imperative that we handle it one way or another, or that there be limitations which in fact will make it harder to use the mechanisms, that seems to us to be possibly more ideologically based that it is practically based.

     And somewhat the same with sinks. We want only to use sinks that actually reduce the emission concentrations, but if we can find ways to do that by the use of sinks as opposed to by reducing emissions, they have the same effect on the climate. If we can find ways to do that, do that in a quantifiable, measurable, monitorable way, then our sense is we ought to do that. And we don't know yet to what extent the Europeans and others will agree with that, but we are concerned that we not be met with the same kind of response as I just described, with a mechanism that somehow or other this way of reducing is good, and this way of reducing is not good. That seems to us to be not helpful.

     MODERATOR: If there are no more questions, any more last words?

     Thank you very much, and have a good day.

END.

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