November 15, 2000

Mr. David B. Sandalow, Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs (OES) and Ambassador Mark G. Hambley, U.S. Special Negotiator on Climate Change and David Gardiner, Executive Director of the White House Climate Change Task Force

DAVID SANDALOW: Thank you. This is the third day of a two-week negotiation and negotiators are settling in for serious discussions on a broad range of technical topics before them. We continue to be encouraged by the seriousness with which delegations are coming to these talks and the evident desire on the part of so many nations to reach a favorable outcome by the end of these negotiations. I thought I would talk today specifically about the topic of international emissions trading, which was one of the significant achievements of the Kyoto Protocol. To be specific, the Kyoto Protocol recognizes international emissions trading as an important tool for fighting global warming. One of the important topics the negotiators are discussing in these negotiations during these two weeks is the rules that apply to international emissions trading. The United States has strongly supported international emissions trading as a tool for fighting global warming and continues to do so. We do that for two reasons. First because it helps us to protect the environment. And second because it does so at a lower cost than an approach that failed to include emissions trading. In the United States we have had an enormously successful experience with this tool. Perhaps the leading example is our acid rain program, which dates to our 1990 Clean Air Act. Under that program emissions of sulfur dioxide have been cut faster and cheaper than anyone predicted at the time. We have also learned in the course of our experience with emissions trading that this tool helps to promote innovation in the fight against pollution. It does that because it gives companies, and it can give countries, the incentive to continue improving their environmental performance below specific regulatory levels. There is strong support for emissions trading among a broad range of experts. Over 2000 economists, including six Nobel Laureates, have signed a statement endorsing market-based policies such as emissions trading as the most efficient approach to slowing climate change. Specifically, these economists stated that, "In order for the world to achieve its climate objectives at minimum costs, a cooperative approach among nations is required, such as international emissions trading." We believe that the rules that we shape here can help us spend our dollars, euros, and yen to maximum advantage in the fight against global warming.

MARK HAMBLEY: Let me just make a brief comment about the ongoing negotiations. Certainly all the various groups are now fully engaged in trying to work through their texts. Some are moving at a little faster pace than others. I guess that is to be expected. I think the general point I would like to make is that the atmosphere, as I indicated on Monday (Nov. 13), is very important to assess. The atmosphere at the moment continues to be very positive. I am very struck by the commitment of delegates from almost every country in their efforts to try to move forward across some very difficult issues to try to make sure that we reach agreement by the end of next week. So as we are now in the middle of the first week, we look forward with some anticipation. There are a lot of difficulties still, but nonetheless there is a lot of anticipation that we hopefully will be able to meet our objectives by the end of next week.

DAVID GARDINER: I would just like to add one point to what David Sandalow said about emissions trading. One of the very exciting things that is going on in the area of emissions trading is that in fact many people in the private sector are already moving ahead with emissions trading. We have with us today a press release about a trade that occurred today between a company in the United States called Murphy Oil and a company in Canada called Transalta in which the U.S. company purchased an emission reduction from the Canadian company. This is just one example of lots of emissions trades that are beginning to occur not just in North America, but elsewhere as well. It is another sign, I think, of the interest the business community has in engaging in emissions trading because it offers all the advantages that David Sandalow identified in terms of being cost effective in terms of achieving our emission reductions.

QUESTIONS:

QUESTION/Matt Dailey, Reuters: I would like to take attention back to European Union statements earlier today. They welcomed the U.S. proposals on sinks that were presented yesterday. They indicated there may be room for a compromise on that issue. Would the U.S. be willing to compromise on an issue that might lead to real carbon emission cuts in order to push forward its sinks proposal?

SANDALOW: Thank you. We have already done so. Our phase-in proposal which the European Union is commenting on is an indication of our flexibility on this topic. We welcome the favorable reception from the European Union. We believe that we should work seriously over the course of the next week to shape a compromise proposal that works for all parties.

Question inaudible:

SANDALOW: We have indicated our flexibility on the specific issue of carbon sinks and that is an important tool for fighting global warming.

QUESTION/Yoh Satoh, Asahi Shimbun: Yesterday you proposed a kind of a basic structure for accounting, a new system I think. Do you think you can reach an agreement��(inaudible)? You made a proposal for a structural accounting system. Do you think that other countries can agree with it?

SANDALOW: I certainly hope so and the immediately preceding questioner reported favorable reaction from the European Union. If that type of favorable reaction is forthcoming from other delegations, then we should be able to reach a result that works for all parties.

QUESTION: How important is it for you to get an agreement by other countries?

SANDALOW: It is very important to the United States to have a decision at this meeting that recognizes the important role of forests and farmlands in fighting climate change.

QUESTION/German Radio: Is there any progress in the discussions about a cap between the U.S. and the EU?

SANDALOW: Discussions are ongoing on a range of issues and that is one of them.

QUESTION/Le Figaro: Emissions trading. One key point for the Europeans is that an international system would need an international referee and very strict rules, including penalties. What are your views about this? Can you elaborate a little bit?

SANDALOW: We strongly agree that this international system requires strict accounting rules and legally binding consequences. The United States has proposed both. They are important for making international emissions trading workable.

QUESTION: I am talking about an international institution that would play the role of referee. What do you have in mind? Who could play this key role?

SANDALOW: There are very important discussions underway here on compliance and the United States has supported a compliance regime for this agreement that would include a facilitation branch and an enforcement branch. The first body would help countries who are out of compliance or who may be headed in that direction. The second would consider a range of enforcement issues.

QUESTION/Andy Revkin, New York Times: Do you anticipate that the U.S. will be willing to come out of here with a quantitative breakdown on how much you can do at home versus how much you do abroad, or is that not possible? Are you 60/40, 50/50, 70/30 or whatever it is�� That's usually what ends up from negotiations; you end up with some point. Is that even in the realm of what you are going to be able to accept?

SANDALOW: Thank you for asking. We are strongly opposed to quantitative restrictions on the use of the market-based mechanisms such as emissions trading and the Clean Development Mechanism. In our view that would only increase costs, reduce incentives for innovation, and substantially complicate efforts to move forward with this protocol. We do not have the luxury of wasting dollars, euros and yen in the fight against climate change. I would add that the United States is already taking strong domestic action to fight global warming. Our position on this issue does not reflect any lack of commitment to domestic action. Indeed, we have a deep commitment to domestic action to reduce greenhouse gases. The efforts that we are already making are paying off. In the past two years, the United States economy has grown by eight percent, but our emissions of greenhouse gases have grown by only one percent. We are starting to prove that our economic growth and emissions growth do not need to go together.

QUESTION/Japanese News Agency Kyoto News: Back to the first questions. If the Europeans did welcome the U.S. plan, but according to my understanding some developing countries are still not so positive in accepting the U.S. plan. Could you tell us your recommendation on that and if that is the case, how you can make a deal with the developing countries? Thank you.

SANDALOW: I have not been briefed on the specific reaction of other delegations to our phase-in proposal of yesterday. But I would expect that several days of conversations would be normal for delegations to ask questions and shape an understanding of the specific elements of this structure. As those of you who have read it know, it has some elements of complexity to it. But we certainly welcome those conversations. We think they are very important.

AMBASSADOR HAMBLEY: Indeed, some developing countries remain somewhat reluctant to endorse this type of an approach to Article 3.4 but even those countries are certainly willing to give every consideration and are listening to our position. I believe that from our very detailed presentation yesterday, which was given in conjunction with the proposal by Japan and Canada, many of them are starting to feel much more comfortable with the approach that we are taking. That is not to say that everyone has come on board, but I think that we pretty much trying to close that loop, we hope.

QUESTION/John Dillon, Earth Times: Your proposal so far does not have specific numbers on the sinks proposal, when do you anticipate to flesh that out? Just a tiny question, when can we see that and will that affect tenor of how the talk will go from here?

SANDALOW: Before the end of this conference. (Laughter. )

Thank you very much.